Fannie Was Securitizer To Top Players in '95

Fannie Mae held a tight grip on the securitization business of the nation's largest lenders in 1995, grabbing most of the business of Countrywide Funding, Norwest Mortgage, Fleet Mortgage Group, and others.

According to data compiled by Mortgage Marketplace, a newsletter affiliated with American Banker, Countrywide securitized $11.5 billion of mortgages with Fannie Mae through Nov. 30, but only $3.4 billion with Freddie Mac.

Indeed, eight of the 10 largest originators securitized more loans with Fannie Mae than with Freddie Mac. Two - Countrywide Credit and Fleet Mortgage - securitized almost three times as many loans with Fannie as with Freddie.

Observers say the reason for the gap is simple: Fannie was offering the big companies more attractive pricing.

"Fannie just had a better execution for a good part of the year," said Terrance G. Hodel, president of North American Mortgage Co., Santa Rosa, Calif., one of the largest securitizers at Fannie Mae.

Fannie Mae's pricing is a function of such considerations as product type and loan-to-value ratios, said Todd Hempstead, director of mortgage- backed securities product development and acquisition. "We look for the best way customers can optimize what they can get out of the transaction," he said.

Officials at Freddie Mac did not return calls seeking comment.

A notable exception to the trend was Prudential Home Mortgage Co., Clayton, Mo., which did more business with Freddie than with Fannie. Eighth-ranked Great Western Bank, Chatsworth, Calif., does not appear on either agency's list of the largest securitizers.

BankAmerica Mortgage Corp., Cypress, Calif., ranked 10th in originations, does not appear on Fannie Mae's list of the top 20 securitizers, but securitized $624 million of loans at Fannie Mae, versus $462 million at Freddie Mac.

The two secondary-market agencies compete fiercely for business, with Fannie Mae usually gaining a little over half of all loans sold to or securitized by the agencies. Last year, Freddie Mac appeared to be gaining an edge over Fannie Mae in securing the business of the largest lenders. This year the tables are turned.

Investors in Freddie Mac's securities receive principal and interest payments 10 days before Fannie Mae securities holders. That difference, experts say, should translate into higher prices for Freddie securities - about 6/32 higher than Fannie's. Freddie Mac's securities do fetch a higher price, but the spread this year has been only half what the experts say it should be, according to Peter Struck, portfolio manager at Washington Mutual Savings Bank, Seattle.

"Freddie Mac is well aware that their securities are not trading as well as they would like," Mr. Struck said.

To compensate, Freddie Mac offered extremely attractive terms on repurchase agreements to Washington Mutual in a deal negotiated early this year, he said.

The data in tables on page 9 offer a partial picture of the securitization business at the two agencies. They do not include securities issued in so-called multiple-lender pools, backed by loans from more than one lender. Such pools account for roughly 17% of the securitization business at Fannie Mae and about 44% of the business at Freddie Mac.

Loans made by the largest lenders tend to be offered in single-lender pools, making these numbers a fairly accurate representation of the securitization business large lenders are sending to the agencies.

The tables do not reflect loans sold for cash to either agency.

Karen Talley contributed to this report.

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