Excellence is a term associated with distinction, accomplishment and expertise. It’s the ability to set goals, then challenge yourself to transcend them. At Freddie Mac, we’re excited to unveil Servicing Excellence, a new pinnacle for servicing success. Servicing Excellence is a multi-year initiative to strengthen the Servicing industry through reciprocal top-quality performance from Freddie Mac and our servicing stakeholders. It’s our strategy to deliver more—and to expect more.

Servicing Excellence builds on the success of Reimaging Servicing®, a five-year plan to modernize our technology infrastructure and revolutionize our Servicer collaborations and interactions. Today we can truly look back and say we’ve accomplished everything that Reimagine Servicing set out to do, from retiring our legacy servicing tools to integrating all workout options in Resolve®, our innovative default management solution. We recognize that we couldn’t have done it without the ongoing collaborations with our Servicers, mortgage insurance (MI) companies, technology vendors and other industry professionals, which are all critical to our success. We owe each of you a huge thank you. But it’s not enough to simply acknowledge our mutual wins. We’re charging ourselves—and we’re challenging you—to elevate our partnerships to do more.

We Remain Focused on Four Entities of the Mortgage Ecosystem

Servicing has evolved into a significant and sophisticated industry, one that’s ever-changing, increasingly dependent on technology and heavily regulated. These challenges demand investment and a commitment to continue to integrate technology. To that end, our focus with Servicing Excellence is to deliver consistent products, services, policies and partnership opportunities that not only meet but exceed expectations, ensuring optimal outcomes for homeowners, investors, Servicers and our employees.

First and foremost, Freddie Mac strives to be a premier asset manager, mitigating financial risk by minimizing serious delinquency (SDQ) rates and total losses. If we can reduce credit losses by just one basis point of our $3 trillion portfolio, that’s $300 million—a significant financial impact for us and our investors. Because servicing is highly complicated and multi-faceted, we must be laser-focused on the performance of our assets—it’s how we build financial strength.

Secondly is a focus on the homeowner. Once a borrower completes their mortgage transaction, they’re a homeowner, with unique needs and challenges. Our plan to create a Homeowner Support Office will consolidate and centralize our current resources and develop new ones, making sure they’re truly serving their intended purpose. We’ll engage with our stakeholders to encourage outreach that helps homeowners identify their goals and offers opportunities to promote retention, helping to support whatever version of sustainable homeownership is right for them.

Thirdly, we know that our Servicers are indispensable to our business model, and that each has their own business objectives and risk tolerance. We want to offer options that match Servicers’ objectives, then partner with them to add efficiency to their operations and help them evolve their business to one that’s successful.

Last but certainly not least, we need to keep investing in the people who work at Freddie Mac. We’re committed to furthering the impact and efficacy of each of our team members by empowering them to do more in their respective roles while enhancing their job performance and fulfillment. That’s a win-win.

Data and Process Changes Make a Substantial Impact

While Servicing Excellence is a continuation of the evolution that began with Reimagine Servicing, it also requires raising the expectations of all stakeholders. That requires deeper partnerships, with clarity on business needs and a commitment to achieve them over the medium-to-long term. On our side:

  • We’re making updates to the Servicer Success Scorecard, with changes to the metrics that place a heavier emphasis on early-stage delinquencies; it’s in our collective best interests to prevent deeper stages of delinquency. 
  • The value of good data will continue to be increasingly important as we leverage technology. To make sure Servicers’ data of record matches up with that of Freddie Mac, we’re focusing on portfolio reconciliation, putting the right controls and incentives in place to ensure pristine data quality.
  • Through a clean and reconciled portfolio, Servicers and Freddie Mac benefit from optimizing available data. However, circumstances including loan transfers and system issues can sometimes cause discrepancies and reconciliation issues. To give Servicers sufficient time to address these discrepancies, we’re announcing a fee amnesty period for any changes needed after the data corrections window has closed. During this time, the $500 fee will be waived. We hope Servicers take full advantage of the amnesty window.

Innovations Are Indispensable for Success

Our existing and upcoming servicing initiatives require increasingly complicated and integrated technology to understand the homeowner and create customized solutions to mitigate delinquencies. More automated solutions are needed, coupled with easier analysis and mindfulness of current risks including climate change, industry trends and market fluctuations, and how they impact the business. 

Last fall, for example, we introduced a new Flex Modification® waterfall in a very short period of time; before Reimagine Servicing, a change like that would have taken longer to incorporate. 

But technology evolves quickly; our plans to update and modernize our existing platform will provide expanded opportunities for efficiencies and Servicer interactions. Five years down the road, our integrated technology solutions and policies will be more responsive and adaptive to change, allowing us to get ahead of and nimbly respond to normal market conditions as well as unanticipated obstacles and crises.

Mutual Commitment Helps Us Navigate Industry Trends

Though we have seen some softening of the labor market and lower rates of home price appreciation, overall, the economy is stronger than expected, changing rate cut expectations that could lead to slower pre-pays and fewer originations. We can also expect continued increases in insurance policy premiums and property taxes, both of which may put added pressure on the homeowner.

Servicing transfers will remain a significant part of our business. Roughly 10% of our book, or 1.3 million loans, are transferred each year. Increased data standards and more advanced technology will reduce the friction around this process. While non-banks will continue as the dominant Servicers, individual entities are deciding in which space they want to operate: conducting servicing activities only during the origination phase of the loan, retaining them through the life of the loan or transferring them at some point. No matter a Servicer’s objectives, we want to support their business model.

Accomplishing all the goals we’ve set out to achieve is going to require all of us to not only address the challenges of today but to be futuristic in our thinking of challenges and opportunities that will emerge over the next three to five years. We’re energized and inspired for this new age of servicing excellence—and we hope you’re excited to embark with us on this journey.