Fannie Mae unit to lift loan cap Electronic service to underwrite loans over $207,000

Approvals within 30 minutes

Jumbo loans are made possible via venture with Merrill Lynch

September 15, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Getting a mortgage is about to become a quicker, simpler process for buyers of homes in the $200,000 range and up, Fannie Mae announced last week.

Starting next month, the Federal National Mortgage Association (Fannie Mae) will expand its electronic loan underwriting system to include loans of $207,000 or more, known as jumbo loans. The agency said there was no limit on the amount it will underwrite.

Using the Fannie Mae Desktop Underwriter network, a loan officer will be able to take a borrower's application, get an appraisal and credit rating and have the loan approved in 30 minutes or less, said officials of Fannie Mae, the nation's largest source of home loan funds.

Fannie Mae's system and a similar one offered by the Federal Home Loan Mortgage Corp. (Freddie Mac) are expected to revolutionize the way buyers get loans.

The systems should help lenders do away with stacks of paper, speed mortgage approvals and eventually allow loans to close in no more than 10 days. Now it takes 30 to 60 days to settle on most properties.

In the past, lenders have been able to use the Fannie Mae system only for loans of $207,000 or less, which is Fannie Mae's loan purchase limit. About 200 lenders nationally have been using the system, said Michael Williams, Fannie Mae's senior vice president for technology marketing.

But through a joint initiative with Merrill Lynch Credit Corp., the appraisal and underwriting system will be expanded in October to include the larger loans.

"Over time, consumers should see a process that's significantly easier and faster," Williams said.

Lenders can use the Fannie Mae system for jumbo loans to be purchased by Merrill Lynch. Fannie Mae will act as underwriter only and will not purchase loans. Electronic appraisals will be done by Lender's Service Inc., an affiliate of Merrill Lynch.

About 20 lenders who now sell loans of $207,000 and less to Fannie Mae are expected to start using the new system for jumbo loans in a pilot program to start next month.

The venture is a first both for Fannie Mae and Merrill Lynch. It allows Fannie Mae for the first time to offer its Desktop Underwriter system to lenders of larger loans. And it marks the first time that Merrill Lynch, which also originates jumbo loans, will become a large-scale purchaser of loans.

Fannie Mae expects to bring other investors into the system in the future, Williams said.

Merrill Lynch Credit, which will repackage loans as securities to sell to investors, expects to purchase more than $1 billion worth of loans during the first year, said Kevin O'Hanlon, president of Merrill Lynch Credit Corp., the Jacksonville, Fla.,-based retail mortgage and credit subsidiary of Merrill Lynch.

"We saw an opportunity to improve the mortgage process for a number of mortgage bankers and make the origination process more efficient and more streamlined -- and generate business for Merrill Lynch," O'Hanlon said.

Merrill Lynch will be able to buy loans on a large scale because of consistent underwriting from Fannie Mae, O'Hanlon said.

"It will make the origination process quicker for consumers, and give them access to a wider array of products," he said.

Lenders will be able to offer borrowers loan products that Merrill Lynch has available as an originator.

One type of mortgage offers no down payment to borrowers who pledge eligible securities in a Merrill Lynch investment account as additional collateral.

Merrill Lynch also offers adjustable-rate mortgages with a choice of a one-month or six-month adjustment period over a 25-year term, with interest-only payments for the first 10 years.

Pub Date: 9/15/96

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