Fannie Mae’s Impact on Digital Verification in Mortgage Servicing

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State-sponsored venture Fannie Mae recently began explicitly allowing mortgage companies to use vendor technology that can help reduce processing time by providing information used to assess problem borrowers for credit modification options.

Automation, which gives mortgage companies permission for consumers to access bank or wage information, has been used to help a borrower get a new loan, but it is used less frequently in services where technology adoption has generally been less common in the past. to a pandemic.

As such, Fannie Mae’s decision to clarify that it digitally validates income and asset data in its “Borrower Response Packet” could come in handy as the pandemic expires and a wave of people must move to new options. But what the adoption rates of service companies and borrowers will be remains to be seen.

“Fannie is taking the digitalization of its creation methodology and offering it for service as a huge step forward,” said Brent Chandler, founder and CEO of FormFree, in an interview. FormFree is one of the providers providing digital validation and analysis of data collected from consumer banks or payroll providers. Its checks return an analysis of historical data about borrowers for a year or two.

Freddie Mac does not have an official policy related to the use of asset and revenue checks in service, but generally allows them based on outsourcing guidethat require them to offer interoperable and secure systems, business continuity measures, and “prompt and accurate responses to borrowers.”

FormFree is receiving many requests for digital verification for service from existing clients who are using its technology to help borrowers get new loans, Chandler said.

Among the developments of interest is the fact that Consumer Financial Protection Bureau warned service providers that he will be careful to ensure that they are working with borrowers as required when the suspension of payments is over, he said.

Also, the increased interest is caused by the volume of loans that service companies will have to process at the end of the deferred payment.

“Two million people are still suffering and … very soon … they will come out,” said Christy Moss, Director of FormFree.

While this number is less than half of what it was at the peak of the pandemic, it is still much higher. higher than it was before March last year, according to Black Knight. Not long before, there were very few problem loans. The latest weekly data from the Mortgage Bankers Association shows that more than 4% of home loan borrowers are generally lenient, while 2.09% of consumers with Fannie or Freddie loans are in the same boat.

The digital verification of borrower data has become more visible in the industry since Fannie Mae introduced its Day 1 Confidence Program in 2016, and some vendors are forecasting more widespread adoption of this technology in service as the demand for loan modifications grows. (However, the initial adoption of the technology was driven in part by the beneficial facilitation of claims and warranties on data points, which is not a service issue.)

“Similar to what we went through using digital verification in sources, we are at the beginning of such use in the service,” Andy Sheehan, President and COO of Finicity, said in an email. “We have already discussed with partners, including major players in the service ecosystem, the possibility of implementing this process. So you will see how it grows, and I suspect quite quickly. “

Asset verification is usually carried out on the basis of data from direct sources of financial institutions about bank or investment accounts. Income verification can be done through integration with payroll providers, which vendors approach slightly differently. Finicity and FormFree experimented with using only bank details for this purpose as contributors GSE pilot project called Single Source Validation.

The most common outcome of evaluating a borrower while exiting a deferred payment may be a relatively new service option known as deferral, in which the borrower simply attaches the missing payments to the end of the loan.

However, some borrowers are expected to be hit by the pandemic in the long term, causing their incomes to decline to the point where they may have to demand lower fees or leave their homes. In such situations, income and asset checks can play a more important role.



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