The Milliman Mortgage Repurchase Index (MMRI) is a lifetime repurchase rate estimate calculated at the loan level for single-family mortgages within each quarterly origination vintage. MMRI defines the repurchase rate as the likelihood that a loan will ever be bought back by the seller from the secondary market agencies, Fannie Mae or Freddie Mac. The results of the 2025 Q2 study reflect the most recent acquisition data available from Fannie Mae and Freddie Mac, with measurement dates starting from June 1, 2023.
Key findings
The value of the MMRI for government sponsored enterprise (GSE) acquisitions increased slightly for Fannie Mae (from 0.184% to 0.188%) and decreased for Freddie Mac (from 0.308% to 0.294%). The increase at Fannie Mae was driven by a 0.8 percentage point increase in loan-to-value (LTV) ratios for new originations. The decrease for Freddie Mac is related to a two-point improvement in credit scores.
Figure 1: MMRI 2025 Q2 dashboard for GSE loans
Summary of trends
For the 2025 Q2 origination cohort, our latest MMRI results indicate that repurchase risk has largely been constant for Fannie (+2%) and decreased slightly for Freddie (−5%).
In September 2025, Fannie Mae published its quarterly defect report1 detailing the top drivers of repurchase on a two-quarter lag. Top drivers of loan repurchase are identified via two sampling methods: a random sample of originated loans and a targeted sample based on known drivers of repurchase. According to the report, “misrepresentation of primary occupancy” was the most frequently identified defect in the random sample. Loan Level Pricing Adjustment (LLPA) grids2 for loans sold to Fannie Mae show investor or second home type mortgage loans could receive an LLPA fee ranging from 1.125% to 4.125% higher for purchase money loans, dependent on LTV ratio, versus an identical primary residence.
The targeted sampling methodology in the same report found that items related to the miscalculation of borrower debt-to-income (DTI) were significant drivers of repurchase. Defects related to income are common given that the selling guide provides strict requirements on allowable DTI ratios. If an underwriting defect is found and the loan then exceeds the guideline DTI threshold, a loan repurchase is triggered. Figure 2 breaks down the origination volume by DTI for existing loans by origination quarter.
Figure 2: Origination volume by DTI
| Freddie Mac | Fannie Mae | |||||||
|---|---|---|---|---|---|---|---|---|
| [0,45) | [45,48) | [48,50) | [50,100] | [0,45) | [45,48) | [48,50) | [50,100] | |
| 2023 Q3 | 65.0% | 14.3% | 11.9% | 8.8% | 71.6% | 13.5% | 10.0% | 4.8% |
| 2023 Q4 | 64.3% | 14.7% | 12.8% | 8.2% | 69.3% | 14.2% | 11.3% | 5.2% |
| 2024 Q1 | 67.6% | 14.1% | 11.7% | 6.6% | 70.8% | 13.6% | 10.5% | 5.1% |
| 2024 Q2 | 66.8% | 14.3% | 11.8% | 7.1% | 70.5% | 13.6% | 10.9% | 5.0% |
| 2024 Q3 | 69.0% | 14.0% | 11.1% | 5.9% | 71.3% | 13.5% | 10.4% | 4.7% |
| 2024 Q4 | 68.6% | 13.8% | 11.1% | 6.6% | 70.6% | 13.6% | 10.5% | 5.2% |
| 2025 Q1 | 67.6% | 14.2% | 11.5% | 6.7% | 69.8% | 13.9% | 11.0% | 5.4% |
| 2025 Q2 | 69.3% | 13.6% | 10.9% | 6.1% | 70.3% | 13.6% | 10.7% | 5.3% |
Average DTI has decreased for both Freddie Mac and Fannie Mae relative to 2025 Q1. The reduction in borrowers at 50% DTI is critical given that minor income related defects can cause DTI to exceed the regulatory level and trigger a costly repurchase.
The reduction in DTI is, in part, driven by slightly lower average mortgage rates during 2025 Q2. Figure 3 plots the 30-year mortgage rate average from the Freddie Mac PMMS survey.
Figure 3: Average 30-year U.S. mortgage rates
One trend to monitor is the decline in mortgage rates from 2025 Q2 to 2025 Q3. The impact of this trend will become more salient as data on the 2025 Q3 origination cohort becomes available. In addition, the Federal Reserve has indicated3 that an additional 25-basis-point cut is expected to the Federal Funds on top of the rate cut announced in September.4 Mortgage rates are influenced by a variety of factors, including the outlook of the MBS market, the strength of the housing market, and Federal Open Market Committee (FOMC) policy with respect to short-term interest rates. FOMC policy may sustain the current downward trajectory of average mortgage rates, though they do not often move in a straight line. Lower mortgage rates would reduce average monthly payments, all else equal, and therefore result in lower average reported DTI ratios. Alternatively, higher mortgage rates would do the opposite.
The share of adjustable-rate mortgages (ARMs) as a proportion of all mortgage loans continues to increase. Figure 4 shows the share of ARM acquisitions going back to 2012 Q1.
