Fannie Mae has reached an agreement with west-coast bank Washington Mutual, allowing the thrift to do multifamily securitizations of Fannie Mae product upwards of $2.5 million through its "Delegated Underwriting and Servicing" (DUS) program without pre-approval from the GSE.

According to sources, this will mark the first time that the agency has approved and aligned itself with a thrift the size of WaMu for its multifamily DUS program. By selecting WaMu and allowing the large thrift to fall under a new category, the bank will be able to write loans faster and go through the loan-application process more efficiently.

"This is our first entry into the GSE world," said Lance Goto, a vice president at Washington Mutual and a former employee of Fannie Mae. "A lot of GSEs and conduit lenders require that we look at a loan package before they allow the lender to fund the loan. There was a limit for us on the loan amounts, and often, third-party reports went above and beyond the appraisal required.

"Furthermore, an attorney was required for the borrower. So, it was no longer cost-effective for our clients. Now that we are working with DUS, we will be able to add more products for our clients to choose from."

Goto said that WaMu had worked with Fannie Mae in the past under different entities, but never within DUS confines. Now, the thrift will be allowed to do securitizations of more than $2.5 million without having to endure Fannie Mae's strict standards.

"Because of our brand-name recognition, we'll maintain our portfolio lending but also offer more programs to our clients," Goto said. Washington Mutual's multifamily portfolio has been very profitable to the bank over the years, but there was a need diversify its product line, he added.

Though Fannie Mae has delegated 24 other institutions for its DUS program, market sources said its alliance with WaMu is particularly significant because it is one of the largest thrifts in the country.

"This can definitely have the potential for increasing securitizations," a source noted.

Moreover, the timing of this agreement with the GSE is notable: Washington Mutual is about to close its $1.5 billion purchase of Bank United Corp. this quarter, which has a risky balance sheet in large part because of its exposure to out-of-state commercial real estate loans.

"This may have something to do with the acquisition, but I can tell you that this agreement with Fannie Mae was thought out well ahead of the Bank United purchase," Goto said.

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