themortgagellm™Fannie vs Freddie channel choice for a clean conforming loan
Prompt
“Should we deliver this loan to Fannie or Freddie? FICO 720, DTI 38, LTV 80, note rate 6.5%.”
Response
Channel-choice (S-learner v1) output for the loan you described — comparing the same loan scored once under Fannie pathway and once under Freddie pathway, then differencing the expected losses:
| Channel | Repurchase prob. | EPD 12-mo prob. | Expected loss ($) |
|---|---|---|---|
| Fannie | 0.13% | 0.68% | ~$321 |
| Freddie | ~0.13% | ~0.68% | ~$321 |
- Expected-loss differential: essentially zero — both GSEs price this clean-credit conforming profile near-identically.
- Recommended channel: EITHER — the differential is immaterial relative to typical pricing-grid and cash-window adjustments.
- Rationale: For a clean-credit, mid-LTV, low-DTI conforming loan, the two GSEs' historical credit-performance distributions overlap almost entirely. Channel selection should fall to non-loss criteria — pricing grid, MSR retention strategy, existing cash-window / Guaranty Fee terms.
Delinquency-curve comparison (Fannie pathway, per-horizon):
| Horizon | 60+DQ probability |
|---|---|
| 12-mo EPD | 0.68% |
| 24-mo cumulative | 1.91% |
| 36-mo cumulative | 3.32% |
Loss assumptions used: $200K per repurchase, $10K per EPD signal. Override via loss_per_repurchase_usd / loss_per_epd_usd on the request payload if your reserve model differs.