A number of enhanced initiatives have been announced by Freddie Mac to increase housing affordability, particularly for first-time homebuyers and borrowers. The company continues to work with the industry to improve efficiency, reduce costs, and offer more opportunities to get qualified borrowers into homes they can afford with improvements to its automated underwriting system, appraisal waiver expansions, and advancements in the down payment assistance space.
The statements were made during the Annual Convention of the Mortgage Bankers Association (MBA), which was held in Denver from October 27 to 30.
“We have been working to create new technology features that simplify the mortgage process and reduce costs for both borrowers and lenders,” said Sonu Mittal, SVP and Head of Single-Family Acquisitions at Freddie Mac. “Despite the very challenging housing environment, for the past six consecutive quarters more than half of the loans Freddie Mac purchased have been to first-time homebuyers. The innovations we are announcing today are vital to building on this record and helping remove obstacles facing prospective homebuyers.”
GSE Revamps Product Selections
The most recent addition to Freddie Mac’s Loan Product Advisor (LPASM) automated underwriting system is LPA Choice. In order to help lenders of all sizes make quicker, better decisions and help qualify more borrowers, LPA Choice provides customized information on purchasing needs along with actionable feedback. This innovation will improve the borrower experience by reducing the number of resubmissions to LPA, increasing the number of qualified borrowers accepted, and saving lenders time. Responses will focus on loan attributes such as reserves, loan-to-value (LTV) ratios, and debt-to-income (DTI) ratios.
Additionally, Freddie Mac is expanding the number of borrowers who can use two of its appraisal alternative solutions for purchase transactions. In particular, Freddie Mac’s eligibility for automated collateral evaluation (ACE) will rise from a maximum of 80% to 90% LTV/TLTV. In order to enable lenders to originate some loans without a conventional appraisal while effectively managing risk, ACE uses proprietary models in conjunction with historical data and public sources. Lower-income borrowers who are currently ineligible for an appraisal waiver, such as many first-time homebuyers, will benefit from this. Borrowers have now saved over $1.63 billion in appraisal fees because to Freddie Mac’s ACE exemptions.
A larger population will be able to take advantage of the cost-saving opportunity as the eligibility for ACE+ PDR (property data report), which permits the on-site gathering of property information in lieu of an appraisal, will be expanded from the 80% maximum LTV/TLTV to applicable program limits (e.g., up to 97% for Home Possible loans).
Sellers approved by Freddie Mac who use Loan Product Advisor will be able to take advantage of the new ACE and ACE+ PDR appraisal waiver expansions. A future Single-Family Seller/Servicer Guide Bulletin will include more details and the date of implementation. These initiatives expand on Freddie Mac’s previous pledges to increase low-income households’ access to homeownership.
Additionally, this month marks the company’s one-year anniversary of the introduction of DPA One, a cutting-edge, free application that compiles and displays down payment assistance programs on a single, insightful platform. The platform began in October 2023 with local level data in only three states, but it has since grown to include data in around 40 states, with goals to reach all 50 by the end of 2024. The platform is currently being used by over 6,000 loan officers to locate and connect customers with several down payment help programs across the country.
“Each of these advancements is part of Freddie Mac’s efforts to serve our mission by making it easier and less expensive for lenders to help borrowers achieve their goals,” Mittal said. “We will continue to hone these efforts as we look for new ways to improve housing affordability for all.”
To read the full release, including more information, click here.
