Freddie Mac allows borrowers to use bank account data for loan underwriting
In a move he says will strengthen the ability of low-income Americans to buy homes, Freddie Mac said he will begin including a review of a potential buyer’s bank account as part of his review of the whether or not to buy a loan from a lender.
The move, which would allow the mortgage buyer to determine if a buyer has positive cash flow, is an industry first, he said.
“With the addition of positive monthly cash flow data, our underwriting system can help more accurately predict a borrower’s ability to repay their mortgage because it uses a comprehensive view of managing finances. over time,” Terri Merlino, Freddie Mac single-family senior vice president and chief credit officer, said in a statement. “Our latest innovation levels the playing field and helps make homes more accessible to borrowers whose lenders might not have qualified them with traditional underwriting methods. This should particularly help first-time buyers and underserved communities. »
With the borrower’s permission, lenders and brokers may submit financial account data to Freddie Mac’s Lending Product Advisor (LPA) to identify 12 or more months of cash activity for inclusion in the tool risk assessment. Data can be obtained from checking, savings, and investment accounts, including those used for direct deposit of income and monthly bill payments, such as rent, utilities, and auto loans. Account data submitted can only positively affect the borrower’s credit risk assessment. To help identify opportunities, LPA will notify lenders when additional account data could benefit a borrower.
Lenders and brokers can obtain financial account data from designated third-party service providers using the same automated process they currently use to verify assets, income (via direct deposit), employment and payments from rent-on-time through a single report via LPA’s Asset and Revenue Modeler (AIM).
Working alongside our industry partners, we have made significant progress in modernizing the mortgage origination process,” said Kevin Kauffman, vice president of customer engagement for Freddie Mac Single-Family in a statement. . “In today’s market, our latest cutting-edge innovation offers lenders efficiencies that can result in cost savings and improvements to the borrower experience, while meeting Freddie’s stringent credit underwriting standards. Mac.”