Influential government-related mortgage investor Fannie Mae has announced that
Fannie will allow 12-months of asset data to verify income and employment when it becomes available for opt-in use on March 29, and for 50% of those who piloted the automated process, it produced "some level of savings" in third-party report costs.
"With this new update in Desktop Underwriter, we are removing a hurdle from the loan application process and bringing greater speed, simplicity, and certainty to both lenders and borrowers," Cyndi Danko, senior vice president and chief credit officer, said in a press release.
The move follows competitor Freddie Mac's
Verification of assets, income and employment have been attractive because Freddie and Fannie have offered upfront representation and warranty relief for it. Both also have used the bank data for cash-flow underwriting and rent payment validation.
What's also significant is that with both competitors offering the process, it's possible for lenders to potentially use digital bank data regardless of which of the two they turn to for loan sales. (While the two aren't the only loan outlets in the U.S., they are major ones and often influential.)
"Now that you have parity between the two GSEs offerings, that's what's going to enable a broader lender engagement and utilization of this type of service," said Brian Francis, who oversees the Accountchek digital bank verification product for Informative Research.
Variations in the two government-sponsored enterprises' processes regarding the uptake of the consumer-permissioned option, how often it validates all the data points, and how lenders handle the workflow will affect the extent of efficiency available, Francis said.
Not every borrower will be verifiable through a single source as some may not have consistent deposit records reflecting employment income. Some other vendors charge mortgage firms separately for data needed at the lender level and Fannie's 12-month report, according to Francis. Also, certain lenders handle the workflow around digital data verification in terms of pulling digital bank, payroll or tax information as needed more manually than others.
"You're getting a recurring direct deposit in 70% of the bank accounts that are coming through our system," Francis said, noting this may be roughly indicative of how often many people have employment income that's verifiable in this way, most commonly those with traditional salaries.
Single-source validations may also cause a wrinkle depending on the extent to which employer names fail to match what's on deposits in situations such as when the payments are made in the name of the benefits provider.
Both vendors and Fannie have been researching and developing ways to address situations like that since research into single source validations began in 2017, according to Francis.
"Those specific analyses are proprietary to Fannie. They've not shared them with us, but we've worked with them over the last seven years in helping them to understand the nuances," he said. (Fannie had not immediately responded to a follow-up inquiry on this point at deadline.)
