Joe Wilson's Silicon Valley Real Estate Blog

By Matt Carter, Inman News, Monday, October 20, 2008.

SAN FRANCISCO -- Fannie Mae and Freddie Mac are shifting their emphasis from earning the maximum return for investors to pricing their loan guarantees to provide maximum liquidity to mortgage markets while still maintaining minimum safety and soundness standards.

That, coupled with the government's backing of Fannie and Freddie's debt and mortgage-backed securities, could help drive down interest rates in coming months, according to the newly appointed top executives at Fannie and Freddie and the head of the federal agency that oversees them.

During a panel discussion today at the Mortgage Bankers Association's annual meeting, the three policymakers said that in addition to canceling fee increases originally planned for this month, Fannie and Freddie are in the process of reevaluating pricing of their loan guarantees and engaging in a concerted effort to keep existing borrowers out of foreclosure.

"This is a very challenging time," said Fannie Mae Chief Executive Officer Herb Allison. "We're totally open to revising and even discarding practices and habits and traditions we've had in the past. We're looking at everything we do to see how we can serve you and more importantly the American public better."

Fannie Mae this month rescinded a plan to increase an adverse market delivery charge from 0.25 percent to 0.5 percent, and Freddie Mac has done the same. Freddie Mac had followed the lead of Fannie Mae in August in announcing that it would double delivery fees charged on all loans in response to mounting losses -- the increase would have resulted in fee increases equivalent to $1,000 on a $200,000 mortgage.

Allison said further pricing changes could be in store, as Fannie's management looks at the company's required return on capital, and instead of focusing on maximum return on capital, focuses on the minimum return required to ensure safety and soundness.