In this exclusive Instant Impact episode at the MBA Annual Conference in Denver, Diego Sanchez from HousingWire sits down with Kevin Kauffman, Head of Seller Engagement at Freddie Mac. They discuss Freddie Mac’s strategies to increase affordability, streamline processes, and help lenders navigate a rapidly evolving market. Here’s a look at the key insights from Kauffman on how Freddie Mac is embracing technology and advising lenders for growth.

Freddie Mac’s flagship tool, Loan Product Advisor (LPA), serves as the cornerstone of the organization’s efforts to help lenders expand affordability and provide access to credit. Kauffman explained, “We see LPA as the hub to drive information to and from our customers to create eligibility opportunities for loans sold to Freddie Mac.” Freddie Mac has enhanced LPA with features like cash flow analysis leveraging asset and income data to help lenders widen credit opportunities for their borrowers.

The company also announced a new offering, LPA Choice, which focuses on providing more information regarding loan eligibility based on key metrics like debt-to-income, loan-to-value ratios and reserves. Kauffman emphasized that this initiative aims to deliver a fairer lending experience by reducing the guesswork for loan officers and making more precise eligibility decisions.

Another significant development launched just last year by Freddie Mac is DPA One, a centralized resource for down payment assistance (DPA) programs. “We sourced down payment assistance solutions from across the entire market to more efficiently put that information into the hands of loan officers,” Kauffman said. “It removes a significant barrier to homeownership by helping lenders connect potential borrowers with available assistance programs.”

Starting with local level data in just three states in October 2023, the platform has now expanded to include such data in nearly 40 states, with plans to reach all 50 by the end of 2024. Currently more than 6,000 loan officers are using the platform to find and match borrowers to many of the down payment assistance programs nationwide.

Freddie Mac’s position allows Kauffman to observe key trends in the mortgage industry. When discussing the difference between tech-forward lenders and those slow to adapt, Kauffman highlighted the importance of not just investing in technology, but also understanding and re-engineering the processes that support it. “The technology enables it, but the behavioral approach is what sets the more innovative lenders apart,” he noted.

However, Kauffman also acknowledged the challenges lenders face. “The main struggle is trying to force new technology into an old process,” he said. Lenders need to think beyond existing practices to achieve true efficiency, but that often requires a willingness to embrace change and manage compliance risks effectively.

Looking ahead to 2025, Kauffman expressed cautious optimism as lenders plan for a potentially shifting market. He pointed to Freddie Mac’s expansion of its automated collateral evaluation  (ACE) appraisal alternative—to increase the maximum loan-to-value (LTV) and total loan-to-value (TLTV) ratios permitted for purchase transactions from 80% maximum LTV/TLTV ratios to 90% maximum LTV/TLTV ratios—as an example of the company’s focus on reducing costs for buyers while increasing efficiency without adding risk. Freddie Mac also announced the maximum LTV/TLTV ratios permitted for purchase transactions using its ACE+ PDR (ACE plus property data report) appraisal alternative, which allows for the onsite collection of property data instead of an appraisal, will increase from 80% maximum LTV/TLTV ratios to the maximum LTV/TLTV ratios permitted for the associated Mortgage offering (e.g., up to 97% for Home Possible loans), helping open the cost-saving opportunity to a broader population. “We’re trying to find ways to identify solutions that improve efficiency while managing risk,” he said.

Kauffman believes competition is a key driver of innovation in the industry. “When you have competition, you get more innovation,” he stated, noting that the current market environment requires lenders to be agile and adaptive. As rates fluctuate and lenders face uncertainty, Kauffman emphasized the importance of adapting to new conditions and taking advantage of competitive opportunities.

Kauffman highlighted Freddie Mac’s Trusted Advisor Program, which aims to provide guidance to lenders on cost-reduction strategies and technology adoption. The program involves direct collaboration between Freddie Mac, lenders, and industry partners to identify areas for automation and risk mitigation.

“For example, if W2 solutions account for 60% of a lender’s loans, we ask, why spend the same amount of time on every file when automation can streamline that?” Kauffman explained. By working closely with lenders, Freddie Mac aims to help them reduce costs, lower defect rates, and reduce repurchase risk.

With 2025 on the horizon, Kauffman expressed optimism while still aware of market challenges. The mortgage industry’s transition from a purchase-heavy environment to a potential refinance market, coupled with economic uncertainties, calls for strategic planning and flexibility.

“Our focus is on helping sellers and partners do business with Freddie Mac efficiently and effectively,” Kauffman concluded. “We want to be more than just a transactional GSE; we want to help lenders understand how to leverage technology and manage risk.”