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Fannie to Offer Quicker Cash for MBS Purchases

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While the economic outlook is brighter than it was one year ago, Fannie Mae (FNM) will continue its efforts to promote the housing market, and will expedite its help to warehouse lenders that provide funding to small lenders. “We’re providing faster funding to lenders so that they get cash immediately after closing to continue funding loans,” Fannie Mae president and CEO Michael Williams said in a speech to the Exchequer Club this week. Fannie Mae purchases loans from small lenders and packages them into mortgage-backed securities, but previously it could take a month or longer for the lender to get the funds from that sale. With Fannie providing the payment immediately, the lender can turn around and extend more loans to consumers faster. Today Fannie, along with its government-sponsored enterprise brother Freddie Mac (FRE), provide about 70% of the mortgage market’s total liquidity, with the Federal Housing Administration (FHA) providing an additional 20% and private institutions take care of the rest. That’s a big change from the peak of the housing boom, Williams said, when private institutions provided 60% of the liquidity and the GSEs and FHA providing a combined 40%. During the past year, Fannie Mae has provided $700bn in market liquidity, helping 1m borrowers buy homes, 2m homeowners refinance their mortgages, and enabled lenders to construct or rehabilitate more than 460,000 rental housing units. “I would say that the patient is out of intensive care – but still has a very long road ahead to a clean bill of health,” Williams said. But there are still other challenges facing the housing market. Williams said one in 10 homeowners has missed at least one mortgage payment and one in 25 US homes is in foreclosure. Williams acknowledged it’s reasonable to expect an increase in foreclosures later this year as those suspended by the various moratoria resume and the backlog of foreclosures continues to be worked out. “As more properties come onto the market, that’s going to make it harder for home prices and the market overall to recover completely,” he said. While Fannie Mae and its servicer partners are trying to help homeowners avoid foreclosures, there are additional challenges. Servicers are increasing capacity to handle more modification requests, but William said only 29% of borrowers who received a Fannie Mae solicitation letter have responded. In response, Fannie Mae is taking a more direct approach to reaching borrowers, mainly by holding regional workshops and events in some of the markets hit hardest by the housing crisis. When modification isn’t an option, Williams said Fannie is making it easier to process short sales and deeds in lieu of foreclosure for distressed borrowers. Treasury Department and housing officials are in the process of finalizing a federal incentive program that will encourage servicers to pursue short sales and deeds-in-lieu of foreclosure. Write to Austin Kilgore.

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