Freddie Mac adds paystub analysis to automated income assessment tool

New capability helps lenders calculate borrower income more quickly and precisely

Freddie Mac on Tuesday announced enhancements to its automated income assessment tool—already used for direct deposits—to also include the borrower’s digital paystub data.

The government sponsored enterprise said lenders can calculate income faster and more precisely, improving loan quality, simplifying the mortgage process and expanding access to credit.

The ability to include paystub data and direct deposit data in the income assessment is available through Freddie’s Loan Product Advisor asset and income modeler (AIM).

“Over the last year, we’ve consistently rolled out innovations to ensure our digital tools are improving speed and efficiency, reducing risk and, ultimately, helping us serve our mission by reaching more qualified borrowers,” Kevin Kauffman, single-family vice president of seller engagement said in a statement. “Today’s innovation further automates income assessment by using historical direct deposit pay patterns and current gross income from recent paystubs, which can help more families achieve homeownership.”

Because income verification issues account for nearly one-third of all purchase transaction defects, this automation tool should help reduce the growing repurchase issue for lenders.

In addition to direct deposit data, Freddie Mac’s AIM tool can assess income from tax return data for self- employed borrowers as well as bank account data to identify a history of positive monthly cash flow activity. This can include data 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.

Freddie Mac said that account data submitted to assess cash flow can only positively affect a borrower’s credit assessment. LPA will notify lenders when submitting this account data could benefit a borrower, the enterprise said.

This new capability will be available beginning June 7. Finicity, a Mastercard company, is the initial service provider supporting Freddie Mac’s AIM for income using direct deposits plus paystub.

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