Fannie Mae provides free access to income calculation tool

Fannie Mae is making a key underwriting tool used for certain types of mortgages free of charge on its website.

The government-sponsored enterprise's income calculator, which serves lenders who originate loans for self-employed clients without traditional salary flow, is now available on Fannie Mae's site via a new web interface. Introduced last year through authorized third-party providers, the tool aims to help originators lower their loan defect rate while streamlining business functions. 

"With the launch of our new web interface, originators now can select the solution that best aligns with their processes and meets their needs, while saving time and improving certainty in the quality of the loan," said Mark Fisher, president of single-family credit risk solutions, in a press release. 

Customers of Fannie Mae's technology vendor partners will continue to have access to the income calculator through their providers' platforms as well, Fisher said.

"Whether through our new web-based user interface or through an integrated technology service provider, Fannie Mae's income calculator simplifies the process of underwriting the qualifying income of self-employed borrowers, which traditionally has been a challenging and time-consuming operation for lenders."

The self-employed population represents approximately 10% of the U.S. workforce, according to U.S. government estimates, as well as a growing number of Fannie Mae loan deliveries. But the steps involved in originating mortgages to such borrowers often involve detailed scrutiny of bank statements and other sources, increasing the possibility of loan defects. 

In April, Aces Quality Management found the loan-defect rate improving to its lowest in over three years, according to the most recent data available. But issues with income and employment came in as the most common type of error, found in more than 23% of loans.

The income calculator tool offered by Fannie Mae uses tax return data to determine monthly wages while also utilizing its current selling guide requirements, prior to submission of the loan. The service returns a monthly qualifying income amount along with warnings to help originators avoid common mistakes.

The latest announcement follows recent changes to Fannie Mae underwriting policy, including approval of single-source validation of a borrowers' assets, income and employment, which is intended to ease processes for lenders. 

The GSE also made moves this year to address concerns about the costly impact on lender business when they are required to repurchase defective loans. Notifications of potential flaws could allow lenders to remedy a defect situation before Fannie Mae moves on to more expensive options, industry leaders said.