Freddie Mac · OTC:FMCC
Freddie Mac — Investor Day (April 2023)
12 slides from Freddie Mac's investor day presentation, Apr 20, 2023
Slide 1: Single-Family Credit Risk Management Overview
Single-Family Credit Risk Management Overview Public Prepared by Freddie Mac © Freddie Mac
Slide 2: Today's Speaker
Today’s Speaker Terri Merlino Senior Vice President & Chief Credit Officer, Single-Family Business As chief credit officer for the past three years, Terri Merlino leveraged her broad-based knowledge of mortgage operations, sales, processing, underwriting, quality control and secondary marketing acti
Slide 3: Our Agenda
Our 1. Remaining Mission & Risk Management Agenda Focused for 2023 2. Single-Family Credit Risk Management 3. The Three Cs 4. Notable Policy Actions 5. Affordable Program Concentration & Risk in 2023 Public Document Title & Date Goes Here Prepared by Freddie Mac © Freddie Mac
Slide 4: Remaining Mission & Risk Management Focused for 2023
Remaining Mission & Risk Management Focused for 2023 • A key strategic priority is delivering on our mission by providing sustainable and equitable access to affordable housing • One area of focus in supporting our mission is to practice risk management excellence; we must meet our affordable goals
Slide 5: Single-Family Credit Risk Management
Single-Family Credit Risk Management Automated Analytics, Seller / Servicer Credit Policy Underwriting Risk Reporting & Oversight Assessment Technology • Define, implement and • Use automation, • Provide single point of • Establish benchmarks for manage credit policy, insights and accountability for
Slide 6: The Three Cs and the Platform
The Cs The Platform Automated Underwriting Risk Assessment Pre-Qual/ Processing/ Credit refers to a borrower’s willingness to repay Pre-Closing Closing the loan, in this context. Factors that determine Application Underwriting Credit credit include: • Credit score • Risk Assessment • Foreclosures &
Slide 7: Funding Mix Shifted; but Quality Remains Strong
Funding Mix Shifted; but Quality Remains Strong • Rising rates in 2022 shifted the market toward purchases and refinances with lower origination volumes. Purchases made up 80% of Q4 and 58% of all 2022 funding, while 2022 volume was down nearly 60% from 2021. • Average TLTV increased during the year
Slide 8: Notable Policy Actions
Notable Policy Actions Credit Underwriting Affordable Refinance Mortgages: Accessory Dwelling Unit (ADU): • Added a requirement that when there is a change in borrowers between the new Expanded to allow the following flexibilities and clarifications: mortgage and the mortgage being refinanced, the n
Slide 9: Notable Policy Actions cont.
Notable Policy Actions cont. COVID-19 Related Underwriting Requirement Added in Seller/Servicer Guide Desktop Appraisals: • Due to success of desktop appraisals permitted for COVID-19, effective for new Loan Product Advisor submissions or resubmissions on or after March 6, 2022, Sellers were offered
Slide 10: Affordable Program Concentration & Risk to Increase in 2023
Affordable Program Concentration & Risk to Increase in 2023 • Affordable Program loans have higher concentration of risk tails and layered risks than non- Affordable Program loans. Borrowers are also much more likely to be first-time home buyers, qualifying on one borrower’s income, and below 80% of
Slide 11: Questions?
Questions? Public Prepared by Freddie Mac © Freddie Mac
Slide 12: Thank You
Thank You Public Prepared by Freddie Mac © Freddie Mac