Fannie Mae Looking Towards Mortgage Lenders Contract Changes

By Liz Clinger Updated on 5/2/2012

Tuesday, May 1, 2012 Fannie Mae announced that some terms under purchase agreements, pricing and mortgage-backed securities contracts with lenders could change.

Lenders with large inventories of outstanding purchase requests would be affected with the new rules.

Fannie Mae indicated that any contracts or agreements on or after May 1st could have pricing changes one or more times during the term. Lenders will be provided with written notice before changes are made and can cancel the arrangement if they disagree.

$68.3 billion in mortgages were purchased by Fannie Mae in March, a 54% increase from last year and is the largest purchase by them since October 2010.

Largely affected is PHH Corp.’s mortgage subsidiary who renewed its master agreement with Fannie Mae, and amended a sale commitment of $1 billion dollars. If PHH’s net worth falls beneath $1 billion, if 30% of it’s buyback requests sit without action for more that 180 days, outstanding repurchase requests exceed 10% of the total by June and 5% by July, or if any buyback requests are outstanding for more than 270 days after July, PHH stand to lose their contract with the government sponsored enterprise. Investors were warned by PHH that Fannie Mae was vital to its mortgage operation. PHH’s profits more than doubled from one year ago in its mortgage department.