Freddie Mac recently listed five ways that lenders can avoid loan repurchases, laying plenty of blame for underwriting defects squarely on the shoulders of management at banks and mortgage lenders.
Pamela Padgett, vice president of single-family underwriting at Freddie Mac, told banks and servicers in a Webinar that despite improvements in underwriting, lenders still are not catching common defects. She described persistent problems with what she called "back-to-basics" fraud, such as altered documentation.
"We continue to find ineligible loans in our performing loan quality control sample," Padgett said. "Why? Because the message has not been delivered effectively across departments, especially production and underwriting." Lenders still have plenty of "room for improvement in the loan quality of current originations," she said.
Other common defects leading to loan buybacks are appraisals that do not support the value of the property, insufficient income documentation, income errors and title deficiencies. Loans with these problems are twice as likely to become 90 days delinquent within the first year, Padgett said.