Figure 4: ARM volume as share of acquisition volume, 2012 Q1–2025 Q2
ARM share for Freddie Mac has steadily climbed to levels not seen since 2018. Per the Fannie Mae lending guide,5 DTI reporting on ARM loans is tied to the maximum interest rate the borrower could face within a time horizon defined by the terms of the ARM loan. This makes the repurchase risk outlook for ARM borrowers more sensitive to shifts in the mortgage rate.
Freddie Mac announced an expansion to the appraisal waiver program effective March 2025.6 This policy change increased the maximum LTV threshold from 80% to 90%, expanding access to the appraisal waiver program. This change was in lockstep with a similar policy shift from Fannie announced in October 2024 and effective in March 2025.7 Figure 5 shows the uptick in origination volume as well as an increased percentage share with an appraisal waiver in the 2025 Q2 cohort compared to the 2025 Q1 cohort for both Fannie Mae and Freddie Mac.
Figure 5: Volume with an appraisal waiver by origination cohort ($UPB)
Reliance on internal property valuation model estimates to generate property values opens these loans up to additional scrutiny. Loans need to qualify to receive an appraisal waiver based on more rigorous credit standards. As a result, repurchase rates on appraisal waivers tend to be lower relative to other property valuation methods. All else equal, the volume with an appraisal waiver is expected to increase with the relaxed standards. It will be a trend to monitor if under looser credit guidelines these loans default at a higher rate, which in turn have higher repurchase rates due to how the GSEs sample when looking for defects.
To help mitigate repurchase exposure, both GSEs continue to provide tools to reduce defect incidence and cost, offering income calculators to loan officers and piloting programs that substitute full repurchases with fees paid on performing loans and incentivize quality loan origination.8 The impact of these services is something to continue monitoring as shifting mortgage rates change the origination landscape.
About the MMRI
Milliman is an expert in analyzing complex data and building transparent, intuitive, and informative econometric models. We have used our expertise to assist multiple clients in developing econometric models for evaluating mortgage risk, both at the point of sale and for seasoned mortgages.
The MMRI uses econometric modeling to develop a dynamic model that clients can apply in multiple ways. Because the MMRI produces a lifetime repurchase rate estimate at the loan level, clients use it as a benchmarking tool in loan defect pricing. The repurchase scoring methodology is constructed separately for repurchases that occurred while loans were either performing or delinquent. For new origination cohorts, Milliman applies these scoring methodologies and weights them using the probability the loan will roll into serious delinquency. In addition, Milliman uses a mix of borrower attributes and loan characteristics to identify trends most associated with loan repurchase.
Milliman is one of the largest independent consulting firms in the world and has pioneered strategies, tools, and solutions worldwide. We are recognized leaders in the markets we serve. Milliman insight reaches across global boundaries, offering specialized consulting services in mortgage banking, employee benefits, healthcare, life insurance and financial services, and property and casualty (P&C) insurance. Within these sectors, Milliman consultants serve a wide range of current and emerging markets. Clients know they can depend on us as industry experts, trusted advisers, and creative problem solvers.
Milliman's Mortgage Practice is dedicated to providing strategic, quantitative, and other consulting services to leading organizations in the mortgage banking industry. Past and current clients include many of the nation's largest banks, private mortgage guaranty insurers, financial guaranty insurers, institutional investors, and governmental organizations.
1 Fannie Mae (2025 September 30). Understand top defects to help strengthen loan quality. https://singlefamily.fanniemae.com/originating-underwriting/loan-quality/quality-insider/september-2025.
2 Fannie Mae. (2024, December 5). Loan-level price adjustment matrix. https://singlefamily.fanniemae.com/media/9391/display.
3 Federal Reserve. (2025, October 29). Federal Reserve issues FOMC statement [Press release]. https://www.federalreserve.gov/newsevents/pressreleases/monetary20251029a.htm.
4 Federal Reserve. (2025, September 17). Federal Reserve issues FOMC statement [Press release]. https://www.federalreserve.gov/newsevents/pressreleases/monetary20250917a.htm.
5 Fannie Mae. (2025, August 6). Originating & Underwriting Selling Guide. B3-6-04, Qualifying payment requirements (02/07/2024). Retrieved on August 13, 2025, from https://selling-guide.fanniemae.com/sel/b3-6-04/qualifying-payment-requirements.
6 Freddie Mac Single Family. (2025, March 24). Loan Quality Advisor enhancement to support ACE and ACE+PDR expansion. Retrieved on August 13, 2025, from https://sf.freddiemac.com/articles/news/loan-quality-advisor-enhancement-to-support-ace-and-acepdr-expansion.
7 Fannie Mae. (2024, October 28). Fannie Mae announces changes to appraisal alternatives requirements [Press release]. https://www.fanniemae.com/newsroom/fannie-mae-news/fannie-mae-announces-changes-appraisal-alternatives-requirements.
8 Freddie Mac. (2024, October 28). Freddie Mac expands repurchase alternative pilot for performing loans. https://freddiemac.gcs-web.com/node/29521/pdf.