|Fannie’s Bid for Conseco Servicing Portfolio Draws Concern
FM Watch opposes direct consumer dealings
February 25, 2003
By CHRISTY ROBINSON
|Fannie Mae’s bid last week on the manufactured housing servicing platform of bankrupt Conseco, Inc. has the mortgage industry worried about the government entering the competitive marketplace. But Fannie says it would win the bid only in the unlikely event that no one else wants the loans, and even then Fannie intends to find an outside servicer.
Fannie’s floor bid was $70 billion, the portfolio is valued at $23 billion, and Fannie’s holdings in that portfolio is worth $7 billion. While Fannie wouldn’t actually service the loans itself if it won the bid, it has explicit charter authority to do so and has serviced loans many times before, said spokeswoman Janice Daue.
Chuck Greener, Fannie senior vice president of communications, said that the floor bid was intended to break up an impasse in Conseco’s bankruptcy hearing on Feb. 19.
“Our bid would only be triggered on the highly unlikely event that no one else wants to operate what would be a valuable servicing business,” and that Fannie expects the disposition of the business to be settled within the next few weeks, making its floor bid unnecessary, he said in a statement.
Daue echoed his statement by saying that Fannie’s primary reason for entering the bid was to stimulate activity in the bankruptcy proceedings.
“Of course Fannie is going to downplay the whole situation,” said spokeswoman Beneva Schulte of FM Watch, a watchdog group that monitors Fannie and Freddie Mac’s activities. “They know that the industry is opposed to them going directly to the consumer,” which is what servicing would allow Fannie to do.
Fannie, a government-sponsored housing enterprise, was created to provide liquidity to the secondary mortgage market, not “enter the mortgage servicing business,” said Mike House, executive director of FM Watch. The fact that Fannie placed this bid shows it has strayed from its original mission, he said in a statement.
“Once again, Fannie Mae is putting the interest of its stockholders ahead of the interests of taxpayers and homeowners,” House said. “Fannie Mae has no business expanding into this new area without first getting approval from [the U.S. Department of Housing and Urban Development].”
Other certificate holders are “supportive of what we’re doing,” Daue said. Fannie is not able to provide the names of those certificate holders, she said.
Schulte said that Fannie’s plans to find another servicer if it wins the bid doesn’t make FM Watch any more comfortable. Fannie placing a bid on Conseco’s loans amounts to it entering into unfair competition with non-governmental companies.
Conseco filed chapter 11 bankruptcy in December, in what is one of the largest in U.S. corporate history. At Sept. 30, Conseco listed $52.2 billion in assets.
Christy Robinson is the editor of MortgageDaily.com. She received a bachelor’s degree in news-editorial journalism from The University of Texas at Arlington. Her work has previously been published in The Dallas Morning News.
email Christy at: ChristyRobinson@MortgageDaily.com
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