Freddie Mac is exploring alternatives to those dastardly repurchase demands most lenders hate.
In an extensive interview with National Mortgage Professional, Freddie Mac's Senior Vice President Sonu Mittal would not reveal exactly what the government sponsored enterprise is considering, saying only that lenders who have exemplary records may be given other ways to deal with defective loan packages.
Meanwhile, in her remarks here at the Mortgage Bankers Association’s annual convention, Sandra Thompson, director of the Federal Housing Finance Agency, said she has directed both GSE's to look into ways to repair defective but performing loans without requiring their originators to repurchase them.
Lenders have bemoaned the increase in repurchase requests, but Thompson said that given the state of the economy during the pandemic and after it passed, they “should have been expected.”
Still, she said, “we’ve heard” the chorus of complaints from lenders who maintain many buy-back orders are unjustified because they don’t rise to the need for repurchase. Consequently, the FHFA wants to make sure the rules are promulgated predictably and consistently. “We have to work together,” she said.
In the interview with Mittal, the Freddie Mac executive, who joined the government sponsored enterprise less than a year ago after 20 years in the private mortgage sector, said he feels for originators who think they’ve been wronged.
And he lauded them for improving file quality and the effectiveness of their quality assessment functions. “Our incoming loans have approximately a 30 percent lower defective rate than at their peak,” he said.
He also credited his company for part of the improvement. “We have and will continue to improve our quality control review process to ensure outcomes that are consistentm reasons for defects are well-defined, and feedback is reported clearly to lenders,” the Freddie Mac officer said.
But lenders continue to grouse, some vociferously, that both GSEs are not only nit-picking but going back three and four years to flag loans that are performing well.
Sales trainer Ron Vaimberg told NMP that on a panel he moderated recently, participants complained they are being bombarded with buy-back requests. One panelist maintained loans are being recalled for the most ludicrous reasons, the Jefferson Valley, N.Y., trainer reported. And another said that to protect himself, he is now quality controlling 50% of his production instead of the usual 20%.
Mittal, on the other hand, said that loan defects have blossomed since the sector has transitioned into primarliy a purchase money mortgage market. Freddic Mac’s research shows that purchase loans generally have 35 percent more incidences of defects than refinancing, he said.
