freddie mac issuer session presentation...in response to the significant increase in reo inventory...
TRANSCRIPT
Freddie Mac Issuer Session
STACR and Other Credit Risk Transfer Updates: Servicing and REO Disposition Practices
September 17, 2015
STACR and Other Credit Risk Transfer
Updates: Servicing and REO
Disposition Practices
Speakers:
Yvette Gilmore, Vice President, Servicer Performance Management
Jennifer Meagher, Ops Change Management Director
Eric Will, REO Sales & Closing Senior Director
Moderator: Mike Reynolds, Vice President, Credit Risk Transfer
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation 3 3
Achievements
Launched the STACR Market
Leading the way in Disclosures
Industry Awards Including:
» 2015 RMBS Deal of the Year Award by Global Capital
» 2014 Global Structure Deal of the Year Award by Euromoney
» 2014 Deal of the Year for Americas Award by The Banker
Freddie Mac continues to evolve this asset class, introducing new
products and features to make the program even more effective
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation 4 4
Freddie Mac’s Role in US Housing Finance
Yvette Gilmore, Vice President
Servicing Performance Management
Single-Family Servicing &
Loss Mitigation
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Servicing
Policy
Servicing Leadership Team – Who We Are
Fu
nc
tio
na
l A
rea
s
Servicing
Relationship
Management
Portfolio
Data
Analytics
Responsible for
managing the servicing
performance of the
company’s 1,400
national, regional and
community servicers.
Establishes
relationships with
servicers that enable
improvement of
operational performance
and execution to reduce
credit losses, preserve
homeownership and
facilitate positive
servicing industry
change.
Responsible
for
Servicing data
and reporting,
and the
analytics
support for
Loss
Mitigation
solutions, as
well as the
Servicer
Success
Scorecard,
integral to
Servicer
Relationship
Management.
Responsible for
developing
mortgage
servicing
policies, and
changes to our
Single-Family
Seller/ Servicer
Guide. Works
with FHFA,
industry
participants,
and internal
partners to
develop
solutions to
Servicing
issues.
Servicing Performance Management
Servicing
QA
Responsible for
loan file reviews
to evaluate
Servicers'
compliance with
FRE
requirements for
managing
delinquent loans
and workout
alternatives.
Also identifies
remedies for
non-compliance
and collects on
all requests.
Customer
Performance
Management
Responsible for
providing and
maintaining a
consistent
framework for
business
protocols,
approval
authority, and
account mgmt,
including
management of
negotiated
terms of
business, risk
evaluation, and
customer
support..
Structured
Transactions
Responsible for
delivering
financing
support related
to negotiated
servicing
transfers and
for managing
the
performance of
the T-Deal
servicers,
including
monthly
recoveries on
loss-producing
loans
Single Family Servicing
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© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Key Monitoring Mechanisms Scheduled Monitoring: baseline activities as prescribed by policies/procedures
Ongoing Monitoring: triggered based on surveillance, for example:
financial analysis results, market risk indicators, and changes in the business, industry or regulation
Freddie Mac executes a coordinated and integrated approach to monitoring
and evaluating servicer risks
Servicer Monitoring
Compliance
& Eligibility
Financial
Analysis
Fraud
Investigations
Credit
Monitoring
Servicer
Performance
Monitoring
On-site
Operational
Reviews
(CORE)
Scheduled Monitoring Both Scheduled and Ongoing Monitoring
Results of any of the above functions can lead to actions taken against the
counterparties.
Ongoing Monitoring
Performance is discussed at various forums with cross-divisional representation (e.g., integrated account plan
meetings, Credit Integration Team (CIT) meetings, Single Family Risk Committee)
1. Failure to repurchase
2. Fraud findings
3. Inadequate capital / net worth
4. Non-compliance with Guide
5. Failure to file annual certification
or financials timely
Common reasons for actions
1. Collateral agreements/parental guarantees
2. Suspend negotiated servicing transfers
3. Partial transfers of servicing
4. Terminate eligibility through adverse actions
Examples of actions taken
Onsite
Operational
Review
QA
Remedies
7
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Freddie Mac’s Servicing Success Program focuses on all
aspects of mortgage servicing to improve Servicer
performance. The program includes three components:
The Servicer Performance Profiles website is a tool to help
measure results of all Servicers for the Program, and is
available to all Servicers.
