How Freddie Mac's Sonu Mittal works to slash mortgage costs

April 15, 2024 4:00 AM

Sonu Mittal recently finished his first year heading single-family acquisitions for Freddie Mac, and it's gotten him to think about the path that brought him in addition to what his next set of priorities will be.

Sonu Mittal, the head of single-family acquisitions at Freddie Mac, addresses employees during an all-company event.

His story offers both insights into Freddie's latest initiatives, and a window into what it's like to move from a position in the primary market to the secondary.

In the edited excerpts of the wide-ranging conversation that follows, Mittal shares his thoughts on the professional journey that brought him to where he is today, his accomplishments from the past year and what will follow.

What’s it like to go from a bank to having this position at Freddie?

When you look at before I joined Freddie Mac, I spent 20-plus years on the primary side. I went all the way from being a loan officer to being involved in digital journeys, to operations and risk management. That really allowed me to gain experience with everything we do at Freddie Mac, and in the market, so it can be operationalized in the best possible way.

While I was on the primary side, my company was a customer of the GSEs. I was not new to interacting with Freddie Mac. One thing I've seen since I got here that I hadn't before I was in this role is how incredible the talent at Freddie Mac is in fulfilling our mission of affordability, stability and liquidity. The role I'm able to play is to see how these things will shift up into the primary market. I also understand some of the pain points the sellers encounter on a daily basis. I can make sure we are spending our time, resources and energy on the right items.

One example is when you think about the cost to originate. It's much higher than all of us would like to see. How can we responsibly reduce cost to originate? That's top-of-mind for sellers, and really that's top-of-mind for people who are looking to become first time homebuyers in a sustainable way.

You can talk about loan quality and repurchases in that context. You're familiar with the work we did for the performing loan pilot that is underway. That was based on the experience of understanding what the sellers go through within the rep and warrant framework. Another example on the borrower side is the down payment. The down payment continues to be one of the top barriers for someone to become a homeowner, so we launched a down payment assistance tool, which we are continuing to expand across all the states.

Why did you make this transition in your career?

One of the many drivers that attracted me to this opportunity was that previously, I was working with one servicer or one lender, so I really just impacted that one lender's ability to serve the market. In this role, I'm able to make a bigger impact across the industry.

In one of your blogs on building leaders, you talked about how someone helped you get to the level where you are today. Is there a story behind that?

Years ago, I had moved up on the front end of the origination process, dealing mostly with sales, the digitization of the origination process, business development and analytics. I had a leader that saw the skills I brought to the table and not only allowed me to hone in on my strengths but gave me opportunities to go and work on the complete opposite of that, which was operations and risk management.

When I went and did that, it made me a better leader when it came to thinking about how every decision we make impacts the whole origination process from end-to-end. I went from the front end of the origination process to the back end of the origination process, which really, when I look back, was one of the many critical pivots in my career and allowed me to serve in my current role in a successful way.

We’ve talked about repurchases and down payment assistance. What are other priorities for you?

One is how we continue to deliver on our mission when it comes to affordability. Earlier this year we announced the expansion of credit to very low-income purchasers. We also continue to make progress on the special purpose credit programs. We continue to enhance our offerings through new loan products or initiatives we bring to the market, also how we make our automated underwriting system the system of choice. We look at what is the friction that exists for sellers today that we can address so that they will take advantage of it? We are taking into account borrowers with thin-credit files, or the borrowers who don't have traditional 9-to-5 jobs or banking relationships.

Another priority is we need to continue to think about how we can reduce the cost to originate for lenders and borrowers. When you look at the work we do around asset and income modeler, the data shows that the lenders or sellers who use our digital tools see fewer defects, more improvement in their defect rate, shorter cycle times and a lower cost to originate compared to loans where they did not use our digital tools. Loan quality continues to be a shared priority between us and the industry. We've started the journey of leveraging technology to drive more efficiency in QC, fraud prevention and other areas.

Getting back to loan quality, I wanted to ask about a recent partnership Freddie formed with ICE, a large industry technology player. What does that involve?

As you mentioned, ICE is a critical stakeholder in the mortgage ecosystem, and with the acquisition of Black Knight, they have a big role they play not only in originations but the servicing space. So we continue to look at them as a strategic partner in terms of is there opportunity for us to take out friction in the inefficiencies that exist for sellers and/or servicers. Our next step on that journey is to see how we can improve loan quality and also reduce the cost one incurs when going through that process.

You mentioned fraud earlier and have written about how Freddie is working on technology to improve the dissemination of information about it. Can you elaborate on that?

Similar to lenders, we also have the responsibility to file suspicious activity reports when that makes sense. What this is going to do is make sure we have the right level of automation driving fraud tips to the right place at the right time for the right level of attention. It's not lender facing. It will be internal. We want to spend less time gathering the data and more time analyzing the tips coming through, making sure they get to the right experts for the right level of diligence.

Is there anything else you’d like to say to our readers?

I would just like to emphasize that in coming from the primary side of the business to the GSE side, I've been incredibly impressed with the talent that we have, which allows us to work toward serving the market in an increasingly better way. I'm happy I've been able to bring that experience of being on the other side to how things are operationalized here. I'm as thrilled as I was on day one. There's lots more to do.