This spring homebuying season will certainly have a new ring to it. In fact, this year will be the first homebuying season in more than a decade where those buying a home, rather than those refinancing a home, will dominate the market.
With declining refinance activity, a limited supply of single-family home inventory in many markets and high origination production costs, every lender is trying to find new ways to control costs, while at the same time looking for an edge to better serve a changing customer base.
Fortunately, we have come a long way since the last true purchase market more than a decade ago. Major technological improvements have cut costs, improved efficiency and helped produce loans that are safer and sounder. At Freddie Mac, they’re leveraging data analytics so their clients can more fully-digitize application processing, speed up underwriting and bring borrowers to the closing table sooner.
The importance of this technology solution cannot be overstated. The U.S. Bureau of Labor Statistics (BLS) that self-employment makes up over 10% of total employment in the United States. In fact, BLS goes on to report that self-employment continues to be an important source of jobs for 15M people, and is expected to grow at the same, or faster rate than the overall workforce. Simply put, this technology is hitting the market at the right time for the new economic reality.
From a productivity standpoint, the math is simple. The self-employed and lenders can now save around $400/loan origination and can close loans 3 to 5 days faster, while also receiving immediate representation and warranty relief related to borrower income. And for the borrower, their AIM program for self-employed helps speed up the lending process.
AIM for self-employed borrowers, means lenders do not have to rely solely on human interpretation, subjectivity or calculations when scouring through pages of tax, income and other mortgage documents when originating a loan. The technology helps to deliver process efficiencies and confidence in the income calculation. It’s about data, not documents.
This greatly reduces the chances of incorrect values being inserted unintentionally, and it takes human judgement out of the income assessment.
Ultimately, the speed, efficiency and accuracy of loan production, from originating to closing a mortgage, can cut lenders processing and underwriting costs.
If they haven’t already done so, lenders can take the first step now and take advantage of AIM for self-employed to simplify underwriting of the growing self-employed borrower market.
**Excerpts from article by Andy Higginbotham, SRVP for FreddieMac, Via Economic Focus**