Bankers are voicing opposition to a Fannie Mae policy change that requires at-risk financial institutions to make daily transfers of mortgage payments to the government agency, a shift that could reduce liquidity at a critical time for banks with deteriorating credit.
Brian Faith, a Fannie Mae spokesman, said that collecting principal and interest payments daily rather than monthly is "a protective measure" to ensure that funds are not lost in the event of a bank failure.
The policy, which Fannie announced on a conference call Friday with several banks and industry representatives, is being applied on a "bank by bank" basis and focuses specifically on banks with deteriorating credit ratings, Mr. Faith said in an interview Monday.
Bank servicers typically hold billions in principal and interest payments from borrowers in custodial deposit accounts, which they are able to use for short-term loans and other activities that generate income.
However, those accounts are typically insured only up to $100,000 by the Federal Deposit Insurance Corp., and could be lost if the bank failed.
Under the new policy, Fannie Mae has access to the new trust accounts to monitor and reconcile daily wire transfers, validate the amount of interest earned, and identify and resolve any problems.
(Fannie said that in requiring the faster transfers it is actually exercising an option that has long been available, rather than creating a new policy.)
Mr. Faith said Fannie has a fiduciary responsibility to safeguard these funds on behalf of the taxpayers and investors in mortgage-backed securities.
"Collecting on a daily basis and placing the funds in a trust is a safer option than holding these funds in deposit accounts that have an insurance ceiling," Mr. Faith said.
He declined to name any banks that have been affected by this policy, or are likely to be affected by it.
Nor would he estimate how many banks would be affected by the policy, or how many billions in principal and interest payments have already been transferred to the trust accounts.
Though some bankers agree that holding billions in accounts that are not fully insured is unwise, others said Fannie's new policy could make conditions worse for troubled financial companies by reducing liquidity and increasing administrative costs at a time when some banks are ill-prepared for either.
"Everyone in Washington is working to restore liquidity, and this program moves in the opposite direction," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a trade group that represents financial services companies.
Mr. Talbott said many banks rely on these mortgage payments as a source of deposits, and consider the float on those funds an important source of profits.
"They will have to replace those deposits, and the replacements will be more expensive," Mr. Talbott said.
"While we can certainly appreciate Fannie Mae's concern, the timing of this change could not be worse and will result in even more stress on an already burdened banking system."
Though Fannie Mae said it would reimburse servicers in some form for the early remittance of funds, Mr. Talbott said it was unlikely that any compensation would fully cover the float revenue banks stand to lose.
Steven Horne, the chief executive of Wingspan Portfolio Advisors LLC, a servicer based in Dallas, said the change could have an indirect effect as well by reducing servicer income and causing advances to increase, when they need those deposits to shore up their balance sheets.
"A lot of servicers do rely on that float income that directly supports their operations including loss-mitigation efforts," said Mr. Horne, who was previously a Fannie Mae director of servicing risk strategy. "It could take money out of servicers' pockets."
Nevertheless, he said that Fannie was making "rational decisions based on the current economic environment."
Freddie Mac has not announced any changes to its existing policy, which requires that "at-risk" institutions transfer principal and interest payments to nonaffiliated FDIC depositories, Freddie spokesman Brad German said Monday.
The Federal Housing Finance Agency, the regulator responsible for overseeing both Fannie and Freddie Mac, took management control of the two enterprises on Sept. 7.
As of last week, 13 financial institutions have failed, including the Seattle thrift company Washington Mutual Inc., whose banking operations were sold to JPMorgan Chase & Co. on Friday for $1.9 billion.
The FDIC knows which banks are at risk, and had 117 institutions on its "problem list" on June 30.
The agency does not disclose the names of banks on the list.
