WASHINGTON - Gregory Barmore, chairman of GE Capital Mortgage Corp., was in town last week to unveil a new insurance product.
But he took the opportunity to comment on the recent invitation by the Federal National Mortgage Association to have the Federal Home Loan Mortgage Corp. underwriting system hook up to its origination system.
Mr. Barmore praised Fannie Mae's strategy. He said it was potentially a healthy step toward cooperation between the agencies.
But top Freddie Mac executives have indicated that their agency is unlikely to hook up with Fannie any time soon. They see the invitation as an attempt to cash in on Freddie's head start in underwriting systems.
Mr. Barmore said that he believed Freddie Mac's approach was shortsighted, and could ultimately cost the agency a share of the market. While Freddie Mac is ahead in underwriting technology at the moment, its advantage won't persist, he added.
If Freddie were to join Fannie, lenders who make loans on Fannie's system could submit them for underwriting directly to Freddie as well.
Lenders say that in the absence of cooperation between the agencies, their selling decisions will depend on whose technology they install. Currently, Fannie and Freddie compete fiercely on pricing terms.
In an interview with American Banker, Mr. Barmore emphasized that the mortgage industry needs multiple automated underwriting systems that lenders can access with ease.
For example, he said, lenders should be able to make a loan, and then check to see whether Fannie and Freddie will buy it, and the General Electric Capital Corp. subsidiary would underwrite it.
He warned that if the industry is dominated by a single underwriting system, both credit quality and loans to underserved borrowers would suffer.
"If you have a monolithic source (of underwriting), you could either get in danger of getting too risky and putting the whole system in jeopardy, or being so conservative you could underserve the system," Mr. Barmore said.
In its announcement, GE said it would make available nationally a "lease purchase" program that would allow renters to become homeowners.
Under the program, a portion of the borrower's monthly lease payment is put into a savings account that is held in escrow. The savings can grow into a down payment in one to five years, GE said.
