Lenders electing to blow off training and preparedness for Fannie Mae and Freddie Mac’s new Uniform Mortgage Data Program (UMDP) may run the risk of failing to grasp the future of the secondary market.
As of Dec. 1, any loan sold to Fannie or Freddie has to go through the new program, which includes the Uniform Loan Delivery Dataset (ULDD), as well as the Uniform Appraisal Dataset and the Uniform Collateral Data Portal.
Fannie and Freddie expect lenders to be fully compliant with the new systems by late March.
But there is strong suspicion in the industry that lenders are not ready.
“There’s going to be a lot of folks waiting to get it done at the last minute and they’re not going to be able to get it done,” predicted Jon Auger, senior vice president of retail lending at Natick-based Middlesex Savings Bank.
Attendance at a training session put on by Freddie and the Massachusetts Mortgage Bankers Association (MMBA) Nov. 30 was only sparsely attended, the MMBA said.
No Surprises
The risk in unpreparedness isn’t necessarily limited to the potential inability to sell loans to Fannie and Freddie, Auger said. That inability would also extend to whatever investors provide liquidity in the secondary market if the government pulls the plug on Fannie and Freddie.
The new system “is going to have broad implications beyond Fannie and Freddie,” Auger said. “It’s going to make it easier for private investors to buy larger pools of mortgages.”
Thanks to the UMDP, “there’s a lot more data on the properties underlying these securities,” Auger said. “I don’t know many in the industry that think Fannie and Freddie are going to be around for the long haul. Whoever is going to replace it, this is a step that would make that easier. If this was just for Fannie and Freddie, you would have to question the expense.”
Middlesex Savings keeps the majority of its residential loans in its portfolio. Still, Auger said the bank is ready to use the new, uniform systems.
Another possibility, according to another lender who wished to remain anonymous, is that a “different market” will come into play just for those riskier loans that “do not make it through the portal.”
Michael Roy, vice president of compliance at Easthampton Savings Bank and co-chairman of the MMBA’s education committee, said by now, the new ULDD requirements should be neither a surprise, nor a problem for lenders.
“People have been getting used to the new forms and the new standards,” Roy said. “When technology changes, people do need time to adjust and it takes resources.”
And lenders have had plenty of time to study and adjust, he said.
“People have a fair amount of time to plan. It’s been rolled out in stages,” he said. “People have known it was coming for awhile.”
A Common Language
The ULDD sets uniform loan delivery data standards and defines the data Fannie and Freddie will require based on loan type, loan feature or other business requirements.
According to Freddie Mac, adopting the ULDD will help improve data accuracy, simplify the exchange of data, and increase confidence that loan data delivered to Freddie Mac is complete and accurate. The two institutions previously used proprietary software to process mortgage documents.
Mike Dawson, vice president of customer and business services in Freddie Mac’s single-family sourcing and securitization division, also said lenders should be ready.
He said Freddie and Fannie have been “working jointly, working in lockstep” not only to implement the new uniform systems, but to get lenders ready for it.
“We’ve been doing that through training and web sites and all the technical tools at our disposal,” Dawson said. “It does take a fair amount of effort, but it’s going to help across the industry,” which for the first time will have “a common platform and a common language, as it were” when dealing with Fannie and Freddie.
In 2010, Freddie Mac invested $15 billion in Massachusetts. In the first half of 2011, its investment in the state was $6.7 billion. Between 2000 and 2010, Freddie Mac invested $155 billion, according to corporate statements.
