To gain a competitive advantage in the mortgage space, it often demands access to expertise and capabilities that provide options, confidence, expansion opportunities and an ability to create efficiencies across time, resources and cost. A designation as an approved Seller/Servicer with Freddie Mac is just that—a strategic assistance for both businesses and their borrowers.
The prospect of securing that advantage can seem daunting or is often misunderstood due to the myths surrounding the complexity and timeline of the approval process and misconceptions about the short and long-term benefits of the effort. Helping organizations to understand the facts is a way to bring collective strength to the marketplace. Let’s break down some key considerations.
Resources abound
The reality is that Freddie Mac’s approval process is easy to follow, streamlined and efficient. Additionally, and perhaps most importantly, Freddie Mac has a dedicated team of people wholly invested in a lender’s success, offering a guided and customized onboarding experience. Along with the resources and personal attention offered by Freddie Mac team members, there are industry consultants available, such as Cambridge One, LLC, which specializes in working with lenders to secure their GSE (government-sponsored enterprise) approvals.
Jennifer Whip, a principal of Cambridge One, is an experienced consultant to the mortgage industry. Whip spent much of her career in a senior position with Fannie Mae. When she retired from that role, she realized a pent-up need for lenders seeking help in achieving GSE approval. Working with more than 175 lenders has given her insight into the common pitfalls and misunderstandings that most face. “Many lenders put off applying because they read myths regarding the time frame and complexity of the process. The goal is to navigate them through efficiently, making what seems to be a daunting process manageable.”
The process
It’s commonly stated that one of the toughest parts of being an approved Freddie Mac Seller involves getting past the misconceptions around what is involved and the recognition that an organization could be a candidate. Concerns centered on the difficulty and lengthiness of the approval process are unfounded with a significantly reduced timeline from application to approval. “Freddie Mac continues to dramatically enhance the process for approving Sellers. While every experience is unique, our dedicated and knowledgeable team takes a consultative approach to get applicants prepared and confident to do business with us,” says Christina Randolph, Freddie Mac’s Vice President of Distribution, Single-Family Seller Engagement. “We support applicants through each step and bring in subject matter experts to assist in overcoming unique barriers and proactively identify optimization opportunities. It’s simple and quicker than most people would think.” The key? Preparation. Jennifer Whip adds, “If you’re prepared with well-documented policies and procedures and corresponding internal processes right from the beginning, it reduces the friction and is easier to get through.”
With Freddie Mac, a dedicated representative is accessible during the pre-application vetting and the application process—guiding potential Sellers accordingly. Best practice has demonstrated that being proactive in communications, reminders and guidance helps to minimize the potential of delay and clarifies expectations, easing the transition for lenders. The procedure is fairly simple, with four general steps: pre-application assessment; the submission of the application and necessary documentation; onboarding to establish banking and system access and training; and a readiness review to begin to deliver business. Detailed resources and guides are available to support each stage.
Operational benefits and commitments
Approval of a Seller application involves several operational requirements that may demand that organizations assess their current processes and reporting to ready themselves for the new partnership, but the effort comes with significant operational benefits. Rigorous exercise of quality controls and compliance scrutiny can raise operating standards, and, with it, the associated risk management aspects. Cambridge One’s Jennifer Whip speaks to the intrinsic advantages of such practices: “Having formal meetings and regular reviews changes an organization. Lenders can demonstrate compliance obligations and improve their operations by proactively addressing expensive inefficiencies and repeat errors in operations.” What may first appear as cumbersome could immediately turn into a competitive advantage that ultimately improves efficiency and profitability and lowers risk.
Advantages for growth and stability
The strategic advantage Freddie Mac approval offers is one of growth and stability. Product line expansion to integrate new mortgage offerings and known risk appetite can help open new segments of borrowers, get more buyers to the closing table and improve the customer experience by meeting unique needs. Organizations can evolve to retain servicing rights, expand geographies, have flexibility in managing their portfolio and much more—the potential avenues for benefits are wide. “The GSE approval is really a springboard for lenders that want to move their business forward with more independence and control over the impact on their business results,” Whip said.
Freddie Mac’s Christina Randolph and Giuseppe Grieci, Senior Director of Pricing Strategy, Single-Family Seller Engagement, were able to quickly outline some key strengths that working with Freddie Mac can provide to prospective Sellers:
- Liquidity – Enabling more lending capital and risk mitigation measures
- Mortgage Offerings – Expanding business segments and meeting unique borrower needs
- Insights, Analysis and Research – Accessing industry-leading data to help inform decisions
- Technology Capabilities – Delivering speed, accuracy, ease, efficiencies and streamlined processes
- Retained Servicing – Creating an opportunity to expand business and profitability
- Cash and Guarantor Execution Options – Meeting in-moment and long-term business goals
- Mortgage Lending Process Innovation – Enhancements leading the way to advance the lending ecosystem
- Partnership and Subject Matter Expertise – Collaborating to optimize business and overcome barriers
For proof, look no further than the COVID-era mortgage market, which continues to have ramifications on today’s market. This was a time in which fear and uncertainty ruled, and lenders had to weather volatile market conditions and unforeseen business pressures. Freddie Mac-approved Sellers could continue to operate and move forward, while other lenders may have had to practice a controlled retreat. According to Freddie Mac’s Giuseppe Grieci, “Being an approved Freddie Mac Seller means that you can stand strong during any tide.”
More than a milestone
More than a business milestone, becoming an approved Freddie Mac Seller is a lever for propelling lenders toward greater confidence, stability, flexibility and growth. The approval process, demystified and streamlined, presents a clear pathway to significant operational and strategic benefits. Engaging with Freddie Mac opens new doors for lenders that want to bolster their position in a lean, competitive market, but also fortifies current operations against future challenges. Working with a GSE is an investment in their future—one that signifies operational excellence and market resiliency—regardless of macroeconomic or housing headwinds or tailwinds.
If your organization is interested in learning more about becoming an approved Freddie Mac Seller and/or Servicer, explore these resources.
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