Freddie Mac adds more redefault measures to servicer profile

Freddie Mac is changing its online servicer performance profile so that part of it will focus more on loss mitigation performance.

The influential government-related mortgage investor will include new measures for recidivism rates in flex modifications and payment deferrals as part of the default management metrics on the Gateway platform where it consolidated its single-family automation in January.

The ability to track the new data comes amid a growing interest in reducing serial redefaults and the end to one of the last remaining pandemic-related foreclosure bans.

The new default management measures and other updates Freddie plans to institute on April 30 are aimed at reducing the quantity of loans that become more deeply delinquent rather than reperforming, according to Freddie.

The new metrics for flex mods and deferrals will track whether they cure loans in a six-month period "without the use of additional core methods." Freddie will remove a previous six-month measure it had for modification performance. 

A renamed "transition to beyond time frame" measure will quantify the extent to which servicers following Freddie's guide take a longer than average amount of time to process foreclosures.

Freddie also is making a supplemental metric it has used to track transition rates for mortgages moving from a current status to delinquency a weighted measure in line with the focus on addressing concerns early on as a key means of avoiding default at the outset.

With a Republican-dominated Washington aggressively pursuing efficiency and deregulatory goals and potentially moving to free Freddie from conservatorship, servicers are anticipating an environment where the proliferation of federal government-related loss mitigation could slow or end.

Servicers do still anticipate facing some offsetting state regulation, particularly in cases where there are large-scale local or regional disasters such as the California wildfires.

However, from a federal perspective even the Biden administration that had primarily expanded foreclosure alternatives during its term had started to scale back the chances borrowers get to repay, putting restrictions on home retention options in a Federal Housing Administration policy update.

More than one-third of redefaulting borrowers with government loans had previous loss mitigation in the form of a partial claim in 2024, Donna Schmidt, managing director and owner of DLS Servicing said in an interview last month.

She said some statistics suggest that introducing consumer budget analysis and counseling upon redefault could be a way to improve the odds of reperformance.

A historical DLS study done for a unique client prior to rule changes disallowing the practice showed documented budget data presented to borrowers prior to issuing loss mitigation reduced the redefault rate 75% in a 12-month period. 

Redefaults are a bigger concern and delinquencies are higher in the FHA market than they are at Freddie and its counterpart, Fannie Mae, because the government-insured borrowers in the former market are more likely to be first-time homebuyers with less of a financial buffer against hardships.

Serious single-family delinquencies, a measure of loans considered more likely to roll to foreclosure, have been creeping up but remain historically low at Fannie and Freddie. Freddie's delinquency rate hit an 11-month high in January but it was still only 0.42%.