Freddie Mac Bolsters Underwriting, Removing Brokers From Due Diligence Chain

Loan documentation cannot be passed to brokers or correspondents and must go directly from borrower to lender

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Freddie Mac (FMCC) is tightening its underwriting requirements and ensuring that all loan documentation is delivered directly from borrowers to Freddie Mac lenders, and not passed to a broker or correspondent in between the two. 

The government-sponsored enterprise (GSE) alerted lenders in Freddie Mac’s Optigo lender network of a guide update Wednesday regarding broker-involved loans. The guide update takes effect immediately and is geared toward reinforcing its seller relationships, Commercial Observer has learned. 

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The update comes in the wake of the GSE clamping down on Meridian Capital Group earlier this week, after a loan arranged by the brokerage was called into question. 

The Freddie message Wednesday stated that quote requests involving a broker/correspondent “must be accompanied by a confirmation from the borrower that the Optigo (Freddie Mac) lender is the sole lender authorized to submit the loan to Freddie Mac.”

The guide update also noted that all due diligence documentation from borrowers must be delivered directly to the Optigo lender from the borrower “without the broker/correspondent being in the chain of custody of the documentation.” 

An introduction of the statement obtained by CO from Kevin Palmer, Freddie Mac’s head of multifamily, clarified that the agency works directly with approved Optigo lenders, but doesn’t work directly with brokers. 

“These changes reinforce our seller relationships by clarifying data quality and chain of custody requirements as loan due diligence moves from borrower to lender,” Palmer said in his message. 

The notice from Palmer came after Freddie Mac barred Meridian from placing deals through lenders that are Freddie Mac seller-servicers while an investigation is conducted. New York City-based Meridian also placed one broker on leave while it cooperates with the probe, The Real Deal reported Tuesday. 

Freddie Mac’s rival GSE firm, Fannie Mae (FNMA), contacted lenders Tuesday and stated that all agency-backed loans involving brokers are now subject to pre-review. Fannie Mae utilizes a delegated underwriting system, while Freddie Mac uses a prior review model.

A Freddie Mac spokesperson said in response to the guide update and Meridian investigation, “We are not able to comment on specific lenders, loans or borrowers other than to say we regularly review our book of business to ensure adherence to our standards.” 

Andrew Coen can be reached at acoen@commercialobserver.com