Luncheon Briefing: Run with Digital Innovation – LPA and Beyond

Fuel up with Freddie Mac leaders as they show how digitization is driving efficiency and cost savings in loan originations. 

Join the conversation as we share how the latest advancements to LPA and Freddie Mac digital technologies are setting the stage for optimal process efficiencies, opportunities, savings, loan quality and confidence to provide the best options for borrowers while making the most informed decision.


Transcription:

Christina Randolph (00:10):

Well welcome everyone to lunch with Freddie Mac. We've done this for a few years now. I'm grateful that they keep asking us to come back and do this, or more or less it's them not saying no to when we ask. So thank you to everyone here for joining us and prioritizing this event. And thank you to National Mortgage News as well for always putting on a great production and obviously this great opportunity to be with all of you today. I just got off the panel of judges next door on the main stage. So for any one of you that I have just judged, feel free to judge me back. That's okay. I will accept any and all feedback as much as I can give it. So it's two way street, but it's very clear. And then you will see that with the other three tech showcases that we have between today and tomorrow, that there is still a lot of innovation, thankfully going on in our industry and across the Mortgage Tech landscape today.

(01:11):

There's a lot of companies out there that we all still really care. We want to make the process better. We want to make the industry better. We want to solve real problems together like rising costs to originate, create better process, more efficiency for lenders. And Freddie Mac is no different, right? We are, our goal, especially in the technology space, is to make it easier not only to do business with Freddie Mac, but also for our lenders to do business a lot easier and for technology partners alike as well, to integrate better together, especially with our tools. So I'm pleased today to be here to talk to you a little bit about some of the things that Freddie Mac is contributing to the industry as a whole. I'm even more honored and privileged to be up here with these two because not only do I get to be up here to talk to you all about what Freddie Mac is doing in the market, I get to work alongside these two day in and day out to really continue to drive change in the industry and that is a privilege to me. So to my left, I have Srijana Giri, Senior Director of Loan Products, and then we have Jody Eberhardt, Senior Director of Seller Strategy and Optimization within our seller engagement organization. So Srijana and Jody, thank you so much for being here. If you wouldn't mind giving the audience a little bit of background about yourselves.

 Srijana Giri (02:38):

Yeah, I can go ahead and get started. So thank you everybody for being here this afternoon to join us here for lunch. I'm really thrilled to be here. I wanted to share a little bit about my journey and my background. I immigrated to United States when I was 18 years old and vividly remember when I first bought my first home, the feeling of the pride and the sense of accomplishment. So for me, it represented more than just a place to live. It was really a realization of a dream. So fast forward two decades later, I've been with Freddie for roughly about 10 years now. Held several roles in different capacities. So I started out in our IT division supporting LPA loan product advisor tool, worked there for a couple of years and then moved on to single family risk working in the policy space and most recently in loan product division, creating new products and solution. And this work is deeply personal, helping others achieve the dream of home ownership. So it's really exciting. So thank you again for being here. I'll turn it over to you. Jody.

Jodi Eberhardt (03:53):

Hi everybody, I'm Jodi Eberhardt. I work in the Seller Engagement team and I've been at Freddie Mac for about eight years. Before that, I spent about 20 years in the primary market consulting with lenders on improving technology, improving processes, and really thinking about how to make the whole mortgage origination space better. So it's been really fun to take that journey and bring it to Freddie Mac and think about things really from an industry perspective. So my team works typically with lenders thinking about how to help them leverage Freddie Mac technology really to reduce risk, to reduce cost, and then we spend a lot of time on implementing affordable products and helping homeowners. So it's a great space.

Christina Randolph (04:36):

Thanks. And I'm Christina Randolph, also with Freddie Mac. I've been here for about six years in this industry over 25 years. I have responsibility over customer service, so any one that uses 1-800-FREDDIE, we have a great team behind us to help support any of your questions. Technology guide related. I'm also responsible for new business development with both of our partner and lender segments. And a lot of the focus within distribution, as you can probably imagine by the name, is how we distribute our tools to the market with our technology partners. So it's really critical that we drive sort of how products like LPA and LQA and all of our other tools are presented back to our lender community within the industry. Just like a lot of you who are technology partners here in the room, it's really important how your tools are presented back to the lenders and how easily they can either implement or use because that is the guide path to adoption and utilization and all of the great benefits that we want to provide to lenders. So just by a show of hands, I'm curious how many of you are a technology vendors in the space? Okay, how many of you are lenders?

Jodi Eberhardt (05:52):

Okay.

Christina Randolph (05:52):

Is anybody in another category?

