Sonu Mittal on Freddie Mac’s latest moves to lower costs for lenders and borrowers
In the latest episode of the HousingWire Daily podcast, host Sarah Wheeler sits down with us Freddie MacSonu Mittal – the senior vice president and head of single-family home acquisitions – to explore the recently announced alternative to loan buybacks, as well as appraisal waivers and how they address lenders’ pain points in 2024.
This interview has been edited for length and clarity. The conversation begins with a deep dive into Freddie Mac’s new option to reduce loan repurchases.
Sarah Wieler: Let’s first talk about the expansion you’ve made on buybacks, which has been a sore point for lenders over the last 18 months.
Son Mittal: Our goal was to determine how we can continue to maintain the right focus on loan quality while reducing friction when a buyback occurs for loan servicing. We are excited to share that the FHFA (Federal Agency for Housing Financing) pilot will be expanded to all sellers who do business with Freddie Mac.
In the coming months, sellers will have the opportunity to sign up for the full year 2025. The program is designed to be based on the UPB (unpaid principal balance), or the loan originations we receive from lenders in a specific quarter. and the corresponding NAQ rate, the unacceptable quality rate.
We want to continue to see the right level of commitment from the sector when it comes to loan quality. We also need to ensure that it continues to operate within the representation and warranty framework that FHFA has established for us.
Wheeler and Mittal also discuss how Freddie’s fee-based repurchase alternatives and appraisal-related initiatives address lender concerns.
Cyclist: How do both of these things address some of the pain points that lenders had in 2024?
Mittal: We would like more consistency and predictability about what is expected of them. But if you think about lenders, especially the non-banks or IMBs, they don’t really have a balance sheet. This allows for alternatives – which may be more financially viable if loan quality remains positive – and for greater efficiency for lenders, giving them more time to meet the needs of their borrowers or customers.
Our valuation exemptions were limited to purchase transactions with a loan-to-value (LTV) ratio of 80%. Now, purchase appraisal waivers will be increased to 90% of loan-to-value, and appraisal waivers plus property data reports will be expanded to 97% LTV. We will share the exact date of implementation with lenders in the next 30 to 45 days and we expect it to be available by the end of Q1 2025. This is also a new step that will help starters on the housing market.
Cyclist: How much money do you think homebuyers will save?
Mittal: We have already saved $1.6 billion through our assessment processes. With this initiative, a borrower saves on average between €4,000 and €5,000 on appraisal costs. Even with a real estate data report, they still save $200 to $300. We expect borrowers to save on the full appraisal cost, reducing total appraisal costs by 50%.
After exploring other Freddie Mac initiatives, including improvements to the Automated Underwriting System (AUS), the conversation concludes with Mittal sharing his vision for the 2025 housing market.
Mittal: We will continue to make the right improvements in 2025, as we serve all different aspects of the market. I don’t expect any drastic changes in our approach. Our focus is to make sure we end 2024 on a great note.
