The government-sponsored enterprises are getting back to their core mission, shaking the idea that a resolution to conservatorship is just around the corner and reshaping their business models to reduce risk to taxpayers while expanding access to credit.
That was the message from Timothy Mayopoulos, president and CEO Fannie Mae and Donald Layton, CEO of Freddie Mac, speaking on the “A Conversation with GSE Leadership” panel at the Mortgage Bankers Association’s 102nd Annual Convention and Expo in San Diego, California. Nearly 4,500 real estate finance professionals are in San Diego this week for the convention.
Earlier Monday, Fannie Mae announced it is simplifying the lending process for lenders and borrowers with a series of updates to its mortgage offerings. One of the biggest changes is that beginning in mid-2016, Fannie Mae will require lenders to use trended credit data when underwriting single-family borrowers through Desktop Underwriter. Fannie is working with Equifax and TransUnion to provide the data.
Mayopoulos said that the company’s primary revenues are now coming through guarantee fees as a stable, more reliable revenue source, he said, and that the company is shifting more credit risk to private investors.
He called it a “more sustainable and reliable business structure.”
Layton noted that the GSEs are into their eighth year of conservatorship, and that a “big bill” out of Washington to “redo our entire housing finance system” is years away.
“Conservatorship will be with us for a while. And there is no playbook for running a company in conservatorship,” Layton said.
Layton emphasized the focus on credit risk transfer.
“Credit risk transfer is our entire business model now,” Layton said.
He said that Freddie Mac has rid itself of the early conservatorship mindset, which was hesitant, waiting to get orders from government, and not sure if it was about to end.
“We’re focusing on our classic mission to support families by increasing stability, liquidity and affordability of mortgage market,” he said.