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Monday saw the announcement from Freddie Mac that its automated income assessment tool has undergone an update, now incorporating a borrower’s digital pay-stub data.
Freddie Mac stated that by integrating pay-stub data, their innovative tool enables lenders to evaluate the income of homebuyers conveniently and accurately through direct deposit.
This advancement offers several benefits, including enhancing loan quality, streamlining the mortgage process, and crucially, broadening access to credit.
The enhancement is available nationwide to mortgage lenders through Freddie Mac’s Loan Product Advisor (LPASM) asset and income modeler (AIM).
AIM for income, using direct deposit, offers cost-saving efficiencies while maintaining Freddie Mac’s robust credit underwriting standards, as stated by the government-sponsored enterprise.
Beginning June 7, Freddie Mac-approved sellers using Loan Product Advisor will have access to a new and unique AIM capability.
Kevin Kauffman, single-family vice president of seller engagement at Freddie Mac, highlights the continuous rollout of innovative digital tools aimed at enhancing speed, efficiency, and risk reduction, enabling the organization to fulfill its mission of reaching a larger pool of qualified borrowers.
The latest innovation automates income assessment by leveraging historical direct deposit pay patterns and current gross income from recent paystubs, thereby increasing the likelihood of homeownership for more families.
Freddie Mac stated that its digital tools and solutions provide lenders with cost-effective methods to implement effective quality control operations.
According to a recent analysis, loans originated by lenders utilizing Freddie Mac’s automated offerings are stated to be four times less likely to generate defects compared to loans that lack these technological offerings.
Freddie Mac emphasized that process automation plays a crucial role in documenting income, a vital aspect due to income verification problems contributing to almost a third of purchase transaction defects.
AIM, in addition to analyzing direct deposit information, can evaluate the earnings derived from tax return data for independent workers.
Furthermore, it can scrutinize bank account records to pinpoint a track record of consistent monthly cash flow.
This encompasses various types of accounts like checking, savings, and investment accounts, even encompassing those designated for direct deposit purposes and regular bill settlements such as rent, utilities, and auto loans.
Traditional methods of underwriting may not qualify first-time homebuyers and borrowers in underserved communities, but that data can assist.
According to Freddie Mac, the submission of account data to assess cash flow will have a solely positive impact on a borrower’s credit assessment.
LPA will proactively notify lenders of potential benefits for borrowers when they submit this account data, aiming to identify opportunities.
Finicity, a Mastercard company, is the pioneering service provider for Freddie Mac’s AIM for income program, leveraging direct deposits and paystubs.
You can access Freddie Mac’s comprehensive privacy policy on their website.
Reference Source: National Mortgage Professional
