Repurchase Alternative FAQ

In response to industry feedback, Freddie Mac piloted a new repurchase alternative earlier this year to a small group of Sellers. Based on learnings, we’re expanding the pilot to include additional participants beginning in Q1 2025.

With the pilot, Sellers with a statistically significant non acceptable quality (NAQ) rate are subject to a fee schedule each quarter based on their NAQ rate. The fee (in basis points) will be applied to the total UPB of loans sold to Freddie Mac. Sellers with an NAQ rate under 2% in a given quarter will not be required to pay a fee that quarter. Smaller Sellers for whom Freddie Mac’s sampling volume is insufficient to generate a statistically significant NAQ rate will not be assessed a fee and will not be required to repurchase most performing loans.

The goal of the pilot is to incentivize high quality loan originations, reduce the financial and operational impacts of performing loan repurchases, and compensating Freddie Mac for credit risk if a loan defaults after the 36-month representations & warrants (R&W) relief period. Freddie Mac believes this expansion of the repurchase alternative pilot along with the enhancements to our loan-level remedy path provides Sellers with more control throughout remedy process.

We will communicate this information in the near future. Details about the pilot will be available on our Single-Family Quality Control webpage.

Some Sellers deliver enough loan volume to allow Freddie Mac to determine a representative NAQ rate for all loans delivered in a given quarter, not just those loans sampled for quality control (QC) review.

For some Sellers, the statistical significance of their NAQ rate may change over time. Sellers can look back at prior quarter NAQ rates to determine if it was statistically significant.

NAQ rates can be found in ECO^®: Evaluate | Compare | Optimize^®. For questions about your NAQ rate, contact your Freddie Mac representative or Single-Family Quality Control assigned director.

No. There are no changes to the representation and warranty relief framework. Sellers will continue to appeal repurchase requests in the same manner as today.

Most performing loans with significant defects sampled through Single-Family Quality Control review will be eligible for pilot with a few exceptions. Those exceptions include loans with charter issues, fraud or some collateral defects. Details on exclusions will be provided soon.

No. Loans that are sampled as non-performing loans are not eligible for the pilot.

No. Loans that are sampled for Servicing Quality Control are not eligible for the pilot.

Loans that are self-reported or part of performing loan targeted samples are eligible for the pilot as long as those loans are performing. Loans that are reviewed by Single-Family Quality Control through these samples do not affect a Seller’s NAQ rate (NAQ rate is based solely on the performing loan base sample). Loans that are self-reported or are part of a performing loan targeted sample loans will not result in repurchase unless the significant defect falls into an excluded category for the pilot.

In the new pilot program, if an eligible performing loan with a significant defect subsequently goes delinquent per the terms of the representation and warranty relief framework, it will be subject to immediate repurchase.

As information is released on the expanded pilot, it will be available on our Single-Family Quality Control webpage.

Contact your Freddie Mac representative or the Customer Support Contact Center (800-FREDDIE).

The new Fee-only repurchase remedy may be available for Sellers who do not participate in the pilot. If the Fee-only repurchase remedy is offered on a performing loan, Sellers will be able to pay a fee in exchange for immediate representation and warranty relief on that loan (but remain subject to charter, fraud and life of loan (Guide Sections 1301.11) defects). The fee is based on the current unpaid principal balance (UPB) of the loan. Seller eligibility for this repurchase remedy will be similar to the Recourse remedy and will apply to loans with credit and/or capacity defects. The Fee-Only repurchase alternative will be available on loans with settlement dates on or after January 1, 2025.

The recourse remedy will be available for Sellers who don’t participate in the pilot. The recourse remedy fee has been reduced more than 50% and the term remains at 5 years. Seller eligibility for this repurchase remedy remains unchanged and will now apply to loans with collateral valuation defects. The recourse remedy fee will be available on loans with settlement dates on or after January 1, 2025.