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| Denise Grant |
Grant is a v.p. in mortgage-backed securities at Fannie Mae, where she is responsible for the MBS product line, including marketing, disclosure, compliance and operations oversight.
How will higher rates affect the mortgage industry?
Our internal assessment shows that despite a rise in mortgage rates, home sales are likely to go up. Historical experience has proven that even when interest rates rise, home sales go up because of income and job growth. Employment growth will more than offset the increase in mortgage rates. We see record home sales this year because the purchase market is very strong. This has led to an increase in mortgage debt outstanding, implying more securitization and more supply of mortgage-backed securities in the market.
What is your assessment of origination levels and market supply?
We will certainly see fewer refinances, but new purchases and originations are what result in mortgage debt outstanding. Refinancing just leads to turnover of existing mortgage debt and mortgage securities. It is not absolute growth. Our outlook for purchase market growth is very strong. We expect mortgage debt outstanding to grow over 9% this year.
Will any new regulation or oversight tie your hands?
We believed mortgage debt outstanding would rise dramatically and that is the case now. This means our business volume will keep growing. New regulation is good for us and good for the market. Fannie Mae will grow irrespective of the levels of interest rates. We have been balancing our social goals and shareholder interest well for years. We like to say 'our mission is our business and our business is our mission.' Moreover, there is no new oversight. There are a lot of different proposals out there. Any legislation will recognize our role in the market.
How do you monitor the quality of the underlying collateral of the securities in a rapidly growing business environment?
We have a good surveillance department backed by good technology. We have a strong control system in place and our underwriting guidelines are stringent. We work closely with our lending partners who help us ensure quality in origination.
How will you maintain your leadership in the market?
More things are being securitized in general and mortgage debt is showing strong growth and Fannie Mae's business is growing rapidly. We are doing more business than we possibly could hope to have had in the last couple of years.
Fannie Mae tends to closely follow the overall market and keep in tune with the changes. When there are changes in the marketplace, we work closely with lenders and investors. We work with lenders on ways to improve their origination and help them with securitizing their products. We also work with the investors and the Street to find out what products they would like, what features they would be comfortable with in the securities and their other requirements. We help the lenders to securitize products that would interest investors. This keeps us close to the market to reflect market changes.
We understand what lenders are originating and what investors are interested in and help incorporate the needs of the lender and investors in securitized products to make it attractive in the market. Investors like a certain kind of product for long-term investment and another kind for short-term investment, with different loan features in them. It varies a lot. We customize products depending on their needs.