Freddie Mac is making some headway in addressing two pain points in mortgage lending: the complexities involved in navigating down payment assistance programs and a high volume of repurchases of flawed loans, according to Senior Vice President Sonu Mittal.
An online portal called DPA One that's been in the works for years launched Monday to address the first issue for borrowers in 48 states. Local and municipal programs in Texas and Minnesota also can be searched by anyone. Florida, Virginia, California, Kentucky and other states are on deck to follow shortly thereafter, with the remaining states to follow next year.
"For the loan officer, you can just put in a few data elements for the borrower and see what program they may qualify for, or not," Mittal said in an interview.
The portal is significant because it could help rectify a disconnect between the fact that the down payment is a key homeownership hurdle, particularly for underserved borrower populations, and the fact that relatively few borrowers connect with assistance programs, he added.
"We've also seen that a lot of the down payment assistance programs don't get fully utilized, so by doing this, creating awareness and education of the loan officer community, we are making sure more of these funds can be," Mittal said.
Meanwhile, the government-related mortgage investor also has managed to reduce two key repurchase-related metrics that recently reached cyclical, three- to five-year highs for the most recent quarter.
"Repurchase notices issued are down 60% in Q3 versus Q1, which was the peak, and the NAQ rate, which is the nonacceptable quality rate, is down 30% from the peak, so we are seeing everything moving in the right direction," Mittal said.
An advisory group of lenders that Freddie convened on repurchase issues earlier this year after Mittal became head of single-family acquisitions has contributed to the decline, he added. (Freddie at deadline didn't have any vacancies open in the group, which represents a cross-section of companies in the industry. However, it welcomes any lender's feedback on repurchases, MIttal said.)
Work on repurchase issues continues, Mittal said. The government-related loan buyer also is looking into whether there are ways to offer options other than buybacks in some instances and that he has an understanding of the industry's view of the issues from his previous experience as a mortgage executive at Citizens Bank.
"We don't believe the work is done yet," Mittal said. "There's still a lot more to do, and one of the things we're thinking about is, is there a potential alternative for performing loans?"
Freddie Mac also is examining whether there are additional preventative measures that can be taken prior to funding.
"Wouldn't it be great if we can tell the seller, hey, there's an opportunity for you to fix something before the loan funds rather than after? " Mittal said, noting that Freddie is looking for ways to use automation to do this.
Groups like the Community Home Lenders of America have called for remedies for defects other than what have been costly repurchase agreements.
Repurchase requests among community lenders have fallen even more markedly than what's been seen for mortgage companies overall at 68%, Mittal said.
