A California-based mortgage broker has begun gaining access to the Federal Home Loan Mortgage Corp.'s new automated underwriting system using electronic data interchange - apparently the first mortgage broker to do so, officials said.
Mortgage brokers with access to the Freddie Mac system can quickly learn whether potential loans will be guaranteed for securitization.
Monterey Mortgage Co., a third-party originator based in Gilroy, Calif., electronically submitted a loan application in July to Freddie Mac's new system, called Loan Prospector.
Loan Prospector. currently in a pilot program, is to become available to all lenders early in 1995.
Officials at Freddie Mac said it would reduce the time needed to process a mortgage from as much as 30 days to as little as four minutes.
"We've been piloting since April on the Loan Prospector with a handful of lenders and have had excellent results so far," said Jane Dwight, a Freddie Mac spokeswoman.
"Along with speeding the process, there will be cost savings [for lenders] of between 20% and 50% because there is less paper manipulation."
Here is how it worked: Walnut Creek, Calif.-based Monument Mortgage Inc., a wholesale servicer and seller of mortgages, received a borrower's file from Monterey Mortgage, a client, then ran the borrower's application on its loan-approval system, called Greenlight.
Monument's system then gained access to Freddie Mac's Loan Prospector, software that can make "less biased and more consistent" mortgage decisions, according to Ms. Dwight.
Loan Prospector, which uses artificial intelligence technology, analyzed the application and returned a decision, along with a purchase guarantee, to Monterey within hours.
That saved the broker weeks of document verification and other work processing the loan. Without the system, brokers have done considerable amounts of work only to have applications rejected.
"Ultimately, it will save the customers money since there is less that needs to he done in the process," said Kent Miller, president of Monterey Mortgage.
Central to the EDI transmission was Monument, which teamed up with Contour Software this year.
"We worked with Freddie Mac to develop an interface," said Scott Cooley, president of the Campbell, Calif.-based software company.
Contour has more than 4,000 users of its residential mortgage loan software. Mr. Cooley approached Monument at a recent conference to see whether the two companies could work together.
"Our idea was to somehow determine the best way to connect third-party originators to Freddie Mac's system," Mr. Cooley said.
His approach resulted in a partnership that allowed all brokers using C0ntour's software access to Freddie Mac's new system.