Andrew Bon Salle recaps thoughts shared earlier this month at MBA Secondary
The Mortgage Bankers Association’s (MBA) National Secondary Market Conference & Expo recently brought lenders and other industry stakeholders together in New York to discuss the most pressing opportunities and issues facing the industry.
On May 2, Andrew Bon Salle, Fannie Mae’s Executive Vice President – Single-Family Business, addressed the general session during “A Conversation with GSE Leadership,” along with his Freddie Mac counterpart, David Lowman. We asked Mr. Bon Salle to recap his remarks for the benefit of those unable to attend.
Q: What are Fannie Mae’s customers – lenders and servicers – asking from Fannie Mae?
Bon Salle: Competition for borrowers is fierce, and customers tell us they’re looking for solutions that will help them compete and build their business. They want to drive down origination costs and time to close. Manage regulatory and compliance obligations more effectively and cheaply. Make the origination process simpler. Make the borrower experience easier and less complex. And reduce repurchase risk.
Q: How is Fannie Mae helping its customers achieve those goals?
Bon Salle: We’re delivering solutions like Day 1 Certainty® to help our customers make the mortgage process simpler, faster, more efficient, and more certain. Right now, the average time to close and fund a conventional loan is between 50 and 75 days. Our goal is to help lenders get it to 10 days. Early feedback from customers using the full Day 1 Certainty suite report the app-to-delivery cycle time has been cut in about half. Our open architecture and more data validation vendors will enable greater lender access and an even better experience for our customers. It is helping customers cut costs, be more efficient, and, importantly, it is helping our customers improve the borrower experience.
Q: How is Fannie Mae helping its customers expand access to credit for creditworthy borrowers?
Bon Salle: We look at expanding access to credit through three lenses. First, we want our credit box to support affordable, safe, and sound lending – so that it meets the needs of borrowers and adequately measures risk. Second, lenders don’t always test the reaches of that box and they may apply their own overlays. We think that by automating more of the process and introducing more freedoms from rep and warrants with Day 1 Certainty, those overlays will continue to melt away. Third, we’ve introduced solutions like HomeReady®, designed to meet the needs of creditworthy low- and low-to-moderate income borrowers, and student loan debt solutions, to address the growing challenge and obstacle of student debt.
I also want to mention the Duty to Serve rule. This will be a significant push for the GSEs in expanding access. We’ll work with FHFA and the public in the next few months to make sure our plans are on target and start executing on those plans next year.
Q: FHFA recently published an update (available here) on the common securitization platform and the single security project. What should lenders know as we get closer to the launch of the single security?
Bon Salle: Freddie Mac issued securities though our jointly owned Common Securitization Solutions (CSS) in November. FHFA deemed that first release a success, and is targeting the second release for the second quarter of 2019, with securities issued by Fannie Mae. We will continue to work with FHFA, Freddie Mac, and CSS to ensure a smooth transition for all market participants.
Once the single security is launched, sellers will continue to interact directly with Fannie Mae – not CSS or the platform. There will be no change to Desktop Underwriter®. Fannie Mae will maintain its own separate pricing and BU/BD Grids. There will be no change in selling contracts or guides.
Q: Can you speak to the success of Fannie Mae’s credit risk transfer strategy and what it means to the company and market?
Bon Salle: Credit risk transfer is a normal course of business at Fannie Mae. We use a suite of credit risk transfer vehicles that meet the needs of institutional investors, diversified reinsurers, and lender customers. As of year-end 2016, nearly one quarter of our single-family conventional book of business was included in a reference pool for a credit risk transfer transaction that transferred some of the risk of loss on these loans.
Q: Do you see Fannie Mae’s Nonperforming Loans (NPL) and Re-performing Loans (RPL) programs as ongoing efforts or will they stop once the legacy loans are resolved?
Bon Salle: We plan to continue to sell NPL over the coming months to support the reduction of our retained portfolio. We expect NPL sales to decline as the available population declines.
We’ll also continue to focus on reducing the amount of RPL in our retained portfolio. Our primary means of removing RPL from our balance sheet is to securitize them into MBS. That being said, we expect to continue to sell loans that are not eligible for pooling into our RPL MBS prefixes.
Q: What’s next for Fannie Mae?
Bon Salle: For the rest of 2017, we are going to keep helping lenders adopt the various components of Day 1 Certainty. We are going to continue to test and learn so our services become better and more powerful over time. We are also going to focus on expanding the list of vendors customers can use for data validation.
On the servicing side, we are working to make servicing Fannie Mae loans much simpler with our Simplifying Servicing™ initiative. Across the servicing lifecycle – whether it is technology, clarifying policies, or operations – we are working to simplify the process for our customers. Our goal is a 50 percent overall servicing cost reduction.
And we’ll keep listening. We had the opportunity to meet with many customers during the (MBA Secondary) conference to talk about how Day 1 Certainty and Simplifying Servicing can save them time, cut costs, and improve their experience as Fannie Mae customers. And we want that dialog to continue. We’ll be listening and constantly innovating in the coming years to create dynamic solutions that work for our customers.