The good news for mortgage lenders: This summer, Freddie Mac will start rolling out a suite of tools that should speed sales of loans to the government-sponsored enterprise.
The catch: lenders will have to wait a little longer for a related change that will reduce their liability for buying back defective loans from Freddie.
The government-sponsored enterprise will need the approval of its conservator, the Federal Housing Finance Agency, before the representation and warranty piece of the project moves forward. It's something FHFA reviews because Freddie and its fellow GSE, Fannie Mae, must be aligned in this area, said Andy Higginbotham, Freddie's senior vice president of single-family strategic delivery.
The new product suite, integrating existing loan review tools, will allow lenders to more efficiently conduct pre-close checks of whether their loans are in line with Freddie's criteria, he said.
"They'll know sooner in the process to get us on the same page around the data requirements," Higginbotham said during a press briefing Monday at the Mortgage Bankers Association's national secondary market conference.
The tools rely in part on technology and data developed through the Uniform Mortgage Data Program, a joint initiative by Fannie Mae and Freddie Mac to institute a variety of loan data and collection standards. And Freddie's new product suite parallels many features included in a suite of technology that Fannie began providing lenders in April 2015.
Mortgage technology provider Ellie Mae has been working to integrate the Loan Product Advisor tool that is part of Freddie's new Loan Advisor Suite and it will likely be the first vendor to go live with the technology. LPA is built on the backbone of Freddie Mac's Loan Prospector automated underwriting tool and improves on it, said Higginbotham.
"They've known they've needed to re-platform Loan Prospector for some time," said Kim Thompson, an executive vice president at Overture Technologies. "I view it really as a re-platforming of their technology to take advantage of…emerging data sets."
The technology improvements should result in improved processing time and costs because they make the underwriting and related loan sales process much more efficient, said Chris Boyle, senior vice president of single-family sales at Freddie. Freddie is likely to purchase more submitted loans and do so more quickly because of the more user-friendly feedback on whether loans meet the GSE's criteria.
"You would have to think we will get more pull-through," Boyle said.
While Ellie Mae could be the first vendor with an LPA integration, Freddie has been working with other vendors as well that also will have one, Higginbotham said. Lenders can opt to use the product without connecting through an origination system like Ellie Mae's.
Ellie Mae works with a broad range of lenders large and small, including seven of the top 25, said its vice president of business development, Parvesh Sahi. Higginbotham said this was among the reasons Freddie worked closely with the vendor in testing. Ellie Mae on Monday also noted that it recently formed a new technology partnership with leading lender Wells Fargo.
"We're looking at a very long-term relationship with the Freddie Mac folks," Sahi said.
In addition to working with the large group of vendors, Freddie has been testing the new product suite with 15 lenders of varying shapes and sizes, Higginbotham said. He declined to name any of them.
Lenders that show interest will be able to start transitioning to the product suite this summer as it is phased in to groups of seller-servicers, said Higginbotham. He promised that the transition would be efficient, but said the time involved could vary by lender.
Other aspects of the technology upgrade that may take a little longer to roll out could include a business intelligence module that would allow lenders to quickly look at the frequency of particular types of material loan defects, and the number of loans affected.
The technology will allow lenders to visualize this data on a grid, with a darker color for more common defects and bigger squares for larger numbers of affected loans, said Christa Petrone, a senior director at Freddie.