Tools to monitor performance include:
• Servicer Success Scorecard Tools
− Servicer-specific targets and performance metrics
− Large & Specialty Servicer performance grid
− Bottom 25% NPL performance grid
• Servicer Account Plans
− Executive Summary Reports
− Negotiated Terms of Business
• Integrated Account Plans
− Holistic view of relationship
Portfolio Data Analytics sets annual targets for
Servicers and ranks them each month based on
performance against the Scorecard criteria.
Monitoring Servicer Performance
8
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation 9
Days Delinquent30 DPD 60 DPD 90 DPD 120 DPD 360 Days 720 DaysCurrent FCL Sale
Payment
Relief Options
Forbearance
Repayment Plan
Loan
Modification
Options
Disaster Relief Modification
Standard ModificationStandard
Mod with Imminent Default
Liquidation
Options
Standard Short Sale
Deed-in-Lieu
1
2
3
4
7
8
Streamlined Modification6
HAMP ModificationHAMP
Mod with Imminent Default5
Disaster Relief Modification – A capitalization and extension modification that is offered only to those Borrowers that were impacted by an Eligible Disaster.
HAMP Modification - Modification that reduces delinquent and at-risk borrowers' monthly mortgage payments by achieving a post-modified 31% PITIAS Payment-to-Income ratio (“Target Payment”)
Standard Deed-in-Lieu - Borrowers that wish to gracefully exit the home by voluntarily conveying clear and marketable title to the property to Freddie Mac in exchange for a discharge of debt.
Standard Short Sale - Borrowers that wish to gracefully exit the home by selling the property for less than the total amount necessary to satisfy the mortgage. Cash or note contribution may be required in some instances.
Repayment Plan - Borrowers that have had a short term hardship, and now have the ability to begin making payments again, but either do not want or do not require a loan modification.
Forbearance - Relief option that provides a temporary reduction or suspension of payments to give Borrowers a period of time to improve their financial situation 1
2
3
4
5
6
7
8
Standard Modification - Modification for Borrowers who are ineligible for HAMP. Standard Mod achieves an affordable payment through the capitalization of arrearages, interest rate adjustment, term extension, and partial principal forbearance, as necessary
Streamlined Modification - A proactive modification solution with the same terms as the Standard Modification, the Streamlined Modification is offered to Borrowers who are at least 90 days delinquent, but not more than 720 days delinquent. A complete Borrower Response Package is not required.
Loss Mitigation Solutions
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Borrower Contact Focus on Quality Right Party Contact and standards
Delinquency Management Emphasis on earlier, more frequent contact and response
Loan Modifications, Workouts, and
Foreclosure Alternatives
Promote long-term, sustainable solutions based on best
practices
Foreclosure Timelines Focus on consistent application of timeline measurements
from referral through date of sale
Servicer Incentives and
Compensatory Fees
Compensate for meeting quality benchmarks
Assess fees/remedies for failing to meet quality
benchmarks
• Servicers have done a better job of engaging with homeowners,
resolving their cases more quickly and consistently
• There is greater transparency and a quicker decision-making
process for distressed homeowners
Reduced
Credit
Losses Modifications and Foreclosure Alternative programs have been
greatly expanded, resulting in more positive Borrower outcomes
Areas of Alignment
10
Eric Will, REO Sales & Closing Senior Director
Jennifer Meagher, Operations Change Management Senior Director
HomeSteps REO Overview
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Mission
To effectively manage Freddie Mac’s credit losses in a way that provides affordable housing
opportunities and benefits communities.
HomeSteps Mission
Improve Collateral Values Refinement of our valuation methodology;
Repair strategy focus to improve sales prices
and return on investment; Frequent market area
reviews and analytics to adjust sales and pricing
strategies.
Manage Expenses Monitoring of asset expenditures at the account
group level; Business model review for savings
and efficiencies; Negotiating volume discounts
with vendor for service fees.
Maximize Remedies Effective management and collection of hazard
insurance, primary MI, pool MI, repurchase
claims and any other remedies available.
Preserve, Maintain, & Repair Homes Adherence to the highest quality of preservation,
maintenance and repair standards; Homes look
as good or better than others in the market.
Price Homes at Fair Market Value Homes priced and sold in-line with other retail
sales in the community, ensuring we do not
establish negative comparable sales that lead to
home value declines.
Target Owner Occupant Buyers Sales and marketing strategies employed to
attract owner occupant buyers, resulting in
stronger recoveries than investor sales.
