Fannie Mae is building ‘the strongest book of business we've seen in the last decade,’ according to prepared remarks from the government-sponsored enterprise's president and CEO, Michael Williams.
Williams, speaking before a Women in Housing and Finance luncheon in Washington, D.C., this week, attributed the improvement to recently strengthened underwriting standards.
‘We're emphasizing safer products, especially long-term, fixed-rate loans. We're also asking for better credit quality, better and more complete documentation, and better appraisals on the properties,’ Williams said. ‘By adopting these standards, we have begun to build a new book of business with some of the highest-quality loans we have ever seen.’
Fannie Mae's average loan-to-value ratios are nearly 70%, and credit scores average about 760, which FICO defines as ‘top tier,’ Williams said. Additionally, more than 90% of Fannie's new borrowers have long-term, fixed-rate loans. The company included no subprime loans in its newest book of business.
He also noted that the focus of Fannie Mae's credit-loss containment is on loans acquired two to five years ago.
‘I believe that we are seeing across the U.S. housing market – from borrowers, lenders and everyone with a stake in the future – what I would call a 'new realism,'’ Williams stated. ‘Step-by-step, we are putting in place a new foundation for our industry. It's a foundation based on the right lending standards and on a broad re-examination of what constitutes sensible risk.’
SOURCE: Fannie Mae