This is it – the final article of my series “GSE Guidance”. You might ask why did I invest the time and effort in writing these series? It’s simple, I have a genuine passion for this business and know the importance of being an approved Seller/Servicer with Fannie Mae and/or Freddie Mac. I have learned during my lengthy career in Capital Markets that having more than one investor option is critical to the long-term strategy of a firm. With that in mind, this article will focus on three key elements:
- Benefits of working with Fannie Mae and Freddie Mac
- Business readiness
- Next steps
Don’t be mistaken, there are key differences when a firm is moving from one Capital Markets execution model as an indirect seller, to becoming a direct seller with Fannie Mae or Freddie Mac which must be understood within the C-level leadership team.
- The market makers - liquidity that Fannie Mae and Freddie Mac creates.
- Long-term business models that have been proven to be sustainable.
- Access to the “best of the best” technology resources.
- Capital Markets best execution opportunities.
- Internal underwriting decision making.
- Broad array of effective loan options.
- Leaders in specifically designed Affordable Housing programs.
- Dedicated subject matter resources and training.
Business Readiness: This is the assessment of your firm’s ability to adapt, transition, implement and meet the Seller/Servicer requirements of the GSE’s. While you may have heard that becoming approved with Fannie Mae and Freddie Mac takes a while and can be a big leap, that depends on how you run your business today. It is also incorrect to conclude that once you are approved with Correspondent Aggregators, the approval process with Fannie Mae and Freddie Mac is identical – it is not.
Some of the gaps that I have seen when working with clients include:
1) Perception about the Seller/Servicer application process is incorrect.
2) Different objectives within Leadership team.
3) Leadership is not familiar with GSE expectations and requirements.
4) Corporate Governance does not have structure.
5) Conflicting reporting lines in the loan origination to closing processes.
6) Quality Control Plans, processes, reporting, and remediation are outdated.
7) Risk Management protocols are managed inconsistently.
8) Ineffective and outdated, non-tested Policies and Procedures.
Next Steps: A GSE Readiness Assessment is something that can be done NOW – add it to your Fall calendar. Be ahead of the game – visionary thinking! Your timing is instrumental as there are lenders who will become more aggressive as mortgage brokers, start a mortgage company, and will also modify their business model. BlackFin Group talks to C-level executive’s every day who are having these “live and well” strategies now!
A GSE Readiness Assessment is a method of evaluating your firm’s readiness in submitting its’ Seller/Servicer application and will benefit everyone in a leadership position. It requires an Executive Sponsor and an evaluation of current processes as they align to GSE requirements. Guidance is provided to the client regarding gaps, with recommendations for areas of improvement. It is a highly recommended first step before moving down the formal Seller/Servicer application path.
In closing, be mindful that the present interest rate forecast is positive, it’s just a matter of when, and how much the Federal Reserve’s decisions will result in lower interest rates. And then, while one should never talk about politics, the United States is in the most unprecedented time in history regarding this year’s Presidential race. Those two factors alone will create dynamics in the interest rate environment, consumer sentiment and consumer demand that has yet to reveal itself.
Ask yourself, are you prepared for this journey?
Luana Slettedahl is a Principal Consultant with BlackFin Group in the Mortgage Strategy Practice. Luana brings forty years of diversified experience in Capital Markets, Mortgage Servicing Rights, GSE and Ginnie Mae relationship management and Seller / Servicer requirements. Her understanding of how to successfully do business with the GSE’s and Ginnie Mae, has made her a significant asset to her clients. For more information contact info@blackfin-group.com