Jodi Eberhardt (05:56):

Yeah.

Christina Randolph (05:57):

GS. Oh, GS C. You don't count. Okay, well that's good. Before we launch in, I wanted always like to understand our audience, our customers. So just wanted to start off today by giving you a little bit of a glimpse like I mentioned before, of what we're working on at Freddie Mac. So maybe I'll start with Srijana, if you could give us an idea of what your teams are working on and what you're focused on today.

 Srijana Giri (06:22):

Sure, I'm happy to do that. So I'm a part of the loan product division and what my team is really responsible for is creating new and innovative solution that will lower cost for borrowers and sellers and really provide access to credit for the affordable borrowers. So there are a lot of exciting opportunities we are looking into into 2024 and 2025, and I think I want to highlight three probably items that we've been working on. First is this work that we're doing on digitized P stub and W2, just to give a little bit of background what that is really when you really work with a borrower and if they don't go down the digital path, you still end up collecting traditional documentation. You can work with the technology vendor that can OCR that data, provide that to Freddie Mac, and we're able to provide assessment of income on that.

(07:14):

So that's still going to help you go down the digital journey as far as the loan is concerned. So that's really exciting. The second item that I want to mention is the work that we're doing on assessing rep and warranty relief and assessments of the risk for closed loans. So we really tried to figure out a friction in the process If the loans are really closed and for whatever reason they don't want to run LPA. Again, we wanted to provide a tool and a technology and a standalone API that's out there that you can still use with the data that you have and we can perform assessments of rep and want to relief on that. And the last one, which is exciting is finding opportunities for loan officers to convert more cautions to and accept. And we are doing that with a bunch of different ways.

(08:05):

Want is assessing positive rent payments. So if they're renters and first time home buyers, how do we have access into their history of rent payments and how can we weave that into our risk assessment using their bank data? Second is again utilizing the same bank data to do cash flow assessment so we can see the inflows and outflows going out of that account. So you can really see using data in various different ways to help facilitate finding opportunities for your loan officers. And last I want to mention is new and exciting enhancements where coming out called LP Choice and more to come on that.

Christina Randolph (08:46):

That's great, Srijana, thanks for going through what we're focused on at Freddy. So I think what is just as important as what we're working on I think is sort of how we do it and how we collaborate with each other to not only produce and develop some of these capabilities, but how we get it out to market and socialize and help our lenders operationalize. So Jody, could you talk about that process and how we approach that? I think it's just so interesting. Every time I listen to you talk and I hear you talk to a customer, it just becomes clear and clear and I think it's a huge benefit to how we do things at Freddie Mac.

Jodi Eberhardt (09:28):

I think I'll start by thanking a lot of people in the room here who are really part of this whole process. So a lot of times Srijana's team, the product area has an idea or a spark or something they'd like to explore, but we also hear a lot from everybody in this room where there's ideas that come from the industry, things we should think about, and then there's a part of our team that is CX or customer experience and we go about really flushing out those ideas in a variety of ways. Sometimes we have councils that come together. We're doing one around feedback and LPA feedback right now. We did one around risk and QC last year. We also do a whole series of interviews. So we're in the process. We just wrapped up a whole loan officer interview engagement. We'll be starting some underwriter engagements and we're doing some industry outreach around AIM and our digital offerings too.

(10:21):

So in addition to one-on-one engagements Christina like we do with sellers, you also, your team does that with some software partner side where you have a group that gets together to do that. So a lot of ideas and innovation kind of feeding through a whole bunch of things that we hear. And that really goes then into working with the product team and co-creation of some of these things. So once we have that spark or great idea, it's really about developing that together and figuring out who might be some of the folks that are willing to go along with us on that journey of adopting and helping us flesh out that idea. From there, it goes into the product team and then it goes to Brandon's team on digital tools to build some things out. And then it all comes full circle back around go to market, and that's where you start to see our client education team getting involved, Christina and the partner team rolling things out to all of our lenders and then just really making sure things are working as they should and then continuing to improve things as we go. So it's a big organization, but I think we all do a great job of working together and trying to support the whole industry end to end. It's quite a job

Christina Randolph (11:28):

And I think we've been tasked internally too with quite a big focus and a dedication, which is making sure that we distribute and are mindful about how we are putting tools like LPA out into the industry. I think for a long time, and I could probably speak for both GSCs because I was at full disclosure, I was at Fannie prior to being at Freddie, I think there had been the perception that we just roll things out and we don't have any kind of mindfulness around the impact to not only our technology partners but our lenders. I think there was just this persona of you have to do what we say when we say it right? And that is not obviously the reputation that we want to move forward in this new digital age. We know you guys have choice as a lender, and I think what we want to focus on is to make it easier to do business with us and also make that experience easier for you because at the end of the day, it's going to make it easier for you to do business with your consumer.

