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Certainty Is the Key to Quality

VP Michael DawsonFrom a lender’s point of view, one of the most critical needs for building a successful business in today’s mortgage market is certainty.

Lenders want greater certainty each loan file is complete before delivery. They want certainty borrower and collateral data are accurate. They want certainty the loan complies with the investor’s guidelines so, and most importantly, they have certainty the loans they sell will stay sold. Period! That’s why Freddie Mac’s Single-Family Business is focused on giving our customers greater certainty in every loan we buy or guarantee. We call it our Greater Purchase Certainty initiative.

We believe Greater Purchase Certainty is best achieved by establishing standards based on the realities of the mortgage business, by recognizing that people aren’t infallible, and by giving lenders of all sizes our view of their loans before– not only after – they are sold and delivered.

This is important because the more certainty we provide our customers, the more confidence they have in the loans they sell us. With increased certainty, our customers can focus their resources on building new business and helping more families buy homes or refinance their mortgages.

Every day, we are operationalizing Greater Purchase Certainty in the marketplace by building on the Uniform Mortgage Data Program standards. We’re also rolling out a new generation of tools designed to both assist in improving loan manufacturing quality during the production process and make that process easier and more cost effective. Specific recent examples of Greater Purchase Certainty in action include:

  • Our introduction of Loan Quality Advisor. Send a file through this new tool at any point during production and it instantly flags data problems and other eligibility issues before delivery.
  • Clearer, more explicit feedback messages from Loan Prospector designed to take the guesswork out of underwriting to our credit, documentation, and purchase eligibility requirements. The new feedback messages were developed in response to common defects our QC team found in their reviews.
  • Responsive, accessible, and comprehensive customer support. This includes faster answers on specific loan questions as well as more frequent training seminars and webinars for community, regional, and national lenders.

One key customer benefit of our commitment to Greater Purchase Certainty is our approach to quality control. We have reinforced our Quality Control commitments to our customers:

  • Viewing loans on a comprehensive basis by evaluating the entirety of the loan file with a primary focus on identifying significant underwriting deficiencies.
  • Providing Sellers with detailed and timely feedback on their origination process with the emphasis on significant/systemic origination deficiencies.
  • Providing Sellers the opportunity to resolve loan repurchase requests through an appeal process.

By giving our customers the tools, training, and support they need to create high-quality loans, we provide greater purchase certainty while assisting customers with the operational realities of the lending business. That’s important because even with automated services like Loan Prospector, underwriting is a manual process that will never have “zero defects.”

Our customers are delivering loans with low defect rates under our Greater Purchase Certainty initiative. The delinquency rates on our post-2009 single-family mortgage purchases range from 0.25 to 0.35 percentage points, excluding refinances under HARP. (By contrast, the industry averages for delinquencies is 18 percent for subprime loans and 3.54 percent for prime loans.)

Bottom line: Greater Purchase Certainty provides our customers with the tools and comprehensive support to help them hold the line on quality and line up new business.

 


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