Beginning June 1, Freddie Mac will no longer charge for its automated underwriting service–Loan Prospector–which will affect lenders and borrowers.
Currently, lenders must pay $20 to submit a mortgage application to Loan Prospector in order to receive a decision as to whether or not the loan meets Freddie Mac’s requirements for purchase. This fee allows for up to 15 resubmissions of the loan application to test alternative scenarios, according to National Mortgage News.
Loan Prospector operates through statistics, credit data and loan application data. The service then estimates credit reputation, capacity and collateral. It does not, however, analyze compliance with laws, regulations, ordinances, or any requirements imposed by your regulator, according to loanprospector.com.
Although Loan Prospector doesn’t provide the credit decision on a borrower’s application, lenders frequently require a positive Automated Underwriting System (AUS) finding to proceed with a mortgage application.
“It’s an effort to help lenders get a handle on costs. That, in turn, should help promote liquidity in the market,” Freddie Mac spokesperson Brad German said in an interview.
German went on to say that eliminating the cost of the AUS technology fee will be permanent. “There is no plan to revisit it,” he said. “This is the new normal for LP.”
Lenders who use the AUS to work with the FHA’s Technology Open to Approved Lenders, or TOTAL, Scorecard will also be able to utilize Loan Prospector for free.
Fannie Mae on the other hand will still charge for their underwriting services according to a Fannie Mae spokesperson. “Desktop Underwriter, Collateral Underwriter and EarlyCheck are valuable tools that give lenders greater certainty in the mortgages they make. While we continually assess our pricing model, DU’s value to lenders is clear,” said Andrew Wilson, a Fannie Mae spokesperson.
“It’s certainly in [Freddie’s] interest if they want to continue to be able to stimulate volume,” said Jeff Lebowitz, owner of mortgage technology market research and consulting firm MORTECHLLC. “It may or may not help lenders do more business. The real beneficiary for it is the agency. It’s a form of quality control. I never liked the idea that they would charge for it.”