By Lew Sichelman
Home buyers will soon be able to close on their mortgages at half the current cost, a key housing finance exceutive has predicted.
Thanks largely to the greater efficiencies available from electronic commerce, Freddie Mac President David Glenn told a recent Mortgage Bankers Association conference that they "can count on faster, simpler mortgage originations at half the cost."
Later, Paul Peterson, another officer in the company, which buys loans from local lenders and packages them into securities for sale to investors worldwide, told reporters covering the event that most charges incurred by borrowers -- everything from loan origination fees to processing costs -- can be "significantly streamlined."
Peterson ventured that the average cost to produce a loan is about $1,500 on average. And within five years, that amount would be cut to $750.
He also "fully expects" that the cost savings will be passed on to consumers rather than held by lenders as profit. "Historically, there's always a lag," he advised. "But eventually, any amount lenders try to keep for themselves gets competed away."
Freddie Mac is one of two federally chartered but publically owned corporations charged with bringing liquidity to the mortgage market. Fannie Mae is the other, larger company. And it, too, had a lot to say at the San Diego conference.
One statement that wowed the audience was that the company expects to purchase $400 billion worth of mortgages this year without touching any of them with a human hand -- or eye, for that matter.
That's the volume of loans Fannie Mae anticipates it will underwrite and process electronically, Vice Chairman Jamie Gorelick said. The reason: Even in a declining market -- loan production is off because of rising mortgage rates -- more and more lenders are using the Internet to gain approvals for their mortgages and then sell them to Fannie.
Some 1,000 lenders are processing 60,000 applications a week on the company's automated underwriting program, Gorelick reported.
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