Selling whole loans can help credit unions improve member service and meet members’ mortgage needs. Whole loan sales are a simple and straightforward secondary market transaction. Selling servicing retained to Fannie Mae reduces the opportunity for other mortgage originators to cross-sell similar products and services to members. Whole loan sales also provide immediate liquidity as well as reduce risk.
Hedging mortgage pipeline risk in a fast-paced market can be challenging and costly, so Fannie Mae offers a best efforts whole loan committing option in addition to its mandatory execution option.
What Does Best Efforts Mean to Credit Union?
With a mandatory execution, if a credit union is not able to fulfill the terms of its commitment, Fannie Mae will require it to pair out of the contract, possibly subjecting the credit union to a pair-off fee. With the best effort option, the mortgage originator (whole loan seller) makes a “best effort” attempt to deliver the mortgage loan to the buyer (investor). The risk of a loan not closing with a borrower is effectively transferred from the originator to the investor. When a credit union chooses best efforts committing, the investor effectively handles the pipeline management and interest rate risk for the credit union.
Fannie Mae offers the best efforts committing option to any approved credit union partner on a loan-by-loan basis through its web-based application eCommitONE. With best efforts, credit unions can commit a loan for sale to Fannie Mae and if the loan does not close, Fannie Mae does not assess a pair-off fee.
Credit unions that commit through eCommitONE have a number of benefits at their disposal, including:
Competitive, real-time pricing and after-hours committing.
Fannie Mae offers live pricing throughout the business day beginning 8:15 a.m. EST. Easy online committing access allows credit unions to lock in the rate/price at the same time as rate locking with the member, which helps alleviate interest rate and loan fallout risk. After-hours committing is available on business days between 5 p.m. and 10 p.m. EST, giving credit unions additional flexibility in managing their mortgage pipeline while reducing overnight interest rate risk.
The ability to change loan amount, product type, and note rate.
Credit unions may change the loan amount at any time without incurring an over- or under- delivery fee. They may also re-price their commitment at any time by changing the product or note rate. The price returned will be the price offered on the original commitment effective date for that product or note rate as opposed to current market price.
Flexible commitment periods and extensions.
The best efforts platform allows credit unions to manage members’ mortgage rate lock needs while optimizing execution through flexible commitment periods (from one to 90 days) and extensions. Credit unions may also extend their commitment up to 30 days at a per-diem interest rate cost one day at a time for that 30-day period.
Multiple remittance types and underwriting methods.
Both Actual/Actual (A/A) and Scheduled/Scheduled (S/S) remittance types are available on a commitment-by-commitment basis. With actual/actual remitting, credit unions typically remit daily payments to their investor as their member pays, effectively eliminating advance risk. Loans underwritten using either Desktop Underwriter or an Alternative Underwriting Flexibility method are acceptable.
Immediate funding of delivered and certified loans.
With Fannie Mae, credit unions may receive proceeds within two days of delivering clean data and certified documents, allowing them to pay off their warehouse line or line of credit soon after they have funded their members’ loans.
More information about Fannie Mae’s eCommitONE, including an FAQ and steps for registration, are available on efanniemae.com. Credit unions that are not an approved Fannie Mae seller/servicer, please visit efanniemae.com to access the Path to Approval Toolkit and Self-Assessment Tutorial. Contact a Single-Family Customer Account Manager at 888-Fannie8 (326-6438) or the Capital Markets Sales Desk at 800-752-0257 to get started today.
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