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WASHINGTON – The tally is in. One year after NAFCU President/CEO Fred Becker announced at the association’s 2002 annual conference an alliance between NAFCU and Fannie Mae, approximately 10,000 mortgages have been approved for credit union members as a result of the partnership. The alliance between NAFCU and Fannie Mae – the first of its kind between the Government-Sponsored Enterprise and a credit union association – was implemented to provide NAFCU-member credit unions the opportunity to expand their ability to offer affordable mortgage financing and manage their interest rate, liquidity, and credit risks. The partnership has afforded NAFCU members special pricing in the secondary market for fixed-rate mortgages; access to Desktop Underwriter, Fannie Mae’s underwriting loan technology; educational and training support on how to expand access to the secondary market; the ability to offer a wide range of mortgage products, including fixed and adjustable-rate mortgages; and mortgage loans up to 100% loan-to-value. In 2001, prior to the alliance, 13.5% of NAFCU-member credit unions did business with Fannie Mae. In 2002, that number was up to 17.5%. At press time, the figure wasn’t in yet for 2003. Jeff Hayward, Fannie Mae’s SVP for single family business, said the size of the credit unions that are doing business with Fannie Mae have been “all over the map” and include some of the tiniest CUs, as well as some of the largest. He said CUSO participants have also drawn in some very small credit unions. Becker said NAFCU’s alliance with Fannie Mae “compliments NAFCU Services Corp.’s designation of Prime Alliance – a CUSO created by Boeing Employees’ Credit Union and DEXMA and powered by Fannie Mae Desktop Underwriter – as its preferred partner” for mortgage processing and fulfillment services that was announced in September 2002. It was only a matter of time before interest rates began to go up as they are now, and NAFCU wanted to position credit unions to strategically deal with that when it happened, said Becker. “Fannie Mae wants to help federal credit unions engage in mortgage lending and give them the vehicle to competitively sell mortgages on the secondary market,” said Hayward. That includes doing analysis of credit unions’ mortgage loan portfolios and buying mortgages from them to help them dispose of some of the assets credit unions have loaded up on. “In today’s interest rate environment, as rates start to go up, credit unions will be looking to sell more of their mortgages on the secondary market,” he said. This is especially important, said Becker, as federal credit unions pick up a larger portion of the mortgage market and an increasing number of FCUs convert to community charters and provide more mortgage services to low- and moderate-income areas. According to NAFCU, as of March 2003 there were 878 community-chartered federal credit unions. In 2000, 40 FCUs added underserved areas to their field-of-membership. One year later, that number was up to 164, and in 2002, 224 FCUs added underserved areas. “The prospects for credit unions in the mortgage market have never been better,” said Hayward, even as mortgage rates start to show signs of going up. A rise in mortgage interest rates will push the rate of refis down, Hayward said, but credit unions should not expect to see much change in their purchase transaction volume – at least not in the foreseeable future. There are two factors driving this, he explained: first, some consumers see the current rate environment as a `window of opportunity’ they should take advantage of before rates go higher; second, 6% is still an affordable rate for many consumers. Hayward said Fannie Mae expects to do more than $3 trillion in mortgage this year. Hayward also said Fannie Mae is not concerned about any possible fallout from the investigation in to Freddie Mac’s accounting problems and the resulting changes in Freddie Mac’s executive leadership, and ongoing discussions on Capitol Hill about transferring regulation of the GSEs from the Office of Federal Housing Enterprise Oversight to a newly created branch of the Treasury. Becker concurred. “Credit unions realize Freddie Mac and Fannie Mae are entirely two different companies,” he said. -

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