Freddie Mac rolls out rep and warrant relief for self-employed income

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Freddie Mac is broadly offering instant representation and warranty relief for automatically validated self-employment income following a test of the concept last year.

The automation of the process could help mortgage lenders generate up to $400 in savings when underwriting a self-employed borrower, Freddie COO Andy Higginbotham said in an interview.

"It takes, on average, 30 minutes to underwrite a file," he said, citing data provided by LoanBeam, the data-validation technology vendor Freddie Mac is working with.

A nationally distributed group of lenders representing companies of various sizes have tested LoanBeam's data validation with Freddie Mac, said Higginbotham. The broader rollout will give all the lenders that work with the government-sponsored enterprise the option to use the technology, which has been integrated with Freddie's underwriting system.

Freddie Mac is open to adding other technology providers who can automatically validate self-employment income to its system, but only if those vendors can automatically pull data from tax reports with a high accuracy rate. LoanBeam's accuracy rate is nearly 100%.

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Estimates for the number of self-employed people in the United States and their growth rate vary. They make up roughly 10% of the workforce, according to the Bureau of Labor Statistics. Other estimates, like the Pew Research Center's, are as high as 30%.

The number of self-employed could nearly triple in the next two years, according to a 2018 study by accounting technology vendor FreshBooks. Between 2016 and 2026, the BLS projects a 7.9% growth rate for the self-employed, compared to a 7.4% growth rate for all workers.

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