Fannie Mae Announces $250 Million `Working Mortgage' Pilot; Product Lets Borrowers Make Automatic Payments Tied to Their Pay Schedule, Allows Faster Equity Build-Up

Business Wire, June 14, 1999

WASHINGTON--(BUSINESS WIRE)--June 14, 1999--

Borrowers can benefit from additional underwriting flexibilities and build up equity in their home faster by obtaining the Working Mortgage, a new product introduced today by Fannie Mae (NYSE:FNM), the nation's largest source of financing for home mortgages.

The innovative mortgage product, available initially from Bank One Mortgage, Citicorp Mortgage, FT Mortgage, and Old Kent Mortgage, offers borrowers a mortgage loan with special benefits, including lower down payments, easier qualification rules, and greater buying power.

The product, to be known as the Working Mortgage during its pilot phase, sets up an automatic deduction of the mortgage payment that matches the timing of the borrower's weekly or biweekly paycheck. Withdrawing funds for the mortgage payment with each pay period results in faster amortization of the mortgage, allowing the borrower to build up equity at an accelerated rate.

"The Working Mortgage allows lenders to offer new flexibilities to borrowers who want to improve their personal financial management and budgeting," said Franklin D. Raines, chairman and chief executive officer of Fannie Mae. "We are especially excited about the feature in this new mortgage product that helps working families build up equity faster so they can tap into it for future needs, such as financing a college education, retirement, or estate planning."

A borrower who obtains a Working Mortgage would set up automatic withdrawals that coincide with their pay schedule - whether weekly or biweekly. The Working Mortgage only is available to those employees who use the direct deposit option offered by most employers. The automatic deduction of the mortgage payment also eliminates the hassle of writing and mailing the check for the mortgage payment each month.

After setting up a direct deposit account, the borrower applies for a Working Mortgage with one of the pilot lenders. As a condition of applying for the mortgage, the borrower agrees to have the mortgage payments deducted from their checking or savings account on the same day their pay is deposited. The lender then submits the loan for approval by Fannie Mae.

For employees paid once a week, each deduction would be one-fourth the monthly mortgage payment. For employees paid on a biweekly basis, each deduction would be one-half of the monthly mortgage payment. For loans with two borrowers, the Working Mortgage can accommodate two different payment cycles.

For example, a two-income household could have part of the mortgage payment deducted on a biweekly basis from one of the borrowers, and part of the payment deducted on a weekly basis from the other borrower. The timing of the automatic deduction can be changed if the borrower's pay cycle changes.

Aegis Mortgage Acceleration Corporation of San Francisco, CA, has been selected by Fannie Mae to be the Automated Clearing House transaction processor for the Working Mortgage.

Aegis performs electronic Automated Clearing House withdrawals and mortgage payment processing for more than 50 mortgage servicers and 300,000 homeowners nationwide. Aegis has a relationship with seven of the top ten mortgage servicers in the country.

"We see consumers embracing high value-added financial products and services that are made available at the lowest possible cost. The Working Mortgage is a prime example of how Fannie Mae and its lender partners are bringing change to the marketplace and responding to homeowner's needs. We are pleased to participate in this innovative initiative," said John P. Decker, president of Aegis Mortgage Acceleration Corp.

Because Working Mortgage payments are deducted more frequently, borrowers pay down the outstanding principal balance of the mortgage at a faster rate than if traditional monthly payments were made, so they accumulate equity at a faster rate.

On a $100,000 mortgage with biweekly deductions, this rapid equity appreciation would translate into $4,000 of additional housing wealth for the borrower after the first five years of the Working Mortgage, and almost $10,000 within 10 years.

At the end of the pilot period, which will run through the early part of the Year 2000, Fannie Mae expects to expand the availability of the Working Mortgage.

For more information on the Working Mortgage, consumers may call Fannie Mae's Consumer Resource Center at 1-800-7-FANNIE (1-800-732-6643), Monday through Friday, between 9:00 a.m. and 5:00 p.m. EDT.

Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages.

Over the past 30 years, Fannie Mae has provided nearly $2.5 trillion of mortgage financing for over 30 million families. More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com.

Style Usage: Fannie Mae's Board of Directors has authorized the company to operate as "Fannie Mae," and the company's stock is now listed on the NYSE as "Fannie Mae." In order to facilitate clarity and avoid confusion, news organizations are asked to refer to the company exclusively as "Fannie Mae."