A controversial plan for a Web site for mortgage brokers is being changed to appease critics.
Plantation, Fla.-based mortgage.com had taken some flak for its proposed openclose.com site, which would enable brokers to get a loan approved by Fannie Mae's automated underwriting software, then shop it around to lenders.
Now the company says it will require brokers to choose a "premier lender" every time they use the site to get a loan approved by Fannie's Desktop Underwriter. For 24 hours that lender would have exclusive rights to negotiate with the broker to buy the loan.
The "premier lender" scheme "was designed specifically to ensure that openclose stays true to the intent not to have an auction system," said David W. Larson, president of broker services at mortgage.com.
The tweaking of the openclose plan coincides with conciliatory remarks made at last week's Mortgage Bankers Association secondary conference by Fannie chairman Franklin D. Raines.
Lenders feared Fannie's technology would give brokers more control over the origination process. But Mr. Raines assured the crowd:
"We want the lender to approve the loan and the lender to decide what the broker sees. We want you to control the underwriting decision from DU, and we don't want it to go to brokers without your approval."
In a press conference later, Mr. Raines said Fannie would "constantly monitor" openclose to make sure there was no "auctioning" of Desktop Underwriter-approved loans by brokers.
Brokers can get Desktop Underwriter decisions only through lenders. Before openclose, brokers who wanted to use a Desktop Underwriter finding usually had no choice but to sell the loan to the lender that had provided access to Fannie's system.
The openclose site would enable the broker get a Desktop Underwriter decision using mortgage.com's seller-servicer number, then offer the loan to up to three participating lenders. If a loan is approved by Desktop Underwriter, it is certain to be purchased by Fannie, so the broker can negotiate better pricing for the borrower.
Even with the new 24-hour exclusivity requirement, a broker who does not sell the loan to the "premier" lender is still armed with the knowledge that loan was approved by Desktop Underwriter, Mr. Larson conceded.
Openclose would also lenders with information that they normally would not see, Mr. Larson noted. For example, a lender knows whether it is the broker's premier choice. The premier lender is notified if the broker decides to send the loan package to another lender. And that second lender is notified that it is not the first to see the deal.
Another rule that keeps openclose from being a "blind auction," Mr. Larson said, is that brokers need a lender's approval in order to use the site to review the lender's pricing information or submit a loan to that lender.
The openclose site "keeps lenders in control of the whole process, while speeding up the transaction and lowering the cost," he said. The site is planned to be up and running by the end of May.