AIM is an automated solution in the GSE’s high-tech arsenal
Freddie Mac has played a leading role transforming the mortgage industry with its technology solutions, focusing on providing a simpler and faster mortgage process for lenders and borrowers alike.
Among its innovative products, its application programming interfaces (APIs) enable the seamless flow of information, when and where lenders need it to make faster, better loan approval decisions.
Freddie Mac is continuing to transform the mortgage process with Loan Product Advisor® (LPASM) asset and income modeler (AIM), designed to help lenders automate borrower capacity and reduce risk. With AIM, lenders can simplify their processes and cut back on the need to collect documents, helping to lower costs and reduce cycle times while creating a superior borrower experience.
Read more: Reacting quickly to customers' needs
We caught up with Matt Vincent (pictured), vice-president of credit and capacity in Freddie Mac’s Single-Family Division, to learn more about AIM.
With more than 20 years’ experience at Freddie Mac, Vincent has led credit risk innovation, reporting, analytics and develops solutions to manage single-family credit risk.
Here’s what we learned about the AIM solution, described by one mortgage lender as a game-changer for borrowers and processing staff.
What is AIM and how does it fit in with the origination processes?
AIM stands for asset and income modeler. It’s a solution in LPA that uses data from designated third-party service providers to automate the lender’s income and asset assessment - providing an unbiased view of a borrower’s capacity to repay a loan. AIM moves Freddie Mac’s quality control review up front into the lenders’ origination processes and offers each originating lender early insight into whether the borrower has sufficient income and/or assets for the transaction.
How does AIM reduce risk?
AIM uses data from designated third-party service providers which helps eliminate potential fraud. In addition, AIM automates Freddie Mac’s Guide requirements, helping to reduce risk by applying a consistent set of rules and calculations on all loans, thereby removing subjectivity and reducing the likelihood of manual errors. AIM delivers a significant benefit to lenders by helping reduce their repurchase risk – for example, 97% of income defects are eliminated when sufficient income is confirmed.
What are the overall eligibility requirements for using AIM?
To use AIM, the loan must be assessed by LPA and receive an Accept risk class. The loan must be a conventional mortgage and the lender must use one or more of the third-party service providers designated by Freddie Mac.
AIM has a robust self-employed income solution, can you tell us more about what that covers?
AIM uses data from borrower-provided tax returns, which are uploaded to one of the designated service providers to perform an income assessment. This assessment derives a monthly income amount and performs a business and income analysis (i.e., a determination that the business has sufficient liquidity and is financially capable of producing stable monthly income). If AIM confirms sufficient income and business liquidity/stability, then the lender is eligible for relief from representations and warranties for the accuracy of the income calculation, as well as the business and income analysis. Currently the income types eligible under this offering are the following self-employed income types: sole proprietorship, partnership and S-corporation.
Read more: Freddie Mac employs machine learning to better manage risk
What are three key factors that lenders should keep in mind as they explore leveraging AIM?
1) Lenders will receive relief from certain income and/or asset representations and warranties if AIM’s assessment concludes the borrower has sufficient income and/or assets for the transaction. This gives lenders greater certainty that the borrower’s income and/or assets meets Freddie Mac requirements – lowering repurchase risk. 2) Using AIM results in process efficiencies and lowers costs which allows lenders to focus experienced resources on more complex loans. 3) For loans assessed through AIM, LPA returns clear, actionable feedback messages that enable lenders to identify errors and potential red flags.
