MReport August 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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32 | M R EP O RT FEATURE H omebuyers are facing major challenges in today's market: a dwindling housing supply, rising interest rates, and pandemic relocations are creating a high demand for homes. Other issues plaguing the housing industry include labor shortages, supply chain issues, and rising materials costs, all of which are making new builds a lengthy, frustrating, and extremely costly undertaking. However, these market barriers are only part of the battle. According to a recent study from Mastercard, consumers say obtaining a mortgage is a serious pain point in an already painful homebuying process. The survey shows that 89% of homebuyers find the mortgage process to be equally or more stressful than the homebuying experience. There has been a movement within the industry to adopt a fully digital mortgage and make assessments easier for lenders and borrowers. Freddie Mac has been at the forefront of this effort, working to provide a digital solution that uses bank account data to help streamline the underwriting process. They took another step towards digitization by announcing the latest enhance- ment to Loan Product Advisor (LPA) asset and income modeler (AIM) with the automation of the 10-day preclosing verification (PCV) of employment. This is now live and available in LPA, the company's automated under- writing system. Automated Employment Assessment With AIM T he new VOE Payroll and VOE Transactions reports provide the data Freddie Mac needs for the 10-day PCV. In adding one of the reports, lenders receive only the data needed to close rather than refreshing the current, full reports that have already been underwritten. This helps eliminate last-minute hitches and other redundancies in the closing process. Automated Income Assessment With AIM I n February, Freddie Mac announced AIM for income using direct deposits, facilitating lenders' assessment of a prospec- tive homebuyer's income paid through direct deposit to reduce the paper documentation burden on borrowers, thereby allowing lenders to close loans faster and simplifying the mortgage lending process. This provides cost- and time-saving efficiencies, while continuing to meet Freddie Mac's stringent credit underwriting standards. As a designated third-par- ty service provider of Freddie Mac, Finicity, a wholly owned subsidiary of Mastercard, offers an integration of its open banking data and Mortgage Verification Services (MVS) with AIM that allows clients to automate the capacity assessment using con- sumer-permissioned data, direct deposit account data, and work history. In the case of income, lenders can now look at direct deposit history to verify income. According to the American Payroll Association, with more than 93% of U.S. workers being paid by direct deposit, AIM can assess various income sources. In addition to direct deposit data, with borrower permission, AIM can assess an applicant's income from employer data. Finicity, a Mastercard company, was one of the initial service providers supporting Freddie Mac's AIM for income using direct deposits and is one of the few providers that offers both transaction and payroll data for the 10-day em- ployment verification. "Freddie Mac's integration of Mastercard's open banking Open Banking Data Pushes Mortgage Underwriting Further Into the Digital Age Here's how Freddie Mac's Loan Product Advisor acceptance of direct deposit data to assess income, payroll, and account transactions data for verification of employment can enable digitization through open banking. By Andy Sheehan

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