Ishbia urges FHFA to step in on GSE loan buyback issue

Mat Ishbia, president and CEO of United Wholesale Mortgage, has echoed the frustration of mortgage industry experts and leaders with the increased volume of loan buybacks from the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac

In a recorded video distributed on Tuesday, Ishbia claimed the Federal Housing Finance Agency (FHFA), which oversees the GSEs, “is going to have to step in again because it’s becoming a big issue.” 

FHFA did not immediately respond to a request for comments.

According to Ishbia, the FHFA years ago took action so Freddie Mac and Fannie Mae would not push back loans for “illogical reasons, small reasons left and right or after a 36-month window.” However, it doesn’t seem to be working, Ishbia said. 

“They are making billions, and lenders are barely scraping by, but they continue to make them buy back loans for small reasons here, little things that happened on a loan that maybe are not impacting the borrower’s success in that loan,” Ishbia said.  

At the end of August, HousingWire reported on a new report by mergers-and-acquisitions consulting firm Sterling Point Advisors showing that loan-repurchase rates have been on the rise in recent quarters when many IMBs are struggling to stay in business.  

In 2020, Fannie Mae reported $1.1 billion in repurchases on $1.4 trillion of single-family loan-acquisition volume (loans originated by lenders and purchased by Fannie Mae), or an eight basis-point repurchase rate. In Q1 2023, the GSE had $459 million in repurchases on about $68 billion in loan-acquisition volume or a 68 basis-point repurchase rate, the report shows. 

“The industry is up in arms and is very frustrated with the amount of repurchases Fannie Mae and particularly Freddie Mac are pushing back on lenders,” Ishbia said. “A lot of trade groups, a lot of people are talking about it, and it’s impacting lenders, impacting mortgage people, and impacting consumers at the end of the day as well.”

The GSEs showed a different approach to buybacks in May during the Mortgage Bankers Association (MBA) Secondary and Capital Markets Conference and Expo in New York. Fannie Mae’s position was that the loan-repurchase increases are an economic problem, not an underwriting process issue. Meanwhile, Freddie Mac said it’s in talks with lenders to address the problem through a more customer-focused approach. 

Amid mounting concerns that loan-repurchase rates in upcoming quarters are likely to continue to trend upward, Freddie Mac told HousingWire last week that, “We’re seeing a positive trend in loan quality and materially fewer repurchase letters as a result of the progress we’ve made by working collaboratively with our industry partners in the past year. We will continue to look for opportunities to build on this progress.”

Freddie Mac also said they are “always looking for ways to improve our quality control processes, and we will continue to engage in open and productive dialogue with lenders to find ways to further improve loan quality while fostering sustainable homeownership.”