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© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
REO Business Process
Outsourcer
Oversight
Vendor
Services
Operational
Accounting
Valuation
Management
Servicer
Relations &
Recoveries
Regional
Area
Managers
REO Core Process
Closing
& Title
Listing
& Sales
Pre List
Available
Pre List
Not Available
Redemption
Eviction
Complex Title
Litigation
Valuation
Strategy
Repair
Rental
Listing
Strategy Updates
Offer Negotiation
Contract Execution
Sale Pending
Title Resolution
Settlement
Bulk Sales
Quality
Assurance
Special Sales
Programs -
Auction, Bulk
Marketing &
Customer
Service
Reporting &
Process
Automation
Repurchase Primary MI
REO Support &
Financial Functions
13
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Portfolio Overview
14
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Portfolio Overview
15
Inventory Statistics
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Portfolio Overview
16
Top 10 States
Inventory Volume & % of Total Inventory
3.0%3.9%4.0%4.7%5.5%6.2%6.2%7.0%
8.4%
11.9%
0
1K
2K
3K
4K
5K
FL IL OH MD MI NJ NY MN PA OR
Current Inventory YTD Authorizations YTD Dispositions
As of August 31, 2015
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Portfolio Overview
17
As of August 31, 2015
1
10 7 5
4
8
6 3 2 9
Top 10 States
1. FL
2. IL
3. OH
4. MD
5. MI
6. NJ
7. NY
8. MN
9. PA
10. OR
The Top 10 States
Comprise 61% Of
Our Total Portfolio
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Best Practices
Vendor
Management
Good Neighbor
Policy
Community
Stabilization
Marketing Programs
& Incentives
Valuation
Practices
Establishing the most accurate market value is critical
to maximizing financial recovery, reducing timelines,
and protecting home values.
To maximize financial recovery and reduce liability risks,
HomeSteps utilizes an extensive vendor network of licensed, experienced,
and well-trained service providers.
To reduce the negative impact of foreclosures and enhance marketability,
HomeSteps adheres to stringent
preservation and maintenance standards.
HomeSteps actively partners with non-profits,
local governments and HUD to use our homes in support of
community stabilization efforts.
Marketing promotions and programs
encourage owner-occupant sales, mitigating the perception
that REOs sell below market value to investors.
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© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Best Practices
Vendor
Management
Good Neighbor
Policy
Community
Stabilization
Marketing Programs
& Incentives
Recognized “Best In Class” REO
Management Practices & Systems
Strong Reputation, Liability &
Operational Risk Management
Support for community
stabilization and housing recovery
Maximized Financial Recovery for
Freddie Mac, Taxpayers, & Credit
Investors
Valuation
Practices
19
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Improved Capabilities
Valuation precision.
Preservation & Maintenance standards / monitoring
Repair decisioning and maximization of ROI
Stronger, more flexible, diverse vendor networks and management
Capabilities to quickly adapt to changes in laws, ordinances, and
processes governing management and oversight of REO homes
Improved data analytics to help maximize financial recovery
In response to the significant increase in REO inventory resulting from the housing
crisis, HomeSteps heavily invested in enhancements to our business model,
processes, vendor networks, and production/end-user systems.
20
Improved Capabilities
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Results & Accomplishments
21
Results & Accomplishments
Acquired and Sold 500,000 REO
Sold nearly two-thirds of homes to owner-occupant buyers
Achieved better than 95% sales price to market value
Reduced standing inventory over 73% since it’s peak of 75,000
Paid more than 10M invoices; $4.3B in property expenses
Delivered 3.6M Broker’s Price Opinions (BPO’s)
In response to the significant increase in REO inventory resulting from the housing
crisis, HomeSteps heavily invested in enhancements to our business model,
processes, vendor networks, and production/end-user systems.
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Focus Areas
Enhanced Collateral Recoveries
Localization of valuation and pricing
Refinement of repair program
Remedy optimization
Aggressive Portfolio Management
“Not Listed” inventory reduction
“Listed” and “Aged” inventory
acceleration
Broader use of alternative marketing
channels (i.e. auction, bulk)
Focus on Community Stabilization
FHFA’s portfolio contraction and
community stabilization goals
Promote Freddie Mac’s Home
Possible Advantage program for
REO
22
Optimize Vendor Relationships
Increasing P&M Vendor Coverage
Effectively managing size of vendor
network to optimize vendor
performance and fees
© Freddie Mac 2015 ABS East Freddie Mac Issuer Presentation
Q & A