Fannie Mae Enhances Desktop Underwriter

Fannie Mae has announced new capabilities in its automated underwriting system (AUS) to further streamline the mortgage origination process for lenders and homebuyers, enabling improved loan quality control, faster cycle times, and cost savings. This enhancement to Desktop Underwriter (DU) is the latest solution from Fannie Mae to support lenders and responsibly expand opportunities for homeownership.

Effective March 29, 2024, Fannie Mae single-family lenders can use a single 12-month asset verification report in the DU validation service to identify recurring deposits in the applicant’s digital bank statement data to automatically validate income and employment, as well as assets, in one step. The same report also can be used to identify and consider the applicant’s positive rent payment and cash flow history, which may benefit more qualified borrowers who have limited or no credit history.

Modernizing the mortgage process

“Fannie Mae is continually focused on modernizing the mortgage finance experience and exploring new ways to help our lenders open more doors for aspiring homeowners in a responsible and sustainable way,” said Cyndi Danko, Fannie Mae SVP and Single-Family Chief Credit Officer. “With this new update in Desktop Underwriter, we are removing a hurdle from the loan application process and bringing greater speed, simplicity, and certainty to both lenders and borrowers.”

Desktop Underwriter upgrades

The new enhancement in DU uses approved data from third-party vendors to validate the borrower’s assets, income, and employment. Lenders who opt into the DU validation service and leverage asset verification reports with at least 12 months of data may take advantage of several benefits, including getting to “clear to close” faster, the possibility for improved cost savings by reducing third-party report expenses and staff time, and the ability to achieve Day 1 Certainty when income, employment, and/or asset information is validated, which may increase loan quality and reduce repurchase risk.

The history of Day 1 Certainty

In 2016, Fannie Mae launched its Day 1 Certainty initiative to provide customers with freedom from representations and warranties on key aspects of the mortgage origination process. As part of Day 1 Certainty, Fannie Mae offers income, assets, and employment validation services to lenders through Desktop Underwriter. In addition, Fannie Mae provides freedom from representations and warranties on appraised values through Collateral Underwriter and enhanced waivers of property inspection requirements on refinances. Together, these innovations deliver greater speed, simplicity, and certainty to lenders and borrowers. They also bring stronger risk management and promote greater digitization of data and processes to the mortgage industry.

Lenders also can reduce the paperwork burden on mortgage applicants, and they may be able to increase the number of homebuyers who receive an Approve/Eligible recommendation in DU through an automatic cash flow assessment and identification of positive rent payments.

GSE supporting the American homebuyer

Fannie Mae’s recent innovations include:

  • An enhanced pre-qualification experience through the DU early assessment to help lenders determine homebuyer preparedness and mortgage options earlier without the impact of a hard credit check on the consumer.
  • An income calculator to help mortgage lenders automate the calculation of self-employment income streams during the underwriting process for homebuyers who don’t have traditional sources of income.
  • A down payment assistance tool to help homebuyers find the down payment and closing cost assistance they need.
  • Fannie Mae’s HomeView and HomeView en Español, providing consumers and first-time homebuyers with educational tools and information about financial literacy and homeownership.

Where is housing headed in 2024?

According to the latest report from Fannie Mae’s Economic and Strategic Research Group (ESR), existing home sales and new single-family housing starts are expected to grow modestly in 2024, amid lower mortgage rates and increasing homebuyer sentiments.

The ESR commentary found that while housing affordability is still seriously constrained following the home price run-up of the past few years, the supply of existing homes available for sale is ultimately showing recent signs of loosening. Additionally, more households have recently signaled that they expect mortgage rates to decline, as evidenced by Fannie Mae’s most recent Home Purchase Sentiment Index indicating newfound optimism that my signal an increased openness to moving to a new home.

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Eric C. Peck

Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for Entrepreneur.com.
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