New Freddie Deal Offers Subservicing

The American Bankers Association, whose membership represents 90% of all banking assets in the U.S., has signed a secondary marketing agreement with Freddie Mac.

For ABA, it now has agreements with the three largest secondary market outlets for conforming loans. It previously reached agreements with Fannie Mae and the Federal Home Loan Bank of Chicago to participate in the Mortgage Partnership Finance program. There are differences between all three agreements, said an ABA spokesman, but he was unable to elaborate on what those differences are.

Among the specifics of the alliance are an emphasis on developing stronger secondary marketing relationships to help banks manage mortgage portfolio risk, meeting Community Reinvestment Act requirements and providing a private-label subservicing option through Dovenmuhle Mortgage Inc.

The ABA spokesman said the group's members were looking for convenient access to the second market. Among those that will benefit most are those banks that do not have a large enough origination volume on their own. Freddie Mac spokesman Douglas Robinson concurred, saying, "The smaller lender has co-operative negotiating power."

Besides ABA, Freddie Mac has agreements with two other financial institution trade groups: America's Community Bankers and the Credit Union National Association. To participate, the bank must be an approved Freddie Mac seller/servicer. There are a number of specific product benefits and term benefits built around the agreement. Freddie, Mr. Robinson said, learned what the ABA members were looking for.

This agreement differs from the ones with ACB and CUNA. The alliance also offers preferred access to Loanprospector.com. Part of the reason Freddie Mac entered into the agreement was to get the word out about its activities. Mr. Robinson noted that the common belief about Freddie Mac is it only buys "plain vanilla" loans.

The knowledge of what products the company does buy is "not really well known." The agreement is supposed to go into effect on Feb. 10. ABA expects to release the details of the Chicago FHLB deal at its community banking conference on Feb. 9.

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