(12:30):

So that's really critical to us. So that's why we are investing and we're embarking on this journey to really improve and enhance the tool set that we have and we're constantly iterating and innovating on the ways to just make and create more efficiencies for lenders. So I do want to shift gears a little bit because I think what we talked about so far is really important, but I also want to hit on from Jody and Srijana's perspective really how we are continuing to make LPA relevant in the market and how are we positioning it to be part of this continuing digital strategy, digital transformation, especially with the introduction of ai, generative AI into our industry. I mean, there is a lot of opportunity once again in our industry from a technology perspective, and I think it's important for you guys to understand how we view that from a Freddie Mac standpoint to prepare you for that future of what's coming. So Jody, if you don't mind kicking us off with your thoughts there.

Jodi Eberhardt (13:30):

Yeah, I think we work with lenders of really all different sizes and as you all heard some challenges today, everybody's at a different place at that digital journey. So some of the things that we think about is how do we bring solutions to the whole market? So the first thing I'll talk about a little bit is we're working to re-engineer our feedback certificate from Loan Product advisor to really take into consideration what loan officers need for the loan officers that really go direct and use that feedback certificate. So a lot of new work coming out there with Han's team to make sure that what they see they can understand and they can do something with. So that is one big piece. And then on the other end of the spectrum, we have a lot of large lenders that are making forays into AI and particularly using the results from loan product advisor to really drive their workflow.

(14:17):

So that's something that I would say we're spending a lot of time and at least our team particularly right now is consulting with lenders and figuring out how we can use that messaging to drive their workflow, to build out the task-based systems that we've all heard so much about today. And not only that, but how can we think about making the LPA response more digital to help drive some of the AI solutions. So if you all are on that journey, we'd love to talk about that and we'll be available I think for this afternoon and tomorrow morning too. But that is kind of top of mind for me about how to think about LPA and that digital journey. The third piece, Ani, you hinted at LPA choice. I think we're super excited to see that launch. How many of you happen to see an announcement about that on Friday?

(15:05):

Anyone one, Kevin who helped us write that announcement, it came out as a LPA message announcement on Friday. And even though that's what we talk about is some new messages, I think it's really about this whole journey. Srijana talked about making things easier for loan officers, particularly new people to our industry, and how can we help them find opportunity? And there's three things that are coming. It's helping them identify when they're close on reserves or loan amount or DTI that would really help them find opportunity for that homeowner. So there's, like I said, the announcement came out Friday and you'll see more about that in the weeks to come, it should be launching. So that's something we've been working on for quite a while. So thank you to everybody who helped us with feedback on that and making that possible.

 Srijana Giri (15:59):

And one other thing I think I kind of want to highlight is the solution around our asset and income modeler aim, right? AIM has been the core of Freddie Mac's digital strategy. We've made significant investments in front of technology and the product and enhancements in the last decade or so on this. What we've really done is really rounded out our solutions. So it's a full suite of tools that's available to you whether you're trying to serve a wage income borrower or self-employed, you can assess the assets, income and employment. So really using the feedback from our LPA tool with the data that we are producing and really driving some of that workflow in order to create that efficiency for you. So again, the journey of getting away from documentation, using the data and really automating that in your different systems and your workflows.

Christina Randolph (16:54):

And we've really come a long way, I think, right Srijana in that we started this aim journey in 2018 with just two providers and we are now up to 15 providers. And the way we collaborate together, it's really a team effort. So my team is out there responsible for surveying the market. If you have any questions about some of the AIM providers, Daniel Miller is here in the room. I will point him out. His team is unbelievable at scouring the market and understanding what data and document digital solutions are out there to understand what we can leverage. And then what we do is we work with Trina's loan products team to understand what the power of that data truly is, but also she's informing us too of what they're seeing, what from a risk and control and a quality perspective we can go out to scour the market for.

