78% of The Time, It’s Not Your Lender Who’s Making the Rules

by Alex Stenback on February 18, 2010

Graphic Above from Today’s American Banker.

American Banker sketches out the changing landscape at Fannie and Freddie under government control.  Subscription required but the article is free today:

“Eighteen months after the government seized them, the secondary-market giants no longer focus on gaining market share or cultivating partnerships with originators. Their main priorities today are preventing foreclosures and saving taxpayers money.”

Which, if you think about it, is rather far afield from their Congressionally Chartered mission to provide support to the residential mortgage market.  By Charter, Fannie and Freddie are supposed to:

“[P]rovide ongoing assistance to the secondary market for residential mortgages…by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing;  [And]  promote access to mortgage credit throughout the Nation (including central cities, rural areas, and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing;”

And of course, the “repurposing” of Fannie/Freddie  has had some predictable results.  Again from American Banker:

“[We] interviewed more than two dozen mortgage bankers, former GSE executives and other industry members, most of whom did not want to be identified. They painted a picture of radical change in the corporate cultures at Fannie and Freddie, and resulting frustration at their lender partners, who complained that the GSEs have become too risk-averse and bureaucratic.”

Translation: This shift in mission has made them less able to serve their primary purpose – to provide liquidity and access to mortgage credit for homebuyers and homeowners.  And with Fannie and Freddie involved in nearly 80% of new mortgages, this is a big deal.

So just remember that when you go to get a home loan at your local bank branch, or anywhere else, at least 78% of the time, the rules they apply to approve or deny your loan come from up on high at Fannie or Freddie.

Leave a Comment

 

Previous post:

Next post: