Fannie Mae and Freddie Mac each announced changes to their mortgage origination processes this week, with Fannie launching the Day 1 Certainty initiative and Freddie launching additional capabilities to its Loan Advisor Suite.
Fannie’s Day1 Certainty initiative will offer “income, assets, and employment validation services to lenders through its leading mortgage underwriting system, Desktop Underwriter,” as well as “freedom from representations and warranties on appraised values through Collateral Underwriter and enhanced waivers of property inspection requirements on refinances,” according to a statement from Fannie. The initiative includes:
- Providing Fannie customers with tools to reduce risk and improve the experience they provide to borrowers in the primary market;
- Validating the loan application data up-front and gives lenders faster and easier verification of key loan data components;
- Giving lenders the ability to offer their borrowers a dramatically better mortgage experience (borrowers will be able to save time by using electronic data versus collecting documents such as paystubs, bank statements, and investment account statements);
- Providing Fannie lenders Day 1 Certainty on appraised values;
- Enabling lenders to focus more of their attention on high-risk appraisals, and making the process more efficient for appraisers due to fewer underwriter requests for correction and clarification;
- Offering customers who use Desktop Underwriter eligibility for a waiver of Fannie’s property inspection requirement for many refinance transactions (When a waiver offer is issued and accepted by the lender, they have Day 1 Certainty that they will receive representation and warranty relief on property value, condition, and marketability.); and
- Shortening the origination process and reduces loan origination costs making it easier for lenders to do business and making the process easier for borrowers.
“Day 1 Certainty is a major step forward in helping our customers transform the mortgage origination process,” says Timothy J. Mayopoulos, president and CEO, Fannie Mae. “Ultimately, we want our customers to have the confidence to lend so that more qualified borrowers have access to affordable mortgage credit. We will continue to listen to our customers and partner with them to deliver innovative solutions that address the nation’s most important housing challenges.”
Freddie’s Loan Advisor Suite add-ons, available in the spring of 2017, will “reduce costs and provide greater certainty and valuable insights throughout the loan production process,” according to a statement from Freddie. These include:
- A no-cost automated appraisal alternative;
- Automated borrower income verification;
- Automated borrower asset verification; and
- Automated assessment of borrowers without credit scores.
“These powerful enhancements are indicative of the dramatic changes happening in financial services globally,” says David Lowman, executive vice president of Freddie Mac’s Single-Family Business. “As the cost of originating a mortgage has more than doubled since before the financial crisis, we’re collaborating with lenders to create innovative tools that reduce the costs of producing and selling high-quality loans to us.”
Freddie expects, in addition to the new capabilities, to offer collateral representation and warranty relief in early 2017 to significantly relieve mortgage lenders from the risk of loan repurchase due to appraisal defects.