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Loan Prospector Underwriting Feedback Enhancements

September 19, 2013

As a result of your feedback, we continue to make enhancements to our technology that can provide you with greater purchase certainty in the loans you sell to Freddie Mac. In July, Loan Prospector® was updated to reflect enhanced purchase eligibility feedback messages for purchase restrictions. On October 27, 2013, we are updating Loan Prospector to provide you with more transparency about Freddie Mac’s underwriting guidelines, by enhancing the income documentation feedback messages with more loan-specific details and actionable information.

Detailed Income Documentation Feedback Messages

Beginning October 27, 2013, loan submissions and resubmissions to Loan Prospector will receive enhanced income documentation feedback messages. The changes to the income documentation feedback messages in Loan Prospector will include adding:

  • More loan-specific, customized messages relevant to the income type. In addition, we are discontinuing the return of messages that are not applicable to the types of income specific to the subject loan.
  • New messages with specific underwriting guidelines for income types.
  • Consistent message formats that eliminate unnecessary information and include specific direction key to underwriting to Freddie Mac requirements.

To help you better understand these Loan Prospector changes, review the following examples:

  • Loan Specific Feedback Messages – Currently, feedback messages relevant to some income types are returned on every loan submitted to Loan Prospector such as:
  • Alimony/Child support
  • Base
  • Self-employed
  • Bonus
  • Commissions
  • Dividends/Interest
  • Notes Receivable/Installment
  • Overtime

With the upcoming Loan Prospector enhancements, the feedback messages will only be returned when the specific income type is submitted for the loan.

This is an example of the current alimony and child support feedback message, which is returned today on every loan. The future enhanced feedback message will only be returned if the alimony and child support income type is submitted for the loan:

Current Feedback MessageFuture Feedback Message
If using alimony, child support or separate maintenance payments to qualify, obtain copy of signed court order documenting payor's obligation to Borrower for previous six months and evidence payor is obligated to make payments to Borrower for the next three years. File must contain proof of consistent receipt for total court ordered amount for most recent six months. Alimony or child support income for <Borrower Name> must be supported by copy of signed court order documenting payor’s obligation for previous 6 months and evidence payor is obligated to make payments to Borrower for next 3 years. File must contain proof of consistent receipt of total court ordered amount for most recent 6 months. For child support, file must contain proof of ages of children to prove 3-year continuance.
  • New Feedback Messages Specific to Income Type – Specific feedback messages are not returned today for some income types you submit on a loan such as:
  • Military (multiple income types)
  • Other
  • Social Security
  • Pension
  • Subject Property Net Cashflow
  • VA Benefits/Non-Educational
  • Trust
  • Unemployment
  • Mortgage Differential
  • Automobile Expense Account
  • Foster Care
  • Contract Basis

We will be adding new feedback messages that will return specific underwriting guidelines for the income types you currently submit for the loan.

Here is an example of a current income type feedback message that is not income type specific. The future feedback messages will be returned based on the income data submitted in Loan Prospector for the loan:

Current Feedback MessageFuture Feedback Messages
For all income, including income topics such as retirement, long-term disability, temporary leave, public assistance, military reserves, mortgage differentials and assets as a basis for mortgage qualification, refer to the Freddie Mac Single-Family Seller/Servicer Guide, Chapter 37. The guidance includes income topics referenced within the existing LP messages as well as all other income topics. Military income for <Borrower Name> must be supported by a YTD LES documenting at least 30 days of income and most recent W-2 OR a written VOE covering the most recent 1-year period. A verbal VOE is required and must be dated no more than 10 Business Days prior to Note Date or after Note Date but prior to Delivery Date. In lieu of a verbal VOE, an LES dated no more than 30 days prior to Note Date may be provided.
Social Security income for <Borrower Name> must be supported by a copy of the award letter, 1099 or other equivalent documentation that reflects the income type, source and amount.  File must contain most recent 2 months bank statements or other equivalent documentation evidencing consistent receipt of income.
Trust income for <Borrower Name> must be supported by a copy of the Trust Agreement.
Foster care income for <Borrower Name> must be supported by proof of receipt of the income for the most recent 2- year period.
Mortgage differential income for <Borrower Name> must be supported by a copy of the agreement from the employer stating the amount and duration of the payments.
  • Consistent Format of Income Feedback Messages – All income feedback messages will be concise, easy-to-read, follow a consistent format for each message returned, and include key underwriting documentation requirements for each borrower.

    In this example, the future message contains the consistent format, lists the type of income first, the applicable borrower name, and then the specific underwriting guidelines. A separate message for the verbal verification of employment (VOE), will be returned only once per borrower when it is applicable.

    Current Feedback MessageFuture Feedback Messages
    (DOC-CV) Obtain most recent YTD paystub documenting 1 full month, W-2(s) from the most recent tax year, and a verbal VOE, using Form 90 or comparable form, dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date; or, a written VOE for 12 full months and a verbal VOE dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date for <EmplBorr>. Employment/base income for <Borrower Name> must be supported by a YTD paystub documenting at least 30 days of income and W-2(s) for the most recent tax year or a written VOE covering the most recent year.
    A verbal VOE for <Borrower Name> is required from each employer for which income is used to qualify.  If a verbal VOE cannot be obtained, obtain a written VOE or third-party VOE. The VOE must be dated no more than 10 Business Days prior to the Note Date or after the Note Date but prior to the Delivery Date.

With the changes to the income documentation feedback messages, the Loan Prospector Feedback Certificate and document checklist will be streamlined with only feedback messages returned on loans when they apply. There will be no changes to the Loan Prospector interface specification, style sheet, or data field requirements with this enhancement. Additionally there will be no Single-Family Seller/Servicer Guide (Guide) or credit policy changes with these enhancements to Loan Prospector.

As a reminder, the Loan Prospector Feedback Certificate is not a replacement or substitute for the requirements outlined in the Guide and/or Master Agreement.

Importance of Providing Income Types

To receive accurate feedback messages that specifically relate to the income types for a loan, it is necessary to enter the monthly income breakdown details for the appropriate income type field in Loan Prospector. If there is not a specific income type field currently available in Loan Prospector, displaying an applicable income type (e.g., tips, seasonal income), income must be entered as “Other Income" and the Seller must refer to the Guide for the applicable documentation requirements.

To help you prepare for these upcoming changes in Loan Prospector:

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