July 04, 2019
How Freddie Mac Manages Today’s Loan Risks
In a March Q&A with DSNews, Freddie Mac’s Chief Risk Officer Donna Corley described how technology is changing the way Freddie analyzes potential risks to the organization’s single-family business. Her role at Freddie entails being sure loans comply with GSE’s underwriting standards, manufacturing processes, and the duties encumbent upon those who operate and service loans, while simultaneously overseeing the setting of credit policy and managing seller/servicer credit performance.
Addressing the risks of servicing and underwriting home loans, Corley lauded today’s “strong purchase market,” but pointed out that this means “you have more first-time homebuyers out there. You have people making lower down payments, who will end up having higher debt-to-income ratios. You have a growing demographic of new borrowers who are self-employed.” The upshot of all these factors is that loans become “much more complex. And they are costlier for lenders to originate making margins extremely tight for our clients.” As a result, Freddie Mac is putting significant energy into research and development of tools designed to assist clients in honing in on “the most important areas of their business” so that things run more efficiently and are not undermined by further “weakening in the risk management practices that they have.”
Among these tools are new technologies meant to aid in “smart data-driven risk decisions,” which Freddie is focusing on three areas:
- The Loan Advisor Platform – Meant to aid lenders in increasing process efficiency and to “fit their underwriting process by using data-filled solutions to drive results and bring the full breadth and expertise of [the Freddie Mac] team into the lenders’ shops.”
- Freddie’s automated collateral evaluation tool (ACE) – Introduced last year, this tool makes use of advanced analytics processing big data to suss out where a traditional appraisal may be unnecessary, which cuts a good deal of time and money out of the equation for both borrowers and lenders (especially in the aggregate) and can aid lenders in figuring out which properties actually are more “challenging.”
- An asset and income modeling platform (AIM), which aims to (as the name suggests) assess the assets and income of borrowers. This is supplemented by a platform aimed specifically at the self-employed, who often face extra hurdles to achieving home loans, because they do not have employers to speak to their income potential. These platforms glean key information from tax forms and cross-check them against claims made in applications for loans.
You can read the full Q&A here.
Speaking of managing risks, if you are looking to buy a home in Miami, Florida; Providence, Rhode Island; or Boston, Massachussets, give us a call. At Topouzis & Associates, P.C. we utilize our considerable expertise ensure our clients are conveying and purchasing property title clear of judgments and defects. We also help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property. Contact us if you’d like us to do this for you.