LPS looks to usher big banks beyond $19.2 billion in mortgage buybacks
The nation's largest banks will begin using a software package from Lender Processing Services (LPS) in November that could help avoid a recurrence of the billions in representation and warranty claims currently outstanding from Fannie Mae and Freddie Mac. Andy Higginbotham, executive director of the LPS loan quality group, went to the Mortgage Bankers Association annual conference in Chicago this week to pitch the new platform, known as Loan Quality Gateway, to Fannie and Freddie executives. LPS finished building the package in June. Specifically, the software allows lenders to upload property evaluation reports through the Uniform Collateral Data Portal, which launched in September. A total of 28 lenders will roll out this feature, staggered out during the month of November. A new wave of deadlines are looming for the industry, regarding new data they will be required to provide from the mortgages they write, such as the Uniform Appraisal Dataset, which takes effect in March. "When you meet with a CIO, they're overwhelmed with the acronyms," Higginbotham said. "There is more awareness now, but unfortunately they just don't have the staff to make these things happen." Loan Quality Gateway will allow the lenders to choose an appraisal, consumer report or even UCDP vendor. The more than 1,000 data points from the actual mortgage document and appraisal report will be stored in what Higginbotham called an "iFolder." The lender, vendor and even investor will have access to the data. "These outside investors can't see the data from the lenders. As a result, they're not entering the market," Higginbottham said. "They're on the sideline." But just as important, lenders would no longer have to manually check each data point before selling the loan to Fannie and Freddie. Banks have hired thousands of employees to ensure the loan is underwritten to agency guidelines in order to avoid having to buy the mortgage back should it sour. Higginbottham said the top-five lenders currently face $19.2 billion in these buyback requests from the GSEs. "Because of all of these purchase issues, they've literally hired thousands of people to go through a 400 item checklist manually to make sure that loan fits the guidelines before the loan closes and to avoid future repurchase and warranty risk," Higginbotham said, "and as a result they have a huge error rate." Write to Jon Prior. Follow him on Twitter @JonAPrior.