Fannie Mae is reducing its loan loss reserves and reporting strong profits but it has no intention of relaxing its underwriting standards or reducing its loan fees to increase purchase mortgage volume.
Fannie chief executive Tim Mayopoulos said there has been a “substantial decline” in
“We do not expect to reduce our underwriting standards,” he told reporters during a conference call Thursday morning on the company’s second-quarter earnings.
Chief financial officer David Benson noted that Fannie would not change its underwriting or reduce its loan level fees just because the cycle is changing and overall volumes will decline.
However, lenders imposed overlays on top of Fannie’s underwriting standards that make it harder for borrowers to qualify for a loan.
“With the decline in overall mortgage volumes, originators will be looking hard at the overlays that they put on our credit box,” Mayopoulos said. “We think there is an opportunity for them to provide more flexibility without us changing our underwriting standards.”
Meanwhile, Fannie reported $10 billion in net income for the second quarter, compared to $5 billion in the second quarter of 2012.
The secondary market agency acquired $210 billion in single-family loans from lenders and 79% were refinancings.
Its single-family business posted net income of $6.5 billion, up from $4 billion in the 4Q12.
