Sonu Mittal on Freddie Mac’s newest moves to lower lender, borrower costs

In the newest episode of the HousingWire Daily podcast, host Sarah Wheeler sits down with Freddie Mac’s Sonu Mittal — the agency’s senior vice president and head of single-family acquisitions — to explore its recently announced alternative to loan repurchases, as well as appraisal waivers and how they address lender pain points in 2024.

This interview has been edited for length and clarity. The conversation kicks off with a deep dive into Freddie Mac’s new option to reduce loan buybacks.

Sarah Wheeler: First, let’s talk about the expansion that you did when it comes to buybacks, which has been a pain point for lenders over the last 18 months. 

Sonu Mittal: Our goal was determining how to continue having the right focus on loan quality while reducing friction when a repurchase happens for performing loans. We’re excited to share that the FHFA (Federal Housing Finance Agency) pilot is expanded to all sellers who do business with Freddie Mac.

Over the next few months, sellers will have the opportunity to opt in for the full year 2025. The program is designed to be based on the UPB (unpaid principal balance), or the loan deliveries we receive in a specific quarter from the lenders, and the corresponding NAQ rate, which is the non-acceptable quality rate.

We want to continue to see the right level of engagement from the industry when it comes to the loan quality. We also have to make sure it’s continuing to work within the rep and warranty framework, which is outlined for us from FHFA. 

Wheeler and Mittal also discuss how Freddie’s fee-based repurchase alternative and appraisal-related initiatives address lender concerns.

Wheeler: How do both of these things answer some of the pain points that lenders had in 2024?

Mittal: We would like more consistency and predictability on what is expected from them. But also, when you think about lenders, especially the nonbanks or IMBs, they don’t really have a balance sheet. This allows room for alternatives — which may be more financially viable if the loan quality remains positive — and more lender efficiency, giving them more time to meet the needs of their borrowers or customers.

Our appraisal waivers were limited to purchase transactions with an 80% loan-to-value (LTV) ratio. Now, purchase appraisal waivers will be increasing to 90% loan to value, and appraisal waivers plus property data reports will be expanding to 97% LTV. We will be sharing the exact date of the deployment with the lenders over the next 30 to 45 days, and we expect it to be available by the end of Q1 2025. This is also another step that will assist first-time homebuyers.

Wheeler: How much money do you think homebuyers will save?

Mittal: We’ve already saved $1.6 billion with our appraisal processes. With this initiative, a borrower is saving anywhere between $4,000 and $5,000 on average on appraisal costs. Even with a property data report, they’re still saving $200 to $300. We’re expecting borrowers to save on full appraisal costs for a 50% reduction in the overall appraisal cost. 

After exploring other Freddie Mac initiatives, including automated underwriting system (AUS) enhancements, the conversation closes with Mittal sharing his outlook into the 2025 housing market.

Mittal: Going into 2025, we will continue to make the right enhancements as we are serving all different aspects of the market. I don’t expect any drastic changes in our approach. Our focus is to make sure we close out 2024 in a great way.