Friday, May 27 2022

Until recently, lenders took a “less is more” approach to collecting asset documentation, and that’s understandable. The process of requesting, reviewing and (often) re- requesting statements can be cumbersome and time-consuming for everyone involved. Whether borrowers scan paper bank statements or download PDF files retrieved from online banking, they must provide lenders with all statement pages, including those intentionally left blank by the financial institution. Finding missing pages can take days of back and forth between processors and borrowers, extending loan cycle times and frustrating borrowers. To minimize pain, legacy loan manufacturing processes typically collect only the number of months of asset statements required by investors – often just two months for conventional and government loans.

Game Changer: Digital Asset Verification

But times have changed and today more and more lenders are avoiding paper hunting altogether in favor of digital asset verification (VOA), a method in which borrowers grant lenders access to retrieve data. on assets directly from their financial institutions instead of submitting paper documents or PDF statements. Digital VOA is a simple, efficient and cost-effective upgrade to traditional asset verification – and now that its use has become mainstream, it’s time for lenders to rethink the asset history they should ask for during the VOA stage.

Modern financial data aggregation allows VOA providers to deliver up to two years of asset history in a single payload. At first glance, this may seem overkill; does a lender really gain anything by mining all that extra data for a VA loan that only requires two months of bank statements? With the mortgage industry’s rapidly evolving understanding of the power of asset data, the answer is a resounding “yes”. Our use of asset history has evolved beyond simply understanding how much cash borrowers have today, their average monthly balance, and whether they have bounced checks in the past month. . With 12-24 months of directly sourced, digitally verified asset data, today’s mortgage lender can:

  • Meet VOA requirements for Fannie Mae, Freddie Mac, US Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), US Department of Veterans Affairs (VA), US Department of Agriculture (USDA), non-qualified mortgage (non-QM) and jumbo loans;
  • Meet income verification (VOI) requirements for Freddie Mac loans using direct deposit history, eliminating the need to order tax transcripts or collect pay stubs;
  • Create homeownership opportunities for more borrowers by participating in Fannie Mae’s positive rent payment history program; and
  • Perform proprietary borrower cash flow analysis to inform credit risk assessments and pricing.

Asset data: now easy to update

It is important to note that not all data aggregators are created equal. Look for a VOA provider that doesn’t charge extra for Extended Asset History, and be sure to ask about available refresh options that will make Extended Asset History even more powerful. Consider, for example, the myriad of scenarios that require lenders to review assets between loan qualification and loan closing. Perhaps closing delays caused the original asset data to age. Perhaps the loan is associated with a construction project that could take an unknown number of months. Or perhaps the lender simply needs to verify the source of a borrower’s earnest money deposit. In these cases, lenders will benefit from the ability to refresh asset data without requiring consumers to repeat the VOA process.

A long asset history may not be available to all borrowers. Some financial institutions limit the depth of transaction history they share with data aggregators. To ensure the highest possible success rate when ordering a long history of assets, choose a VOA provider that has access to a large network of financial institutions through multiple redundant data aggregation partners.

I’d love to hear your thoughts on long-term asset history. send me a note [email protected].

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