GSEs Announce New Initiatives as They Enter Tenth Year of Conservatorship

At the Mortgage Bankers Association’s (MBA) Annual Convention and Expo in Denver this week, several speakers mentioned a milestone that has never happened before and that no one will celebrate: Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac entering their tenth year of conservatorship under the U.S. Treasury.

“We’ve been talking about GSE reform for nine years,” David Motley, 2018 chairman of the MBA, said in his general session speech on Monday morning. “The status quo is not sustainable.”

Motley said earlier this year the Washington, D.C.-based association released a white paper detailing its recommended approach to GSE reform. The paper discussed, among other topics, a post-GSE strategy and the role the secondary market can play in advancing an affordable housing strategy. Motley said the White House administration welcomed the information and that the MBA will continue to advocate for these and other related changes in the industry.

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Meanwhile, Fannie Mae and Freddie Mac are making some changes related to customer service and other issues in order to adapt to the changing consumer and new technologies. The CEOs of both GSEs spoke about these initiatives during the well-attended conference.

Donald H. Layton, CEO at Freddie Mac, noted that at the conference two years ago, the company unveiled its new logo to reflect its goals of creating a better company and a better housing finance system. Since then, the GSE has been working on improving customer service and updating its technology. “Today, we are revolutionizing our customer focus as a company,” he said. “The GSEs were not known for customer focus pre-conservatorship.”

Layton, who came to Freddie Mac after 30 years with JPMorgan Chase and its predecessors, said the GSE set a goal to be as well-run as the best financial institutions. “We’re working to help you meet challenges, reduce costs, and give you greater certainty that what you sell to us stays with us,” he said. “We have detailed pain points to remove so you can do business with us, so we can serve you as you wish to be served.”

On the technology side, Freddie Mac is making enhancements to Loan Advisor Suite, which it first introduced in 2015. The software has new and upgraded capabilities, Layton said, and more are in the pipeline. Freddie Mac has also expanded its single-family Credit Risk Transfer program and grown its investor base. “The next focus will be on default servicing,” he said. “Stay tuned for that.”

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Meanwhile, Fannie Mae has been working on its own tech upgrades. Timothy Mayopoulos, president and CEO of Fannie Mae, said that last year, the GSE announced its Day 1 Certainty program, part of Desktop Underwriter, specifically a DU validation service. The validation system, which uses third-party vendors, obtains validated information about the borrower’s income, assets, and employment information. With Day 1 Certainty, lenders are reporting that they are cutting cycle time by 10 days or more and reducing costs.

The next step in this evolution, Mayopoulos said, will be single source validation. “You’ll be able to source data from the borrower’s bank account so you see the pay stream and direct deposits,” Mayopoulos said. “Think of all the paper, paystubs, the fax machines that frankly no one owns anymore, and reducing this burden.” The service is in the pilot stage now, and Fannie Mae expects to roll it out in 2018.

Mayopoulos, who joined Fannie Mae shortly after it went into conservatorship, said the second effort that the GSE is working on is an application programming interface, or API, that will enable much faster and simpler lender and third party integrations with Freddie Mac’s software platform. The digital interface will reduce errors and speed the loan origination process, he said. Fannie Mae plans to integrate the API into Desktop Underwriter and this, he said, will yield many new operations efficiencies, including eliminating the need to rekey information and enhancement of DU messages.

Finally, Mayopoulos said in December Fannie Mae will launch a Servicing Marketplace, a sort of loan selling matchmaking product. “If you are a seller, we will provide a marketplace and vice versa,” he said. “There will be less cost and more transparency.” The goal of these three initiatives, he said, is to make the mortgage process faster and easier for everyone.

Nora Caley is a freelance writer based in Denver.

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