Key facts
- Fannie Mae and Freddie Mac are focusing on income verification and occupancy fraud to reduce repurchase risk.
- Fannie Mae has saved borrowers an estimated $3 billion through appraisal alternatives.
- Freddie Mac has saved borrowers nearly $3 billion since 2017 via appraisal waivers.
- Fannie Mae's title programs have saved borrowers approximately $25 million.
- Freddie Mac's title assessment program saves borrowers an average of $600-$650 per transaction.
- Fannie Mae's occupancy misrepresentation tool aims to capture 20% of related defects.
Fannie Mae and Freddie Mac are implementing new strategies to reduce repurchase risk and lower closing costs for borrowers. The mortgage giants are focusing on income verification and occupancy fraud detection, building on previous successes in appraisal alternatives and title fee reductions.
Fannie Mae has processed approximately 5.4 million loans using alternative valuation methods, resulting in an estimated $3 billion in consumer savings by midyear. Jake Williamson, executive vice president and head of single-family at Fannie Mae, highlighted valuation modernization as a mature area.
Freddie Mac reported nearly $3 billion in borrower savings since 2017 through its Automated Collateral Evaluation (ACE) appraisal waivers and ACE+ Property Data Report (PDR) options. Sonu Mittal, executive vice president and head of single-family acquisitions at Freddie Mac, stated that quality has remained strong.
Both GSEs are also targeting title costs. Fannie Mae's title acceptance program and integration of attorney opinion letters have saved borrowers an estimated $25 million. Freddie Mac's comparable offering saves borrowers an average of $600 to $650 per transaction.
To further slash repurchase risk, Freddie Mac is piloting an income calculator for upfront income validation, which has shown promise in reducing loan cycle times. Fannie Mae has also implemented an income calculator and launched an occupancy misrepresentation tool to flag inconsistencies before closing, aiming to capture about 20% of related defects.