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Freddie Mac helps lenders bring self-employed underwriting into the digital age

Q&A with Andrew Higginbotham on new asset and income modeler and LoanBeam integration

HW sat down with Andrew Higginbotham, senior vice president and chief operating officer, single-family, at Freddie Mac, to talk about the company’s new asset and income modeler (AIM) for self-employed borrowers.

Q. What led Freddie Mac to expand its highly-successful AIM program to include income assessment for self-employed borrowers?

higginA. Today’s mortgage and housing industry cannot operate efficiently using yesterday’s tools and our clients know that success with their customers depends on improving service. There are millions of self-employed workers in the United States and that number is only expected to grow, which means traditional underwriting standards and techniques won’t accommodate this new demographic.

We are working to develop cutting-edge algorithmic models fueled by data analytics to help our lenders underwrite quality loans quickly and cost-effectively. The bottom line: a better borrower and lender experience and a more liquid and financially sound housing market.

Q. How is Freddie Mac preparing to better serve future borrowers?

A. We are always thinking about ways to better serve the housing industry, its clients and borrowers. Our Loan Product Advisor AIM for the self-employed provides our lenders with a new way to make their processes more efficient – to cut costs and reduce cycle times.

It gives them a competitive edge to expand their business in a tightening purchase market by penetrating a growing, underserved market, and it gives them confidence that the loans they deliver align with Freddie Mac’s purchase eligibility requirements as captured in Loan Product Advisor. With our AIM for self-employed program, we are able to open the door to an easier mortgage experience for an entire group of potential borrowers who were previously underserved by the traditional methods.

Q. What benefits do lenders get by using the AIM for self-employed borrowers offering?

A. That’s a good question. By creating a more streamlined process for underwriting loans for self-employed borrowers, we have been able to make the process more efficient for both the lender and borrower, and even been able to save lenders up to $200 in the process.

Determining the stable monthly income used to qualify self-employed borrowers used to be a challenging, tedious, and mostly manual process. One of our clients recently said that through AIM, it approved self-employed borrower mortgages in two thirds of the time it usually took, and it reduced closing times by about five days.

Q. How does Freddie Mac’s AIM for self-employed differ from other offerings in the market?

A. Success breeds success, and we’ve integrated LoanBeam’s technology into Freddie Mac’s Loan Product Advisor, our toolbox of products and programs that enhances the automated underwriting system and helps simplify the loan origination process, making AIM for self-employed the industry’s only automated underwriting integrated solution for self-employed borrower income assessment.

AIM for self-employed borrowers automates qualifying income calculations using LoanBeam’s underlying optical character recognition technology that has been refined over 14 years and used across millions of tax documents. What’s unique about our solution with LoanBeam is that the integration with Loan Product Advisor facilitates data to be exchanged automatically between the lender, LoanBeam, and Freddie Mac so results are seen more quickly.

Best of all, AIM for self-employed helps lenders close loans faster, provides immediate rep and warranty relief related to certain borrower income, and simplifies lender underwriting of this growing borrower segment.

Q. How does AIM for self-employed fit into Freddie Mac’s overall strategy of technology within the mortgage industry?

A. Freddie Mac is continuously innovating to better meet our lenders’ needs to cut costs, drive efficiency and deliver a better borrower experience, and this is just one more way we offer lenders and borrowers the Freddie Edge.

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