Early reviews of newly purchased loans show that underwriting deficiencies are on the decline, according to Freddie Mac.
“In recent years, we have worked actively with our seller/servicers to improve loan underwriting quality,” the GSE says in its annual financial report.
As a result, the average underwriting deficiency rate across all Freddie seller/servicers for loans funded in 2011 fell to 5% from 13% in 2010. Freddie has not completed its review of 2012 originations.
The most common underwriting deficiency in 2011 related to insufficient income and inadequate or missing documentation to support borrower qualification. The next most common deficiency was inaccurate data entered into Loan Prospector—Freddie’s automated underwriting system.
Freddie also noted in the report that its outstanding loan
“During 2012, our increased reviews of defaulted loans that were originated before 2009 resulted in a slightly higher amount of repurchase requests,” the secondary market agency said.
Going forward, Freddie expects to see an increase in repurchase request volumes.
