Freddie Mac will launch a new fee-based repurchase alternative pilot program for performing loans in 2024, designed to improve the quality of performing loans through a potential replacement of its current repurchase policy for defective performing loans.

“The pilot will use a fee-based structure that is more efficient, transparent and rewards lenders that deliver high-quality loans,” the GSE said. “Specifically, lenders will not be subject to repurchases on most performing loans and will instead be subject to a fee-based structure based on non-acceptable quality (NAQ) rates.”

That fee uniformly applies to both medium- and large-sized lenders based on NAQ rates, and will be waived for smaller lenders unable to deliver volume large enough to generate an NAQ rate that is “statistically significant.”

“Loans that are non-performing within 36 months or subject to life of loan defects will still be subject to repurchase,” Freddie Mac said. “This fee structure will begin with a limited rollout with targeted lenders in early 2024.”

Last month, Federal Housing Finance Agency (FHFA) Director Sandra Thompson said that the GSEs must implement a fair, consistent and predictable process for identifying loan defects and the appropriate remedies for them during an October event hosted by the Mortgage Bankers Association (MBA) in Philadelphia.

“After multiple years of record-high loan volume, we have seen an increase in the absolute number of repurchase requests – which is to be expected,” Thompson said at the event. “The good news is that there has been a large decrease in repurchase requests since their peak in early 2022, as the Enterprises have worked through loans originated during the refinance boom.”

Thompson went on to say that both Freddie Mac and Fannie Mae have examined their existing processes and practices, which include improving the language in selling guidelines and providing more consistent feedback to lenders on buybacks to minimize ambiguity during the underwriting process.