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New frontier in mortgage lending: Automation


By Jeff Lazerson


What I think: Last week, I conveyed that Fannie and Freddie will likely increase loan limits, that a new collection of mortgage translations are emerging, and what former Fed Chair Janet Yellen and Lakers Operations President Magic Johnson were thinking at the annual Mortgage Bankers Convention I attended in Washington, D.C.

In convention commentary part two, let’s kick off this column with all the rage about the digital mortgage era, industry disruption and new innovations like machine learning.

Mortgage giants Freddie Mac and Fannie Mae are focused on a faster, more convenient loan approvals using automation.

Freddie Mac calls its new product the Freddie Edge. Fannie Mae calls it Day 1 Certainty.

There are plenty of industry vendors gushing about how their companies are supporting the digital mortgage era.

Jay Kingsley offered up CoreLogic’s new fact-checking and income calculation tool named AutomatIQ Borrower.

Experian’s Michele Pearson was pitching its new way to prequalify properties and borrowers in a pre-application process she called the modern mortgage.

The industry has been so inwardly focused. Stakeholders assumed the consumer would just go along by allowing one-time temporary access to his or her financial accounts so that your information can be retrieved and validated.

Providing permission to a third party to confirm your income or your credit is much different than giving direct bank account access. In my experience, borrowers want none of it and they start awfulizing about it when asked.

In other news, Doug Duncan, Fannie Mae’s chief economist, expects entry-level home prices to continue to rise due to the short supply. Duncan had other ideas regarding the higher end of the market. But Duncan added that appreciation rates will slow at the higher end of the market.

Duncan sees the Federal Reserve raising short-term rates in December, March and June as well as two more raises beyond that. Today, the prime rate is 5.25 percent. Assuming we have five raises at one-quarter point each, we could be looking at a prime rate of 6.5 percent soon enough.

Mike Fratantoni, chief economist of the Mortgage Bankers Association, sees the 30-year fixed mortgage ranging from 5.1 to 5.2 percent in 2019. He also predicted next year’s loan volume will be about $1.6 trillion, about the same as this year.

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Jeff Lazerson - Mortgage Columnist since 2011