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Data Depicts Broader Picture

Janet Ford, senior vice president at The Work Number, St. Louis, recently stopped by SourceMedia’s office in New York to talk about how mortgage servicers or organizations that are working on behalf of the GSEs are using real-time employment and income verification data to provide a broader picture of a borrower’s earnings.

These loans may have been underwritten by Fannie Mae or Freddie Mac and now these organizations must go back to determine if the lender took all the steps that were necessary and acquired the right information at the time to make the best decision possible.

Roughly 2,100 individual employers contribute payroll data to The Work Number database. The data are not released unless the employee has given consent.

Whether it’s origination or servicing, lenders are trying to do more with fewer employees. In this economic cycle, they have to play different roles, especially when it comes to compliance. “That’s an area where we are able to plug in and fill some gaps. Because of having this large database, when Fannie Mae got ready to put out their regulations, we were able to make some modifications to support the requirements. It’s almost as if they have to re-originate a loan.” In addition to having employer-provided data, the company is pulling information from IRS-provided data through its two key acquisitions including Discover Source and Rapid Reporting.

For servicers looking at any type of loan mod, having more information surrounding a borrower’s earnings helps understand more about their ability to repay.

“The credit statement, the credit report gives you a history of what they have done in their past, which gives you an idea of their willingness to repay,” Ms. Ford tells me. “You can have all the willingness in the world, but if you don’t have the income to support it you’re going to have a problem. So it really completes the picture for them.”

If a new borrower wants to potentially qualify for an REO property, their information could be pulled through this database.

“We don’t necessarily ask our lenders, on what type of property it is, so we don’t have visibility to know what percent is on originations that might be REO properties, but lenders can absolutely use the data for that purpose.”

The company is seeing changes in new originations, which provide a positive light on the industry. The Work Number is also gaining interest in the secondary market where some customers want to look at a portfolio of loans, providing a picture of the health of that portfolio of loans. No decisions are made, positive or negative to the borrower.

Today, lenders need to have as much information as possible whether they are in the part of the cycle that is the origination, in the quality part of the cycle, or if they are on the servicing side, this data can be valuable.

“We are seeing them want to acquire more information at the front of the process. Some of the challenges they are facing are trying to incorporate new sources of data into their already strong processes. Attempting to incorporate a new data source into that process is not like a flip of the switch,” said Ms. Ford.

“In working with servicers especially, their world has turned upside down. Being able to plug all these other holes that they have, being able to utilize a third-party vendor, takes that weight off of their shoulders and allows them to focus on their core competency and still meet the new requirements have been imposed on them.”