How D1C can improve your client's experience
What's most important to a real estate agent when referring a buyer to a lender? Communication? Cost? Cobranded marketing offers? NOPE!
The #1 thing (get ready for the 'duh' moment) a real estate agent wants when referring a buyer is for that buyer to buy a home and get to the closing table, preferably with a smile on their face.
Day 1 Certainty (D1C) and direct-to-source data is allowing us to offer a happier loan process to buyers than they've seen since 2008 when they could do a "no-doc, you have a pulse you're approved" type loan.
So what is D1C?
In short, it's the guarantee from Fannie Mae and Freddie Mac that for conventional loans allows us to do mortgage loans for qualified clients with any of the following features - an appraisal waiver, no income documentation required, and/or no bank/asset statements required. For lenders using D1C, having a good loan officer will drastically increase your odds of receiving a waiver on any or even all of a loan's appraisal, income, and asset requirements. Knowing how to properly run AUS (automated underwriting system) and how to navigate the Work Number income verification system is vital to using D1C, but with a little extra work up front, clients can have a much easier loan process.
Here's how it works:
A loan officer has their client input asset information through their online application portal like our SWIFT system requests a verification of income through the work number, and runs AUS to determine what Fannie Mae or Freddie Mac require. If they've done their due diligence up front, the findings/approval will indicate that the borrower is eligible for an income or asset waiver, and will also indicate if a property is eligible for an appraisal waiver.
If you want the nuts and bolts, this is made possible by 'direct to source' data. Fannie Mae is viewing (behind the curtains of computers, algorithms, and system networks) borrower's asset information directly through the bank where their money is. They're viewing income directly as reported by their employers to a data warehouse. They're viewing property specific information (in the case of appraisal waivers) through the data portals Fannie and Freddie have been creating over the past decade, analyzing neighborhood and other local data to determine if a home's value, as input into an application, is accurate.
If this is so easy, why don't you hear more about it?
A LOT of lenders aren't using D1C. For some, it's not even on their radar yet, but it is without a doubt the future of the mortgage industry. BUT, even if a lender uses D1C, a loan officer has to order verifications of income, which most do not do, and also has to be well versed in both Fannie Mae and Freddie Mac's AUS systems. To put it bluntly, only a quality loan officer working for a strong lender is going to be able to offer these benefits. But the benefits are tremendous.
Imagine a world where there are no worries about a short appraisal. Imagine clients not having to explain large deposits or chase down paper trails for money moving in preparation for a move. Imagine that buyer who has fluctuating income not having to provide any documentation nor explanation to the lender. That's the reality of D1C.
Does every client qualify?
Nope. But a lot do. And more are, every day, as the tech gets smarter and more systems start playing nicely together (for example, I'm lucky enough to be a part of Freddie Mac's pilot program for D1C income validations starting July 15). Just in June, I had 4 closings benefit from D1C - 2 income validations where the client had to provide NO income documentation at all, and 2 appraisal waivers, saving the clients a combined $900 in appraisal costs and shaving a full week off the loan process.
Currently, D1C is only available for conventional loans, but government loans are on the horizon - HUD has already announced they're looking into following suit. There is no denying D1C is the way the industry is headed. If you're working with a lender using D1C, your clients will have a far better experience than the traditional lender who is still asking everyone for 2 years paystubs, tax returns, and bank statements.
As a listing agent, D1C will eliminate the uncertainty of an appraisal when appraisal waivers are applicable. For buyer's agents, D1C allows a stronger offer with shortened contingency timeframes and minimal chance for anything to go awry, strengthening the buyer's offer (not a bad tool in a competitive market!).
Appraisals? Nope. Income documents? Nope. Asset paperwork? Nope. With D1C, the loan process turns into days, not weeks, and you get to achieve the number 1 goal - getting your clients to closing with a smile on their face.