Freddie Mac, Finicity offer technology that merges pay stub, bank data
Freddie Mac is partnering with Finicity to give lenders access to a new automated process that advances efforts to consolidate borrower-authorized data validation checks used in the secondary market underwriting process.
Freddie provides access to Finicity's data-based verifications through its asset and income modeler technology. The verifications are based on a patent-pending process through which information can be extracted from pay statements and cross-referenced to checking accounts in a single file.
The move is part of evolving efforts to develop a single source of data through which mortgage lenders can efficiently verify borrowers' income, employment and assets.
"The real opportunity in the future is to have enough information available within a person's checking account to do a full verification of employment and income but there are some challenges in the single-source validation process," said Finicity CEO Steve Smith. "They can be overcome over time."
In the meantime, lenders can use a waterfall process in which the first step is to see if there is sufficient data from a consumer-authorized bank statement to verify information. They can then proceed to a cross check against paystub data if there are gaps, according to Smith.
"Over time, I think the hit rate on the first portion of that process will go up," he said.
Challenges the GSEs have run into in efforts to consolidate different forms of data validation have included differences in the way banks handle the delivery of their data.
There are efforts underway to create standards, but they may take some time to play out, said Smith.
Using all vendors in the market, an estimated 25% of single borrowers and 15% of dual borrowers can have all their relevant income, employment and asset information verified digitally, according to Smith.
Although there currently is a lack of standardization in bank data delivery and permission processes, the data available is sufficient to digitally verify assets alone for the majority of borrowers, he said.
Digital verifications may or may not be in line with individual lenders' or the GSEs' underwriting standards.