Fannie Mae's Jim Johnson pledges to eliminateduplicate fees for automated underwriting;...

SAN FRANCISCO--(BUSINESS WIRE)--May 5, 1997--In a speech here Monday to the nation's leading housing lenders, Fannie Mae Chairman and Chief Executive Officer James A. Johnson said the company would lower lenders' costs of using underwriting technology in a variety of ways, including the elimination

of lenders' duplicate underwriting fees, a reduction in the amount of data required for an automated underwriting decision, and a commitment to help its customers interconnect all of the automated underwriting systems and networks they currently use.

Speaking to the Mortgage Bankers Association's National Secondary Market Conference, Johnson announced "Best Connections," Fannie Mae's (NYSE:FNM) latest initiatives to make automated mortgage underwriting technology less expensive for lenders, and even easier to use.

"Technology costs should not be a barrier to our customers' success," said Johnson. "We've listened to their concerns about the cost of access to automated underwriting systems and are taking action. One of the first steps of this initiative is to immediately begin work on eliminating the duplicate fees that lenders can be charged as they determine which of several underwriting avenues they wish to undertake."

"We call these new steps `Best Connections' because through these initiatives, we will help create the best possible connections between lenders and their customers, as well as between lenders and the variety of technologies they now employ. These improvements will mean cost and time savings for consumers, greater efficiencies for mortgage lenders, and the improved interconnection of different automated systems in use today," Johnson told conference attendees.

Johnson announced that Fannie Mae will achieve the following goals by Oct. 1, 1997:

1. Eliminate Duplicate Fees and Increase Ease of Use

-- To seek elimination of duplicate underwriting fees, Fannie Mae

will complete three pilots with lenders designed to test new

pricing approaches for the company's Desktop Underwriter system.

In Pilot 1, lenders would pay a nominal service charge for

using the system and would only pay the full fee if they then go

on to deliver the loan to Fannie Mae. In Pilot 2, lenders would

pay a periodic licensing fee in lieu of individual loan-by-loan

charges. In Pilot 3, lenders would pay a fee that does not

include a waiver of reps and warrants for portfolio loans because

Fannie Mae is not the ultimate investor in these loans.

At the conclusion of these pilots, the company will initiate a

pricing policy which allows the best secondary market execution

without lenders' paying duplicate fees to have the loan

underwritten prior to deciding where to sell the loan;

-- Fannie Mae will reduce data requirements for point-of-sale

implementation of Desktop Underwriter by 30 percent. The company

currently requires approximately 60 data elements to underwrite a

loan through Desktop Underwriter. By October, Fannie Mae will

reduce this requirement down to approximately 40 elements for the

majority of loans that are processed through Desktop Underwriter.

By simplifying the amount of information necessary to underwrite a

loan, borrowers will get quicker loan decisions and lenders will

benefit from greater productivity;

-- Fannie Mae will expand upon its industry-leading work by

enhancing the property risk assessment features of Desktop

Underwriter. For the first time, Fannie Mae will be using an

automated system to measure the value of a property. In some cases,

this will result in a streamlined property inspection instead of a

traditional appraisal, and an estimated 25 percent additional time

and cost savings for borrowers.

2. Reduce Costs

-- Fannie Mae will reduce charges to MORNETPlus by more than half

from $12.00 to $5.95 an hour by re-engineering the network and

using local access numbers;

-- Fannie Mae will charge only a $10 submission fee, instead of

the full fee, for loans that Desktop Underwriter evaluates as

"Refer with Caution." Fannie Mae wants lenders to reach out to as

many borrowers as possible and doesn't want to impose substantial

costs on this effort. Fannie Mae expects that many borrowers

whose loans, at first, get this designation will be put on the

path to homeownership through counseling. However, lenders should

not be reluctant to try underwriting such loans out of a concern

over fees;

3. Make Information More Accessible

-- Starting today, the company will publish Fannie Mae's systems

integration guide on the Fannie Mae website --

http://www.fanniemae.com . This will allow customers and vendors

access to data specifications and applications program interfaces,

including complete data standards, and;

4. Work with Industry to Set Standards for Interconnection of Systems

-- In partnership with the MBA, Fannie Mae will define industry

standards for a common data set and interface for gaining access

to and integrating underwriting systems. Fannie Mae embraces the

MBA's position calling for automated underwriting systems with

easy access and delivery at a reasonable cost to the lender.

"The reason we are moving forward with these initiatives is simple. We believe it is critical to the lender's ability to streamline their process, open new channels of distribution, and expand their product offerings to more home buyers," said Johnson.

"Duplicate fees for automated underwriting through the secondary market should not be a factor. There should be a way to allow lenders to have access to multiple underwriting systems, simply and inexpensively. Also, we believe automated underwriting is beneficial to consumers because it enables more people to gain access to homeownership."

"We've made it our business to listen to our customers and respond to their technology needs so that they can open the doors of homeownership to more low- to moderate-income families. The success of Desktop Underwriter is a testament to that responsiveness, as usage of the system has grown by more than 1,000 percent over the past twelve months, and is now evaluating up to 2,000 loans a day, or nearly 25 percent of our total loan volume," Johnson added. "We expect that percentage to more than double by the end of the year."

"The message is clear. There is no going back. As more of our business is done through automated mortgage underwriting, our best connection to our customers will continue to be open dialogue and open minds on how best to work together," Johnson said.

"I congratulate Fannie Mae for its leadership in addressing lenders' concerns about duplicate fees. This has been a key concern of lenders since the advent of automated underwriting. Fannie Mae has taken bold steps today toward cutting out duplicate fees and improving the access and affordablity of technology," said Ron McCord, president of the Mortgage Bankers Association of America.

"Fannie Mae's work in the technology arena should help reduce costs in the mortgage origination process and we look forward to working with them to facilitate these new changes over the coming months."

Johnson also announced that through its technology efforts over the last two years, Fannie Mae has:

-- Expanded its loan eligibility and mortgage risk analysis

capabilities through the recent announcement of Desktop Underwriter

Version 3.1, leading to an increased proportion of loans

recommended for streamlined approval;

-- Expanded access and homeownership opportunities by providing

free Desktop Underwriter for loan submissions under Fannie Mae's

Community Home Buyer's Program;

-- Streamlined the process of origination by providing

point-of-sale loan decision for all channels of business; and,

-- Provided lenders with links to automated underwriting decision

systems for government, jumbo, and subprime mortgages, including

agreements announced Monday with Residential Funding Corp. and

Standard & Poor's.

"All these steps together will further accelerate use of technology in the industry. It is now beyond all doubt that utilizing underwriting technology is how we will do business in the future. But we must continue to be ever vigilant in making the technology work in the best possible way for our customers. These initiatives announced today will do that. We will reduce our customers costs, and enable them to offer increased value to consumers. This is an important step forward," said Johnson. -0-

Fannie Mae is a congressionally chartered, shareholder-owned company and the nation's largest source of funds for home mortgages. It has committed to provide $1 trillion in targeted lending for 10 million homes by the end of the decade.

The targeted lending will serve low- and moderate-income families, minorities, new immigrants, residents of central cities and other underserved areas, and people who have special housing needs. More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com .

Style Usage: Fannie Mae's board of directors has authorized the company to operate as "Fannie Mae," and the company's stock is now listed on the NYSE as "Fannie Mae." In order to facilitate clarity and avoid confusion news organizations are asked to refer to the company exclusively as "Fannie Mae."

CONTACT: Fannie Mae

Janice Daue, 202/752-2131

Media Hotline: 1-888-FAN-NOW4 (1-888-326-6694)