Fannie Policy Shift Criticized as a Threat to Bank Liquidity

American Banker (09/30/08) P. 10; Berry, Kate
A policy change at Fannie Mae will require banks at risk of financial collapse to transfer mortgage payments on a daily--rather than monthly--basis, generating opposition from bankers. Fannie Mae spokesman Brian Faith says the daily transfers ensure that bank failures do not result in lost funds, but bankers fret the move will reduce liquidity. "They will have to replace these deposits, and the replacements will be expensive," says Financial Services Roundtable chief lobbyist Scott Talbott. Fannie Mae, which will implement the change on a bank-by-bank basis, has not indicated how many banks could be affected.