Will Fannie Squeeze Out Technology Providers?

Miami -- Many in the industry are concerned about Fannie Mae's plan to bring the Desktop Underwriter decision to the point-of-sale, scrub it for fraud and order the services to fulfill the loan because this initiative cuts several players out of the process and is not too far away from the creation of a Fannie Mae loan origination system.

At the 8th Annual Mortgage Technology Conference here, David Flaxman, senior vice president of e-solutions at the GSE, announced a plan that would put Fannie directly in the origination space in attempt to cut $500 out of the loan process. The GSE would create private-label websites in the name of the lender that go out to the consumer.

Specifically, the flow of the system would work in such a way that the consumer would enter their information into the website, a DU decision would be rendered, that decision would be checked for fraud, and lastly all services needed to fulfill that loan would be automatically ordered based on the DU findings. This move has some scratching their head wondering if Fannie would remain a GSE or become a GSE, a lender and a technology vendor all at the same time.

"I was surprised by the comments made by David Flaxman at the Mortgage Technology Conference," said Cy Brinn, chief executive officer at GHR Systems, Wayne, Pa. "If I understood his slides and comments correctly, it appears that Fannie Mae is now in the business of providing lenders with websites and other loan origination technology. Mr. Flaxman said that Fannie Mae is expanding Desktop Underwriter to enable lenders to use Fannie Mae's decisioning technology for automating lender-specific decisioning and the pricing of any loan. I assume this means providing technology to enable lenders to underwrite and price loans that lenders will either put into their portfolios or sell to other secondary market investors.

"If Fannie Mae is engaging in either of these business practices, I will be very concerned," he continued. "It seems to me that such business practices are well outside the boundaries of Fannie Mae's mission to increase homeownership for Americans. Our employees work hard to keep GHR ahead of the competition in the lending automation market. It would be unreasonably challenging for us to have to compete with Fannie Mae to deliver technology to America's mortgage lenders. Fannie Mae's low cost of capital, and their leverage with lenders through the guarantee fee ...