Freddie Mac is launching an automated method for lenders to assess prospective borrowers’ income that is paid through direct deposits. The tool is intended to help reduce the paper documentation burden on borrowers so loans can close faster, Freddie Mac says.
The income assessment tool will be available to mortgage lenders nationwide and can be used, with a borrower’s permission, to assess income made by direct deposits into accounts. More than 93% of U.S. workers are paid by direct deposit, according to the American Payroll Association.
The tool also can assess an applicant’s income from employer data and review tax return data for self-employed individuals.
A Freddie Mac studypdf recently showed how lenders using such tools can shorten average cycle times for processing loan requests by up to 15 days.
“Our direct deposit solution is an innovative, data-driven approach that takes minutes, not days, to assess income so our clients can serve more borrowers more efficiently,” says Matt Vincent, Freddie Mac’s single-family vice president of credit and capacity. “Sourcing data directly from the mortgage applicant’s bank account increases accuracy, removes subjectivity, reduces manual underwriting errors and delivers a better experience for borrowers and lenders.”