Borrowers of Fannie Mae and Freddie Mac mortgages are in for a simplified mortgage origination process. Both have made enhancements to reduce the costs and time in underwriting conventional loans for borrowers and lenders.
Fannie Mae has already rolled out a waiver to submit appraisals on some refinance loans. Freddie Mac is expected to deliver an automated alternative to traditional appraisals at no cost starting this spring.
Fannie Mae’s Day 1 Certainty™ Innovations
Fannie Mae launched Day 1 Certainty™, which offers a faster and easier way for lenders to verify the income, assets, and employment of borrowers.
As early as October 24, Fannie Mae has made available its income validation services under Desktop Underwriter®. By using electronic data, Fannie hopes that borrowers will save time from collecting financial documents like bank statements, investment account statements, and pay stubs.
At the center of Fannie’s mortgage origination initiative is the enhanced property inspection waiver. Fannie Mae will waive the appraisal requirement on eligible refinance transactions. To receive an offer to waive an appraisal, the property must have a prior appraisal submitted; otherwise, Fannie Mae will require an appraisal to be done by a professional appraiser. The PIW as enhanced will no longer require a fee of $75 effective 1 January 2017.
On the part of the lenders, the streamlined appraisal helps them focus on riskier appraisals. It will also make things efficient for appraisers who’d receive lesser correction and clarification requests.
Asset and employment validation, enhanced property inspection waiver and Collateral Underwriter®, which provides certainty on appraised values were implemented on December 10.
Freddie Mac’s Loan Advisor Suite℠ Automated Capabilities
Freddie Mac has upgraded its Loan Advisor Suite℠ to include certain automated verification and assessment capabilities as part of its mortgage origination update.
Beginning this spring, Freddie Mac will offer a no-cost automated appraisal alternative. Freddie is doing away with appraisals traditionally done by appraisers and instead will rely on an automated system that will be a no-cost alternative to borrowers and lenders, Chicago Tribune reported.
This could mean savings of between $350 and $600 in appraisal related expenses, the report noted. Freddie, like Fannie, maintains a trove of data containing millions of appraisals on existing houses and aims to supplement that information with its automated process.
Other than its plan to automate appraisals which was met by concern from appraisers, Freddie will offer automated processes in the areas of:
- Borrower income verification
- Borrower asset verification
- Borrowers without credit scores assessment
Under their respective initiatives, Fannie Mae and Freddie Mac will grant lenders a broad representation and warranty relief. This protects lenders from possible mortgage repurchases as a result of defective appraisals, appraisal values and more.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.