While the future of Fannie Mae and Freddie Mac remains uncertain, there are a number of things the two are doing to improve their operations and financial soundness, according to Patrick Lawler, chief economist and associate director of the Federal Housing Finance Agency (FHFA).
Speaking at the SourceMedia Best Practices in Loss Mitigation Conference in Dallas Monday, Lawler said the GSEs’ book of business post-conservatorship is profitable and well underwritten. But with Fannie and Freddie providing secondary market liquidity for about 65% of all new mortgages, there are steps they can take to improve no matter how long they remain the dominant force in the industry.
The GSEs are reducing their retained portfolios and have instituted a policy of not creating any new loan programs outside of initiatives to promote loss mitigation and helping homeowners avoid foreclosure.
Also, an alignment initiative is creating consistency in the policies and procedures at the two, and brings together the best policies at each institution, making them both better companies, Lawler said.
Lawler added that FHFA is also working with state and federal regulators to help manage changes to practices like mortgage servicing. The “massive change in servicing behavior that we're trying to create” may include changes to the servicing fee structure.
Lawler said servicers should get more money for the work they do to handle nonperforming loans, but added that it should come with a decline in the fee servicers receive for processing performing pools.