Fannie Shuts Door to More Small Lenders

American Banker (09/22/08) P. 1; Berry, Kate
New eligibility rules issued by Fannie Mae could make it difficult for small lenders to remain in business, though the Mortgage Bankers Association is uncertain how many would be impacted. Under the rules, lenders cannot experience material adverse changes or four straight quarters of net losses coupled with a 30-percent decline in net worth. Lenders also will be in breach of contract if their net worth falls more than 25 percent during three months or more than 40 percent over six months, if the lender defaults on its warehouse line or if an affiliate defaults on its obligations to Fannie Mae.