Fannie and Freddie Plan to Streamline Mortgage Underwriting

Both government-sponsored enterprises (GSEs) announced plans to simplify and speed up the mortgage underwriting process. Together the GSEs back more than half the mortgages in the U.S.

New home construcion in Palm Coast, FLPALM COAST, FL – October 26, 2016 – Both government-sponsored enterprises (GSEs) – Fannie Mae and Freddie Mac – announced plans to simplify and speed up the mortgage underwriting process. Together the GSEs back more than half the mortgages in the U.S.

While Fannie and Freddie don't loan directly to consumers, lenders often originate loans and sell them to the GSEs, which means those loans – over half of all U.S. mortgage lending – must adhere to GSE standards. If Fannie and Freddie ease their loan buying requirements, market lenders usually follow suit.

Freddie Mac

Freddie Mac says it will add new capabilities to its Loan Advisor Suite that reduce the cost of originating a loan. The new capabilities, slated to become effective in spring 2017, include:

  • A no-cost automated appraisal alternative
  • Automated borrower income verification
  • Automated borrower asset verification
  • Automated assessment of borrowers without credit scores

Loan Advisor Suite also plans 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." Currently, Freddie Mac only offers collateral representation and warranty relief in select circumstances.

"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," says David Lowman, executive vice president of Freddie Mac's Single-Family Business.

"By pairing big data with advanced analytics, we're creating efficiencies and reducing costs for lenders and borrowers," adds Andy Higginbotham, senior vice president of strategic delivery for Freddie Mac's Single-Family Business.

Fannie Mae

Fannie Mae announced its "Day 1 Certainty" initiative. It says the program will provide its customers with "freedom from representations and warranties on key aspects of the mortgage origination process."

Under its new program, Fannie Mae is offering:

  • Income, assets, and employment validation services to lenders through Desktop Underwriter, its mortgage underwriting system
  • Freedom from representations and warranties on appraised values through Collateral Underwriter and enhanced waivers of property inspection requirements on refinances

Fannie Mae says the changes will deliver greater speed, simplicity and certainty to lenders and borrowers, along with stronger risk management and more digitization of data.

"Ultimately, we want our customers to have the confidence to lend, so that more qualified borrowers have access to affordable mortgage credit," says Timothy J. Mayopoulos, president and chief executive officer, Fannie Mae.

Fannie Mae's high-profile changes for borrowers

  • Validates loan application data upfront and gives lenders faster verification of key loan data components, such as income, assets and employment information.
  • Borrowers will save time using electronic data versus collecting documents, such as paystubs, bank statements and investment account statements.
  • Income validation is available today. Asset and employment validation will be available on Dec. 10, 2016, as will Collateral Underwriter and Enhanced Property Inspection Waiver upgrades.
  • When a property receives a qualifying score through Collateral Underwriter, customers will receive representation and warranty relief for the appraised value of the property.
  • Refinance transaction customers are eligible for a waiver of the property inspection requirement if using Desktop Underwriter.

© 2016 Florida Realtors®. All rights reserved. Reptinted with permission.

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