CHICAGO -- The chairmen of Fannie Mae and Freddie Mac staked out their positions on key industry issues -- technology and market growth -- at the annual convention of the Mortgage Bankers Association this week.

Leland Brendsel, chairman of the Federal Home Loan Mortgage Corp., or Freddie Mac, spoke about its plans to develop cost-cutting technology to originate and process mortgage loans.

Arch-rival Fannie Mae, the Federal National Mortgage Association, already has made that issue a high and visible priority and is widely perceived as being ahead of Freddie Mac on that score.

"Freddie Mac intends to stay at the forefront of technological innovation and efficiency," Mr. Brendsel told mortgage bankers. "We are examining each part of the lending process to make it faster, easier, and more responsive to America's homebuyers."

Emphasis on |Open' Systems

Mr. Brendsel said Freddie Mac would test an automated underwriting system in a pilot program with lenders early next year. He told lenders the system would reduce the risk of repurchase for loans made through the system. Both Fannie Mae and Freddie Mac require lenders to buy back loans that do not meet their underwriting guidelines.

Mr. Brendsel discouraged efforts by lenders to develop their own underwriting systems, implying that Freddie Mac was better suited to the job.

"We believe you should not ... risk investing in a system that will be obsolete a year later," he said. Underwriting practices "should be reexamined, redesigned, and tested to give the best decisions before being automated," he said.

At the same time, he tried to calm lenders, such as Countrywide Credit Industries, Norwest, and PMI, that already have automated underwriting systems in place.

Some executives, including Countrywide's president, Angelo R. Mozilo, have expressed fears about Fannie Mae's previously announced plans to develop technology affecting the origination side of the business.

Mr. Mozilo, for example, has said he is worried he would have to scrap his expensive technology if Fannie Mae comes out with a system that cannot communicate with his system, or if Fannie Mae gives lenders substantial incentives to use its own technology.

Mr. Brendsel said, however: "We're determined to give you something you can integrate with your existing system rather than requiring you to scrap an investment you've already made. We believe the future is in open systems, rather than proprietary ones."

Fannie Mae's vice chairman, Franklin Raines, has previously said that his company, too, is developing an "open" system.

Fannie Mae's chairman, James A. Johnson, told mortgage bankers that the industry's growth would be fueled by a large wave of immigrants in the 1990s.

"The future success of our industry will depend in large part on our ability to reach out to these new customers," Mr. Johnson said.

Both Fannie Mae and Freddie Mac, as well as mortgage banking companies, are being pressured by regulators to increase their business among lower-income and minority borrowers.

Mr. Johnson frequently uses his public appearances to speak about Fannie Mae's commitment to that effort.

"To succeed, companies will have to do more than simply respond to regulatory oversight or legislative mandates," he said. "Rather, they must aggressively seek out the customers of the future, and adapt their businesses to serve these potential home-buyers effectively."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.