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88 88 pending market changes suggest that lenders' desire for reduced credit standards and layered risk has only grown since then: » In June, Movement Mortgage joined a growing number of lenders offering programs for first-time homebuyers that require no down payment at all. » On July 1, Equifax, Experian, and TransUnion stopped collecting and reporting public information on virtually all civil judgments, inflating the scores of millions of consumers. In preparation for the change, Fannie Mae issued Lender Letter LL-2017-02 clarifying that it will continue to require delinquent credit, including judgments and liens, to be paid off at or prior to closing — but that lien and judgment data is not required for upfront submission to Desktop Underwriter (DU) for risk assessment purposes. » en on July 29, Fannie Mae raised its debt-to-income (DTI) ceiling from 45 to 50 percent, making it possible for large numbers of new homebuyers to enter the market. » Meanwhile, Congress is considering the Financial Choice Act, a bill that would significantly roll back Dodd-Frank and gut the Consumer Financial Protection Bureau (CFPB). ough general consensus among political analysts is that the bill won't pass the Senate in its current form, some degree of regulatory relaxation is almost certainly on the horizon. In short, today's first-time borrowers are already more highly leveraged than they've been in years — perhaps ever—and they're only becoming more so. When the next wave of foreclosures comes, these borrowers could be the first to go under. NEW TOOLS HELP RATE RISK One thing the NMRI doesn't take into account, however, is that lenders have begun to embrace new technologies that call on direct- source data to better assess borrower ability to repay (ATR). For instance, automated verification and analysis of asset and deposit data allows lenders to make a more accurate determination of borrower ATR using real-world standards like net income instead of gross income. Similarly, now that lien and judgment data is no longer included in credit reporting, a direct feed of lien and judgment data is essential to identifying and accounting for civil debts during the underwriting phase—and getting them resolved before the debts derail loan closings. As these technologies—already available in the marketplace and embraced by the GSEs—become widely adopted by lenders, they'll go a long way toward neutralizing the risks introduced by looser lending standards and keeping the NMRI in check. In the meantime, prudent servicers should consider how these same technologies can aid in loss mitigation and eliminate default servicing pain points related to ATR documentation. Once a loan goes into default status, it can go only one of two ways: it will get back on track and achieve reperforming loan (RPL) status, or it will enter foreclosure. In either case, keeping the default servicing timeline as short as possible is imperative, as the annual cost of servicing a nonperforming loan is more than 10 times that of servicing a performing loan. In other words, default servicers need tools that will help them quickly and accurately assess the likelihood that a borrower can get back on track (with or without a loan modification) after falling behind. One such tool is automated, consumer-permissioned asset verification, which makes it possible for servicers to analyze checking, savings, retirement, and investment assets—anything that could be brought to bear on bringing a mortgage current—in just a few minutes. Since the introduction of automated asset verification as part of Fannie Mae's Day 1 Certainty initiative last October, lenders have reported that the technology shaves days— sometimes weeks—off the origination process. For default servicers, who are often slowed down by their requirement to provide a single point of contact (SPOC) to borrowers seeking foreclosure avoidance, the savings could be even more substantial. Instead of searching for statements and then painstakingly mailing, faxing, scanning, or uploading them to a loss mitigation specialist, automated asset verification allows borrowers to authorize the secure sharing of real-time asset data using any smart device. e raw asset data is then pulled directly from the source financial institution using bank-level encryption, eliminating the costs and time waste associated with lost or missing borrower-submitted statement pages while also freeing servicers from having to wait for deposits to clear or the next account statement to generate. And the most sophisticated verification apps don't just collect borrower asset data quickly—they standardize asset reporting and automate asset review using algorithmic analysis to eliminate the time and risk associated with manual review and evaluation. Together, these efficiencies allow default servicers to make a well-informed decision about whether to offer loan modification—or to fast-track foreclosure—days or weeks sooner. It's an unbeatable recipe for controlling cost and increasing consumer satisfaction. Automated asset verification may even allow default servicers to claim a small premium when pricing RPLs for sale on the secondary market, because investors are assured that the evaluation of a borrower's ability to pay was based on timely and accurate data and analysis that need not be repeated at the secondary market level. Best-of- breed systems will, however, be able to provide investors with the source data itself in case they wish to do their own analysis. What Benjamin Franklin said so long ago is even more accurate in today's default servicing industry: time is money. With profit margins stretched thin and distressed borrowers clamoring for relief, it makes sense to know— as soon as possible—whether remediation is possible. Using today's technology, servicers can quickly and securely get the information they need to determine which road is best for all. "Since the introduction of automated asset verification as part of Fannie Mae's Day 1 Certainty initiative last October, lenders have reported that the technology shaves days—sometimes weeks—off the origination process. For default servicers, who are often slowed down by their requirement to provide a single point of contact (SPOC) to borrowers seeking foreclosure avoidance, the savings could be even more substantial."

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