Fannie Mae and Freddie Mac jockeyed for position in their technology race this week as mortgage bankers gathered in New York for a major convention.

The Federal National Mortgage Association, or Fannie Mae, announced that four of the industry's largest mortgage insurers would electronically approve loans made on its new system.

Fannie Mae invited the Federal Home Loan Mortgage Corp., or Freddie Mac, which has introduced a competing electronic underwriting system, to join forces.

But Freddie's president, David Glenn, suggested this would be unlikely anytime soon. Freddie Mac has not detected demand among mortgage bankers for linking the rival systems, he said.

Mr. Glenn told reporters that given Freddie Mac's success in rolling out its new system, he could see why Fannie Mae had extended the invitation.

"There's a lot of enthusiasm about (the Freddie Mac system), and I can certainly understand their interest in getting it on their system," he said.

The exchange took place as about 1,500 people gathered for the Mortgage Bankers Association of America's annual secondary market conference.

The two mortgage agencies have taken somewhat different approaches to automating home lending. Fannie Mae is working on a comprehensive system that would automate both applications and approvals.

Freddie Mac is taking a more targeted approach. It has designed an underwriting system and is working to make it compatible with originations systems supplied by other vendors.

Meanwhile, Mr. Glenn said Freddie Mac is watching the impact that its underwriting technology would have on the cost of writing a mortgage and on the speed of prepayments.

Mortgage bankers and investors are concerned, he said, that a sharp reduction in loan origination costs would make it more enticing for consumers to refinance, thus increasing prepayments in mortgage-backed securities.

Mr. Glenn said that if prepayments rose substantially the standard 30- year, fixed-rate mortgage may be modified. He acknowledged that investors have so far been unwilling to accept lower yields on securities backed by loans that give consumers lower rates in exchange for prepayment penalties.

"This is an issue we will watch," Mr. Glenn said. "There are ways to deal with it if it becomes a big problem."

Separately, Warren Lasko, executive vice president of the Mortgage Bankers Association, said Fannie Mae and Freddie Mac had beaten back a proposal to impose user fees of $700 million annually on their securities.

The fees had been part of a recent version of the House budget, which is designed to eliminate the federal budget deficit in seven years.

A source said that Speaker of the House Newt Gingrich had personally lobbied the chairman of the House Budget Committee, Rep. John Kasich, R- Ohio, on the issue.

Rep. Kasich is reported to have dropped the provision under protest. In exchange, he plans to introduce a bill later this year to privatize Fannie Mae and Freddie Mac.

Mr. Lasko said such a bill might pass the House but would be unlikely to pass the Senate.

On the future of the Federal Housing Administration, mortgage bankers appear to be breathing at least a temporary sigh of relief.

That's because the House Budget Committee made no mention of changes in the FHA's single-family insurance plan in the draft budget submitted this week.

Robert O'Toole, senior staff vice president of the MBA, said that probably means the single-family program will not be drastically changed, for example, through privatization.

But he added that proposals to target the program to first-time homebuyers may still surface.

The House Budget Committee has proposed that the FHA place a moratorium on insuring new loans in its troubled multifamily division.

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