(17:49):

So this is kind of a little bit of the secret sauce within Freddie Mac, but that's how we understand the full opportunity that there is out there in the market to create, again, lower cost and greater efficiency for the industry. And then on top of that, it doesn't just stop there. From a partner and integration perspective, we're constantly in contact and managing relationships with point of sale systems and loan origination systems. Again, because it's great that we are innovating and putting all these solutions out into the market with AIM and a lot of our collateral solutions, E-Mortgage digital solutions, but it doesn't have as much of a reach if it's not installed or implemented into point of sale or loan origination systems, lender systems of record for it to be easily implemented and adopted. So I hit on that point a lot because I'm really passionate about making it easier for lenders to take advantage of all of these great innovations in our industry. But again, this all sounds great, but I also want to make sure everyone is aware of the actual benefits to integrating and taking advantage of the use of these digital solutions. So Jody, we just updated our cost to originate study earlier this year. If you wouldn't mind just walking through some of the high points, I think from a technology vendor perspective as well as a lender perspective, these are the RLI KPIs that you guys want to pay attention to.

Jodi Eberhardt (19:17):

Yeah, thanks Christina. I think I did hear a couple references to that study in some of the demos and conversations earlier today. So I'll call out a couple things. One is that two thirds of the cost involves personnel. And so as we can imagine shifting gears here and going into a different market, that will continue to be something that's on everybody's mind. And what we learned is that really leveraging Freddie Mac's loan product advisor and our digital tools for a and Ace, the lenders that really do a great job of using those tools, they were producing loans at 14% less cost and they were closing five days sooner. So the industry as a whole, we saw those costs rise about $3,000 or 35% over the last three years. So everybody's in the space now of thinking about how can they manage and reduce cost. At least that's where people have been the last year.

(20:09):

I think as the market shifts we're going to see, and we're already seeing honestly lenders shift and investing in technology to think about being more efficient and to really being in a position where how they can think about scaling without adding quite so many people as the market changes. So one of the other pieces I think, Christina, you mentioned that those software providers should pay attention to. We did hear in our surveys that lenders, once they rolled out technology had a one to 10% savings. But the other thing we heard is that the anticipated savings, they believe what's coming could be up to a 40% savings. So that's something with everybody's eye on the prize is not looking in the rear view mirror about where we've been, but thinking about where we're going and how could you get to perhaps that 40% mark, which is a pretty high bar.

(21:02):

And we do see progress. We've seen really our aim tools pick up this year. I see lenders reinvesting. I see them really looking more toward digital assessment and including the new pay stub and W2 piece. The other thing that I think was a significant change is for those of you that were at the Docutech demo that just finished, that was about eClose. And we've seen actually a pretty significant pickup in E-Mortgage and the last six months we were closing in on 10%. There's over a hundred lenders that are sending e mortgages our way, and a full 27% of them are using that on half their loans. So if you think about a good chunk, well more than 27 lenders are doing their closes with half. That's something that we really haven't seen in the industry before. So I'm hoping we're kind of over the tipping point with some of these things and the momentum really starts to pick up.

 Srijana Giri (22:00):

And I just want to quickly highlight on the benefits from a QC standpoint, right? We published a study a couple of years ago on the loan quality and what we saw in that study was the lenders that do use the tools and technology could have 40% of their defects would've been resolved if technology was used. And we refreshed that study this year and learned that, for example, if the aim was used 25% of all repurchases could have been avoided. So just wanted to give you a little bit of a background on just not just from a front end cost saving perspective, there is an efficiency from a QC and risk perspective as well.

Christina Randolph (22:44):

Thanks Srijana and Jody. So I think we are appreciative of all that you guys have on your plates literally and figuratively. So we appreciate you sitting through the lunch and listening to us. If you would like to hear more about some of the ROI, some of the information in the cost to originate study, please feel free to stay after. We will have folks in the room in the conference over the next day and a half to engage with you. I think what really sets us apart or we like to think sets us apart is that engagement factor. We are here, we want to listen to all of the feedback, the good, the bad, the ugly. Because if we don't know about it, we can't change it. And I think a lot of us up here over the years have been more and more cognizant that we as Freddie Mac need to listen to our clients and to our technology partners because we can't just continue in the same pattern and repeat the same insanity that's been going on over the last few years or in years past.

(23:43):

We really need to be a team, and I just want you guys to know that we are looking to drive change and we're looking to do that in partnership with all of you. So I will just point to, Jody has a trusted advisor consulting team. So if you are a lender in the room, we do offer some services and some tips and tricks. If you are a technology partner in the room, we have a couple of us here that would be happy to talk with you about integration possibilities. We do have another session coming up with Brandon Rush head of digital experience later on this afternoon to talk about some real world AI use cases. So please join us later this afternoon. And if anyone again would like to talk about new seller onboarding, new partner onboarding, and new opportunities as an existing partner, we are here to engage. So thank you guys all very much. I know it was tough to hear through all the conversation and the clanking, but we appreciate you being here. So thank you very much. Have a great rest of your conference.