The demands of the federal government and consumers are forcing a change in direction of the secondary mortgage market's future. Evidence of course alteration is Fannie Mae's recent initiative to change its underwriting standards to meet goals and create new business in rural areas.

Looking for ways to help meet HUD-set 30/30 goals and, in the process, strengthen its foothold in the rural lending market, Fannie Mae said it is creating new underwriting guidelines and modifying existing ones to help carve a bigger niche in that market.

The agency plans to detail the information in a pamphlet scheduled for February release. The pamphlet is the next step in Fannie's 2-year-old venture with the Farmers Home Loan Administration called the Farmers Home Section 502 Guaranteed Loan Program, or just "Farmers Home."

"We have been fairly aggressive in changing our underwriting guidelines," said Herb Moses, Fannie Mae assistant director of product initiatives. "We've been reluctant to put out a book that summarizes our guidelines in this area because of the way things have been changing.

"So we're waiting for a stopping point." he said. "Fannie has been undergoing a fairly intensive look at its credit and property underwriting guidelines the past couple years, and when that calms down and we decide we likely won't be making many more changes, then we'll press ahead."

That calming pattern may come soon. Moses said Fannie aim to have its pamphlet outlining Fannie's rural lending guidelines ready for the Independent Bankers Association of America annual conference in February. Smaller banks like those represented by the IBAA are most likely to benefit from the program.

"We are actually fairly good in [lending in] rural areas, but most people seem to think that we're not," Moses said. "There are no restrictions on the distance an appraiser has to travel in order to find comparables and no restrictions on the percent of value that the land has in relation to the whole property."

Moses said that Fannie had a good network of rural lenders. and organizations like the IBAA. the American Bankers Association and' CBA were helping to expand that base. A joint project with the Farmers Home Loan Administration "is going gangbusters."

"Their ~502 Direct' program was getting very expensive so they converted their direct authority to a guaranty because they wanted their loans to be made by lenders, rather than Farmer Mac," Moses said. "They worked with us to develop this program for something conventional. lenders could originate and that [Fannie] would purchase because most lenders indicated they wanted a secondary market for these loans."

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