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The Exchange: Kevin Palmer SVP of Single Family Portfolio Management, Freddie Mac

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As Senior Vice President of Single Family Portfolio Management at Freddie mac, Kevin Palmer has broad responsibility for the Single-Family portfolio, including Freddie Mac’s warranty portfolio, pricing and analysis, maintenance and REO. He also leads Single Family Credit Risk Transfer (CRT) including Freddie Mac STACR securitizations, ACIS reinsurance, Whole Loan Securities and initial risk transfer offers. Since 2001, he has held various other roles at Freddie Mac including full loan negotiation, non-branch ABS portfolio management and risk management. He holds an MBA in Finance from Virginia Tech and a Bachelor of Arts in Economics from Weber State University.

How do you see Freddie Mac’s role in supporting the housing market during the pandemic and now in our country’s recovery period?
Palmer: This pandemic has been really difficult for everyone. One of the key roles Freddie Mac plays, especially during times of stress, is to help provide liquidity and stability to the housing market. I think support is one of the main reasons that housing has remained a bright spot during all of these troubled times. Millions of homeowners were unable to pay their mortgages during this pandemic. Without the support that we have been able to provide, I think we may have had another crisis on our hands.

For the hundreds of thousands of Freddie Mac borrowers who have fallen behind on their mortgages, we’ve been able to roll out a massive forbearance program. Forbearance is a way to provide a waiting period, a period during which borrowers are not required to pay their mortgages. In fact, not only are they not required to pay their mortgages, but they are also not reported to the credit bureaus as overdue, so the delay does not affect their credit history. This gives them leeway – time to get back on their feet and be able to repay their mortgages again.

Forbearance was a huge step in providing the needed relief; we also looked at what might be the right exit strategies from forbearance.

How can borrowers gracefully go from a break on their mortgage payments to a new repayment without any problem?
Palmer:
We have put in additional programs such as the deferral of payment which basically defers the amount of missed payments until the very end of their mortgages. This is all done without interest and they can start making their mortgage payments again, which has been essential in helping existing homeowners. We have also made a great effort to educate homeowners about these weight reduction options.

Often times, when you are unable to pay your bills, you do not contact immediately. We made sure borrowers understood that relief was available if they needed it. We have also supported the mortgage market through new arrangements. When the pandemic hit, we looked at all of our different policies and procedures and said, “We want to continue supporting this market, but we want to do it in a safe way, with social distancing.” So we analyzed everything we historically needed to determine if we still needed these requirements and if we could creatively adapt them. We have seen a huge investment not only from us but also from many mortgage companies who have invested in digital platforms which has created an enhanced digital experience for many borrowers. We have focused on investing in ways that have enabled more digital assessments as well as other measures to help streamline and automate processes, while ensuring that risk is fully covered. This has allowed the mortgage market to continue to function and provide new mortgages to those who wish to participate in this housing market.

In what ways should the mortgage industry prepare to help borrowers as they exit forbearances and the moratorium on foreclosures begins to expire?
Palmer: When the pandemic ends, many of these COVID-19 programs will also end. I want to mention that I think some things will not end. For example, I don’t see the end of investments in digital platforms. Borrowers are now willing to use – and can access more easily – these digital platforms. I hope a lot of this will stay because it will benefit us all. Think about tolerance; it is not something that we created during this pandemic.

Forbearance is something we have had in our toolbox when we have seen natural disasters or forest fires. One of the reasons we were able to react so quickly during this pandemic is that we were able to quickly adapt our existing toolkits, the ones we applied in very specific areas, and expand them. To the extent that something in the future will require us to renew the forbearance, we can do it quickly.

Can you give us an overview of how these homeowner options perform in today’s market?
Palmer: Of the hundreds of thousands of borrowers in Freddie Mac’s portfolio who have started forbearance, we’ve seen about two-thirds of them already come out of forbearance. Over the past two months, we have seen significant improvement in several key indices. We see the economy reopening, the unemployment rate going down and things are definitely going in the right direction. We are seeing more and more borrowers gracefully come out of forbearance and maintain home ownership, which is so important.

We are not out of the woods, but we have had tremendous success so far. At the same time, many borrowers are still in abstention, most of them for almost a year. Their situation is probably more serious than that of other borrowers who have already abandoned the forbearance. So the tools that worked for the first half of borrowers might need to be different from the tools we use for the remaining borrowers. We have options for them, like our Flex Modification program, which not only allows them to start making a mortgage payment again, but also allows a reduced mortgage payment for borrowers who need it. It is essential that our mortgage services / companies work with borrowers, and we constantly focus on sustainable home ownership, encouraging borrowers to continue to work closely with their mortgage companies. A mortgage company can advise borrowers on their relief options and help them understand their options services so that whenever we need additional tools to help homeowners, we are there, ready and able to deploy them.


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