Freddie Mac Advances Mortgage Automation Revolution

The new suite provides an automated process for helping lenders determine if a loan meets Freddie Mac’s guidelines.

Written by Patrick Barnard

Freddie Mac recently rolled out its new Loan Advisor Suite, a set of Web-based tools covering the entire loan lifecycle – from application to post-delivery – designed to make it faster and simpler for lenders to do business with the company.

The suite provides an automated process for helping lenders determine if a loan meets Freddie Mac’s guidelines; thus, it helps lenders achieve new operational efficiencies and gain peace of mind that the loans they originate meet the companies’ requirements. It also helps lenders improve loan quality and gain greater certainty about repurchase risk.

Importantly, each application in the suite delivers actionable data and messaging to lenders in an automated fashion to help speed the origination process, as well as improve monitoring and reporting on all origination and secondary marketing activities.

The flagship application in the suite is Loan Product Advisor, a next-generation automated underwriting system that gives lenders access to Freddie Mac’s credit requirements, as well as a detailed view of their credit risk. The suite also includes enhanced versions of Loan Quality Advisor, the company’s risk assessment and eligibility tool; Loan Coverage Advisor, its comprehensive loan management system; and Selling System, which is used for pricing, contracting and loan delivery.

In addition, Freddie Mac is introducing three new solutions: Loan Collateral Advisor, an advanced appraisal scoring tool; Loan Closing Advisor, which helps lenders validate their closing data against the Uniform Closing Dataset for completeness, accuracy and data consistency; and a suite-wide Business Intelligence capability, which enables monitoring and leveraging of loan data to help lenders produce high-quality loans. All of the applications are available for free – either on a stand-alone basis or bundled together – via a central Web portal. In addition, the applications can be integrated into a lender’s loan origination system (LOS) and other core systems.

To learn more about this new suite of tools and what it will deliver for lenders, MortgageOrb recently interviewed Andy Higginbotham, senior vice president and head of single-family strategic delivery for Freddie Mac. What follows are excerpts from our interviews.

Q: What is Freddie Mac’s main objective in releasing this new suite of tools?

Higginbotham: There are two main objectives: First is giving lenders a greater degree of comfort that loan buybacks won’t be a concern, and second is delivering automation to lenders in a way that will help them gain new efficiencies, cut costs and increase revenue.

The whole intent was to develop a comprehensive suite of tools that would address aspects all across the loan origination process – and to create services that could be called upon at the appropriate points during the process and aid the integration using MISMO data sets.

Q: I understand that some of the newer tools in the suite won’t be released until later this year?

Higginbotham: That’s correct. Loan Closing Advisor is available now. We opened the customer test environment (CTE) broadly earlier this month. We’re currently rolling out Loan Collateral Advisor using a consultative approach with customers. Business Intelligence will be available later this fall.

Loan Closing Advisor is really getting a lot of attention right now, as lenders try to make sure they have solid data sets that can be interrogated for compliance with the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure rule. The tool helps lenders validate that their closing data is complete, and now, with our CTE available, lenders can test their data against the Uniform Closing Dataset (UCD) and prepare for the third quarter 2017 mandatory delivery date. Our tool is more than just a collection solution, though; it provides detailed feedback messaging that helps drive operational efficiency and certainty around the closing data.

Q: How are you helping lenders with the transition to the new tools?

Higginbotham: We’re using a consultative onboarding approach to ensure our customers realize maximum value from the new applications. The migration path depends on the customer’s needs. We’ll create a detailed rollout plan for each customer that involves our sales team and a brand-new group that manages the integration process. That group includes people who have worked in the primary mortgage market and are experts on LOS deployments.

Also, we’re working with multiple LOS vendors in order to achieve seamless integration with their systems. We will have integrations with all of the major LOS in the market.

Q: I understand that users can either use the tools in the suite on a stand-alone, on-demand basis, accessing them via the portal, or go for the full integration. What are the benefits for lenders doing the full integration, and how many of them do you expect will take advantage of that?

Higginbotham: Integration is always going to give a lender the maximum productivity lift. We want to help them take steps out of the process and avoid rekeying information and data when they don’t need to. We want to help automate their manual checklist processes. Because we use MISMO data sets as our method of translation – and every LOS today is built to handle those MISMO data sets – we already have a common interface approach, which makes the integration a lot easier than it would’ve been in the past.

Most LOS already export a set of data that looks like the MISMO format. Examples of the data sets that we’re using for the applications include the Uniform Appraisal Dataset for Loan Collateral Advisor, the UCD for Loan Closing Advisor and the Uniform Loan Delivery Dataset for Loan Quality Advisor.

Ultimately, system-to-system integration is what allows for greater automation, and that’s where bigger efficiencies really lie.

Q: Do you anticipate having to make any on-site visits in order to give lenders the support they need in making the transition?

Higginbotham: We do have resources that we can send to a lender’s site, but, in general, it won’t be necessary. We have great training and e-learning tools, plus the learning curve is really minimal.

A lot of the work has more to do with optimal LOS configurations than integrations. First, we work with each lender to understand how it uses its LOS in its origination process. Next, we work with its LOS vendor to configure the LOS to best integrate with and realize the greatest possible value of Loan Advisor Suite. Last, our Strategic Technology Integration team helps the lender identify the best configurations, per LOS, to maximize productivity. So far, our support model has been well received by the lenders.

Q: Tell us about the value of the Business Intelligence tool.

Higginbotham: It’s all about speed. It’s about how fast a lender can move through an application, but also about visual reporting, down to the loan level. Business Intelligence has built-in heat maps so you can identify where your primary areas of concern should be. We built it so the data can be updated in near-real time during multiple junctures throughout the loan process. This gives lenders the ability to track problems in real time and perform source cause analysis when the loans are being processed during the day, giving them the power to determine where gaps are occurring and to adjust their processes. The problems could be due to a variety of reasons. It could be an employee is inexperienced, a regional issue or a unique one-time event. That kind of information is really valuable to an operations manager.

The combination of the tools with the Business Intelligence increases a lender’s ability to deliver loans to us that are of impeccable data quality. The better their ability to identify issues and resolve them, the better chance lenders have of getting data that is near 100% accurate the first time around, as opposed to getting the information after closing the loan and trying to resolve issues on the back side, which is time-consuming and costly.

We’re also developing a mobile Business Intelligence app that will let lenders annotate reports and then email them directly to staff. So, if I’m a manager, and I see a series of missed data fields that are not getting updated, and they’re all coming from the same correspondent lender, then I can shoot off an annotated report from my tablet or phone and say, “We need to get on that.” I can see it directly on the screen, and my handwritten notes will show up in that reply email to the line manager. We’re in the prototype phase now and will be piloting it next year.

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