By Jody Shenn, Clea Benson and Heather Perlberg |
“Fannie Mae (FNMA) and Ginnie Mae are seeking to protect taxpayers as a flood of new lenders apply to do business with them. That’s also helping big banks’ profit and blunting Federal Reserve efforts to boost housing.
Fannie Mae, the government-supported mortgage financier, has begun limiting how many loans annually it will guarantee or buy from certain firms. Ginnie Mae has moved slowly with responses to applications, according to David Lykken, an industry consultant. The U.S.-owned bond insurer has gotten tougher this year about approving lenders even as it’s signed up about 50, Ginnie Mae President Ted Tozer said in an interview.
Limited competition in the industry and a lack of capacity to meet demand is helping JPMorgan Chase (JPM) & Co. Chief Executive Officer Jamie Dimon get “very high” mortgage margins. That’s frustrating central bankers such as William Dudley, the Federal Reserve Bank of New York president, who said this month that mortgage rates are higher than they could be after the Fed said it plans to acquire $40 billion of home-loan securities a month.
“More direct access to Fannie would end up in more mortgage companies getting a better price and consumers would benefit,” said John Robbins, head of Bexil American Mortgage Inc., who founded two lenders later sold to banks now part of JPMorgan and Wells Fargo & Co. (WFC) “The problem is, if you’re Fannie you just can’t let all these companies have unlimited access. You don’t want to give a high-speed, temperamental race car to someone who just got a driver’s license.”
Taxpayer Conflict
The conflict between protecting taxpayers and encouraging more lending to help the real estate market recover from the worst slump since the Great Depression shows the challenges facing the government and the industry as about 3,500 people attend the Mortgage Bankers Association’s annual conference in Chicago that started yesterday.
U.S.-backed mortgages still account for about 90 percent of new lending in the almost $9.6 trillion home-loan market four years after Fannie Mae and rival Freddie Mac were rescued by taxpayers.
The companies “are playing an outsized role: in a properly functioning market, Fannie Mae should not have such a significant share,” Chief Executive Officer Timothy J. Mayopoulos said yesterday in a speech at the conference. “We see little evidence of substantial private capital ready to meet the very significant market needs.”
Changing Rules
David Stevens, the MBA president, former Federal Housing Administration head and ex-Freddie Mac executive, says his organization is worried that the company and Fannie Mae are changing a broad range of rules without first going through the same steps to seek public input as other arms of the government.
“No matter how much they say they’re being transparent with the customers, it really pales in comparison to the process required by other rulemakers,” he said.
Fannie Mae, which has more than 1,000 approved lenders, won’t disclose how many have been capped or its total applications and approvals this year for customers that originate and service mortgages, or so-called seller-servicers.”