What keeps executives of Fannie Mae awake nights? A big worry, apparently, is being misunderstood.
Larry Small, the company's president, laid this problem on the line in addressing a regional conference of mortgage bankers' associations here last week.
Mr. Small said there were a lot of misconceptions or myths about "what Fannie Mae is up to" that he wanted to put to rest.
One myth, he said, is that the secondary-market agency is angling to get into mortgage originations. "Fannie Mae is not going to become a mortgage originator," he said. "It's not an option and not a consideration."
He added that the company - formally the Federal National Mortgage Association - is prohibited by charter from lending directly. Beyond that, he said, the company simply does not have enough people. With just 3,300 employees to manage its huge business, it already has its hands full.
"We can manage small aggregations of large transactions," he said. "Originators do the opposite, managing large aggregations of small transactions."
Another myth, he said, is that Fannie Mae is using technology to take over the industry. The entire purpose of Fannie's technology effort, he said, is to help the agency's lenders do business faster and better.
"Technology is everywhere in the mortgage industry," he said. "It was late arriving, but when it came, it came in waves and limitless varieties, not all of which fit together very well."
And a third myth, according to Mr. Small, is that there is something insidious about Fannie Mae's delivery of $350 million in stock to the Fannie Mae foundation, which will now take over all of the agency's outreach efforts to underserved markets.
"We've received 1.6 million calls (in response to the outreach program) so far, and 32% of the callers were in homes within a year," he said. But people are worried that the names collected in the outreach process will be used by Fannie Mae for direct marketing.
Quite to the contrary, he said, Fannie Mae would have no access to these names and the foundation structure further insulates the mailing list from Fannie Mae.
Meanwhile, one of the things that seems to be keeping some lenders awake nights is credit scoring.
At a conference session, panelists from the Federal Home Loan Mortgage Corp., Mortgage Guaranty Insurance Corp., and Citicorp provided great detail about how their scoring systems were developed and how effective they were in predicting default risk.
But the real story came in the question-and-answer period, in which members of the audience expressed support for the idea of credit scoring but said they had a great deal of discomfort about putting the tool to use.
One issue was validity of the data on which the scores are based. "I get merged credit files, and I get three different scores," one lender said. "I think I'm looking at three different customers."
Another pointed out that it was psychologically difficult for a loan officer to look at an application with a poor credit score and approve it anyway. The fear is that a repurchase request may be made if the low- scoring loan goes bad, she said.
"There is the fear that lenders have of what will happen if they get it wrong," another lender said.
Connie Ferran, director of mortgage policy at Freddie Mac, said her company was actively giving lenders additional guidance in using credit scores and compensating factors effectively.