The mortgage technology firm FNC Inc. in Oxford, Miss., has entered a three-year agreement with U.S. Bancorp's Elavon merchant acquiring unit aimed at helping FNC's loan-originating customers comply with new requirements imposed earlier this year by Fannie Mae and Freddie Mac.
Elavon said last week that it would provide credit and debit processing services for transactions that are initiated through FNC's Collateral Management System.
Financial companies can use the FNC system to keep track of the various elements that are part of the mortgage origination process.
In particular, FNC's lender customers can use its system when third-party loan producers, such as independent mortgage brokers, come to the bank seeking appraisals for their borrower customers' homes, according to Jon Fisher, FNC's director of strategic projects.
"This allows the financial institution to collect the money in advance of ordering the appraisal," Fisher said.
Under the Home Valuation Code of Conduct that took effect in May, Fannie Mae and Freddie Mac imposed contractual provisions on originators that sell loans to them.
One of the requirements of the policy is that appraisals be ordered by the mortgage originator, whose interest is in assuring that the true value of the property is sufficient to cover the bank's loan in case the borrower defaults, and not by the third party, who might be more interested in assuring that the appraisal is sufficient to secure the mortgage.
"This thickens that firewall," Fisher said, by enabling the originator to charge the cost of the appraisal to the third party's credit card and then recover the expense from the broker when the loan closes.
Elavon said its role in the agreement is enabling the lenders to collect and pay their vendor fees more efficiently.
Fisher said the transaction processing system is already being used by some of the 35 financial companies that are using hosted implementations of its Collateral Management System.
"We don't automatically install it on everybody's platform," Fisher said, because many mortgage lenders have been puling back from wholesale origination as a result of the credit crisis.