Frank Raines of Fannie Mae told thrift executives at a meeting here that his agency could help them control the risks of their seasoned loan portfolios as well as current loan production.
Mr. Raines, vice chairman of the Federal National Mortgage Association, or Fannie Mae, made his pitch for business to an audience of secondary market executives at a meeting Tuesday of America's Community Bankers, the thrift trade group.
Mr. Raines said Fannie Mae has securitized more than 1,200 variations of adjustable-rate mortgages and would work with lenders to accommodate nonstandard documentation and underwriting.
Both Fannie Mae and the rival Federal Home Loan Mortgage Corp., or Freddie Mac, have targeted thrift portfolios in an attempt to bolster their purchases and securitizations of ARMs, which continue to be held primarily by depository institutions.
For thrifts, swapping whole loans for agency securities is an easy way to reduce their risk-based capital requirements as well as to get better rates on borrowed funds.
Mr. Raines said that in 1995 Fannie Mae did 80% of all secondary market ARM business, securitizing or buying for its own portfolio $20 billion in adjustable-rate loans.
Speaking to reporters later, Mr. Raines gave an update on his agency's technology initiatives.
He said 100 lenders have now installed Fannie Mae's automated underwriting system, which uses a blend of automated rules and credit scoring to approve loans or refer them to human underwriters.
Seventy of these lenders were recently given the newest version of the agency's underwriting system, and the rest will soon obtain it, he said.
Though only a "tiny" volume of loans bought by Fannie Mae is underwritten using this system, Mr. Raines was optimistic that the total would rise substantially within the next year and a half.
Through agreements with several vendors of loan origination systems to mortgage lenders, Fannie Mae's underwriting technology will be easily available to lenders who use these systems.
Lenders can now get consistent underwriting decisions, even as they decentralize decision-making, Mr. Raines said.
"These are big changes, and they are big changes that are not just available to the big guys," he said. "Now the smallest lender can have the most advanced technology."
In response to a question, Mr. Raines said Fannie Mae had "not given one moment's thought to what the world might be like if there were no loan limits."
Addressing the same meeting Monday, Freddie Mac chairman Leland Brendsel surprised many with a proposal to eliminate the conforming-loan limit, which now sets a ceiling of $207,000 on the largest loans the agencies may buy.
"We view our business prospects as excellent within the current limit," Mr. Raines said; "therefore, there is nothing in our planning or thinking that would require the elimination of the loan limit."
