If in doubt, call Fannie Mae and Freddie Mac.
Apparently the pair of government-owned (taxpayer owned) mortgage financiers are going to make life easier for mortgage bankers, according to the WSJ.
Word on the street is the pair will expand a pilot program in which they provide advance commitments to purchase home loans that meet certain requirements.
This in turn provides the short-term credit mortgage bankers and warehouse lenders need, while greatly reducing the risk of being stuck with loans that can’t be sold.
The previously undisclosed pilot program was set up with Burlingame, CA-based mortgage lender Provident Funding and St. Petersburg, FL-based warehouse lender NattyMac.
Essentially, Provident originates loans that are financed by NattyMac and sold to Freddie Mac; advance commitments reduce the risk that loans will need to be sold at a discount to private investors if they don’t meet certain quality standards.
Back in March, the MBA looked to save warehouse lending by proposing that risk based capital rules be eased to align with risks comparable to conventional loans and government-insured mortgage exposures.
The group said warehouse lending capacity fell from $200 billion in 2007 to $20-$25 billion, and noted that there were 90 warehouse lenders in operation in 2007, but just 10 today.
During the first half of the year, the top three lenders (Wells, BofA, Chase) accounted for 52 percent of the mortgage market, up from 37 percent in 2007.