One of the common misconceptions about an organization’s legal team is that it stands in the way of innovation or change. However, I can tell you firsthand that at Freddie Mac, the Legal Division embraces change and works side by side with the business to develop creative approaches to serving the company’s mission. 

As Freddie Mac’s General Counsel, I lead a team focused on removing barriers and anticipating potential problems so that Freddie Mac can continue expanding access to homeownership and rental opportunities in a safe, sound and sustainable manner.

Our legal team partners with our business segments to strengthen the legal framework that brings our equity projects to life, protects fair lending, and enhances diversity and inclusion. In short, Legal lays the foundation to Make Home Possible in ways both new and traditional.

Protecting Fair Lending 

A core part of the legal team’s job at Freddie Mac is to help ensure we meet fair lending standards, which helps make sure qualified borrowers have equitable and nondiscriminatory access to credit and housing. There are many facets of this work, including working diligently to improve fairness in the credit assessment of borrowers and to root out bias in appraisal reports.

Last year, for example, Legal worked with business segments to improve appraisal bias detection capabilities in our underwriting system and make other important revisions. With better data, more sophisticated modeling, and a culture of challenging our own assumptions, we’ve built better models that have more predictive power and a more nuanced assessment of credit risk. Indeed, Freddie Mac leverages some of its most cutting-edge machine learning to achieve stronger models that are more fair.

Additionally, we’ve updated the Single-Family Seller/Servicer Guide to clarify sellers’ responsibilities for appraisals and establish new requirements for servicers to maintain certain fair lending data elements. These meaningful changes help identify qualified borrowers who might have been overlooked and to protect fairness in credit decisions.

Guiding Equity in Housing

For the almost two years that I’ve been at Freddie Mac, the legal team has provided the legal framework and direction necessary to advance fundamental parts of the Equitable Housing Finance Plan that Freddie Mac released in 2022 and updated in 2023.

This effort included creating the legal foundation for Special Purpose Credit Programs (SPCPs), which lenders may use to offer special underwriting or pricing for families living in underserved areas to help them achieve homeownership. In 2022, Freddie Mac launched its first SPCP, BorrowSmart AccessSM, and since then, has purchased thousands of loans originated through approved lender SPCPs.

In 2024, we will continue to help Freddie Mac navigate the evolving legal environment to help make progress toward our affordable and equitable housing goals. 

Tenant Protections 

The legal team also works closely with the Multifamily division on a variety of initiatives. In 2023, we collaboratively identified opportunities to bolster property due diligence to promote property and tenant safety. For example, we revised due diligence provisions in our guidelines, which are rooted in a strong legal framework, to describe borrower responsibilities. Separately, we played a primary role in the development of Freddie Mac’s 2023 tenant protection research and future-state thinking.

We are also working with servicers to help ensure borrowers resolve property concerns in a suitable manner. This includes timely, quality and objective reporting and inspections. All of this translates to accessible, safe and affordable rentals for the thousands of units we finance every year.

Priorities for 2024 

Just as we have made great strides in 2023, so too are we looking ahead to the challenges and opportunities in 2024. As we think about the year ahead, I have asked myself and my team these questions:

  • How do we optimize our legal framework to embrace innovation and propel Freddie Mac’s mission into the future?
  • How do we advance equity in housing and rentals in durable, sustainable ways?
  • How do we improve processes so that all renters, borrowers and owners can have a safe, healthy and affordable place to call home?

Regarding equity, we will continue to partner with our business segments to deliver progress on our Equitable Housing Finance Plan. This effort includes keeping a lens on how we can support Freddie Mac’s goal to maintain an inclusive workplace that represents the diversity of the communities we serve.

In addition, like many companies, we are taking a close look at artificial intelligence and how it might enhance our operations. We are thinking about the opportunities and risks presented, and how we can put together a framework for its use and practical application. Already, the Legal Division has a team of experts in place who understand the legal issues raised: privacy, data protection, cybersecurity, intellectual property, bias and data ownership. 

The reality is that Freddie Mac already leverages machine learning in a number of ways, and we have the benefit of working with many best-in-class modelers. In short, we do this work every day, so we have a great baseline from which to work.

Freddie Mac’s mission is to provide liquidity, stability and affordability to the housing market. While we achieve this work in a number of ways, establishing a strong legal foundation makes that work durable and impactful over time.

©2024 by Freddie Mac.