In case you missed it – Fannie Mae’s Selling Guide Announcement dated December 14, 2022 (SEL-2022-10), highlights a, significant, potentially major impact on your business model. One item to note is – for 2023 Sellers must sell 12 loans to Fannie Mae and Servicers must service 1 loan. (For further details please refer to Fannie Mae’s Website.)
Fannie Mae outlines a clear expectation of what sale and servicing activities need to be completed by your firm with particular focus on loan sale volume and servicing requirements and is short and to the point – to maintain your firms Seller / Servicer approval, you must do business with Fannie Mae in the calendar year 2023. In addition to your ability to sell or service this could also impact your firms access to valuable technology tools such as Desktop Underwriter.
Many lenders have gone through the approval process and yet for a variety of reasons have a current business model that does not include selling directly to Fannie Mae and are in an inactive status; if you fall into this category you need to evaluate and adapt your business model, so you don’t lose this critical outlet.
Whether you are a Portfolio lender or are selling loans on a servicing released basis maintaining Fannie Mae approval will provide numerous advantages:
Your team, your plan, your future … Some key “value add” items to be aware of:
- More loan program options for your customer / membership base. Do you know that Fannie Mae has loan programs with a 3% down payment?
- Housing and Finance Authorities promote GSE loan programs that offer down-payment assistance. If your firm is not approved with the GSE’s, it can impact your ability to work with these Agencies.
- Access to robust and efficient technology for loan underwriting standards, appraisal validation, and data integrity. These tools reduce present and future credit risk.
- Underwriting decisions reside within your firm, your team.
- Pricing is established by the GSE – you no longer need to manage to other investor pricing overlays based upon that investors credit risk model.
- Access to selling loans on a cash basis or issuing a Mortgage-Backed Security (MBS).
- Balance sheet / capital management by creating and holding MBS.
- Warehouse line management – your firm is no longer dependent on additional days for other investors to review, approve, suspend, or re-underwrite loans prior to purchase. This impacts your employee count, expense, and cycle times – a profitability improvement.
- Ability to sell the loan servicing rights through GSE options.
Returning to an active Seller / Servicer status involves not only working direct sales to Fannie Mae into your business model it requires a systematic review and most likely modification of policies and procedures. You must be able to demonstrate your firm can meet all of Fannie Mae requirements. Impact areas include policies, procedures, infrastructure, governance standards and financial capability.
The BlackFin Group encourages you to evaluate the importance of having earned approval as a Seller / Servicer approval from Fannie Mae and act now to maintain your approved status. BlackFin has provided consulting services for many different firms in the industry, whether your firm is an Independent Mortgage Banker, Community Bank, or Credit Union.
At BlackFin we specialize in navigating these breaking news changes. We highly recommend your team does not underestimate the attention this discussion needs withing your team NOW. For the most part, it’s already February and this will take the better part of 2023 for applicable teams to work through, analyze, decide, shift, and adapt to these critical changes. We have a diverse team of industry professionals who have walked in “your shoes” as lenders working directly with Fannie Mae – we “get it.” BlackFin can walk you through the questions of “should I maintain Fannie Mae approval”, “how do I incorporate direct sales into my business model” and finally “what do I need to do to become an active Seller / Servicer again”?
Luana Slettedahl is a Principal at BlackFin Group. BlackFin Group is an umbrella of services and software products that specializes in the financial services industry. BlackFin is where national, regional, and community-banks, credit unions, and independent mortgage bankers turn for trusted consulting experts, services, and insights. For more information, contact the company at (303) 524-1907, [email protected], or visit its website https://www.blackfin-group.com.