Multiple income sources? Calculate self-employed income? That’s easy. With a streamlined interface and productivity gains of up to 100%, AutomatIQ Borrower Income Analysis’ all-in-one solution helps quickly qualify borrowers and reduces the risk of loan repurchases. Plus, all available GSE rep and warrant programs and all income types are included with the tool.
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#MortgageTech #IncomeAnalysis #LoanDecisions #FinTech
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TechTranscript
00:00Hi there and welcome to HousingWire's Demo Day on Demand. I'm Alison LaForgia, Managing Editor
00:05of HousingWire's Content Studio and I'm glad you're joining us. This is where we spotlight the most
00:11innovative technology companies in housing and mortgage, giving you a front row seat to real
00:16product demos from the teams building the tools that move our industry forward. In this session
00:22we're featuring Cotality, a company that's solving real-world challenges with smart,
00:27scalable solutions. Stick around after the demo, we'll dive into a short conversation where I'll
00:32ask the questions that help you connect the dots between their tech and your business needs.
00:37In this Cotality demo, Eric will be taking us through Cotality Automatic Borrower Income Analysis.
00:43Automatic Borrower Income Analysis is a streamlined all-in-one income calculation tool for mortgage
00:50qualification with all available GSE rep and warrant programs and all income types. In this demo,
00:57Eric will showcase two new income calculation rep and warrant programs, Fannie Mae Schedule E Rental
01:04and Freddie Mac AIM Check for Payroll. Join us to see how Automatic Borrower Income Analysis can
01:10accelerate your income calculations and loan decisions. Eric, take us through the demo.
01:16Hello everyone and welcome. As Alison described, I'm here presenting our Cotality Automatic Borrower
01:24Income Analysis tool and two new programs that we've recently implemented in May.
01:31The highlights of what make us different than all the other tools in the marketplace are one that we
01:35provide one tool to handle all income types. So you should never need to leave our tool to go to a
01:42spreadsheet or a calculator to handle any type of income, be that asset depletion, rental, self-employment,
01:51retirement, you name it. All of it can be handled within one tool. Secondly, we are deeply partnered
01:58with both GSEs and we are offering all of the available rep and warrant programs that they currently
02:07have active and are partnering with them to continue to do that into the future. So with one tool,
02:12you know, we can participate and show you results from either GSE for the programs that are available.
02:19So how does this tool work? Generally, you send us documents and data. We go through and we'll use
02:27technology to extract that data. We'll run rules that follow guidelines or perhaps a portfolio overlay to do
02:35our baseline calculations for you. Then we provide the web-based experience that you're seeing on the
02:40screen now in order for you to go in and review all the income, make any necessary adjustments that
02:47might be required. And finally, we provide a single PDF output that includes just the qualifying income
02:55with the relevant calculations fully documented with any comments that are made by the underwriter.
03:00So with that, let's jump into the tool here. And first, let me get you oriented on, you know,
03:07kind of the high level interface here. So you've sent us your income documents. We've done all the analysis.
03:14And now you're in here looking at the results. As you can see on the screen, we have a drill down
03:21based interface with these little chevrons in it. And you'll notice that we have four primary income
03:26categories. So we've got all the wage employers, self-employed entities and companies, rental income,
03:34and other income sections. Your other income, if I drill into that detail, is going to include
03:41all of the other types of income you would normally find, for example, on a personal tax return that are
03:45typically used to qualify income. So you can read those on the screen. I don't need to read them for you.
03:51In addition to that, you have the ability to go in and add other income sources and use one of our
03:57calculators to do an asset depletion, to do some sort of, you know, interest bearing income that might
04:04be out there or any other type of income. So then you'll notice to the right, we have three columns
04:12here, a baseline column. So the baseline, just think of us being, you know, a robot extracting all of the
04:20exact data points off these documents, plug and playing them into cash flow templates, rental worksheets,
04:27you know, wage GSE calculations and providing just a standard answer.
04:33Potential income is what we do, is we kind of look at all of the calculations and we're following,
04:41you know, waterfall logic and tolerances to determine which of the calculations we're going to default to
04:46when we, you know, make that baseline. But there is the opportunity for your underwriting team to
04:54condition and potentially get that income up to a different number. So think of this as like a
05:00possible range, the realm of the possible on this loan where it can get to. You can see how this gives
05:05you a kind of an immediate snapshot of, you know, what could we do potentially with this loan to get
05:10to get that bar qualified. And finally, adjust it as you're working total. So as you're working with
05:15the income making, making changes, you're going to end up having an adjusted number here. And that's
05:22what is going to end up, you know, in your system of record for qualification. And that's what got
05:29returned from the GSEs. And that's what you're going to have on your final output PDF report when it
05:36goes, what that you put in your, your LOS and in the loan delivery file. So some other tabs of note
05:42here, we have a rental detail tab, but we have a document storage tab. So what we do is we will
05:48categorize, you know, we will classify all the documents you submit, and then we'll provide you
05:54a working list that is an inventory along with, you know, a status for any documents that are still required
06:01required in order to, in order to conclude your analysis. So you'll notice at the top here,
06:08we're asking for some VOEs, we're calling them missing, even though we're here to talk about our
06:12new Freddie wage implementation, I'll show you that later. Right now, we have our portfolio investor
06:19checked. So we're still requiring a VOEI in order to go and do, you know, variable pay calculations.
06:26So coming down, the other one I want to note for you here is our change log. So one of the important
06:32things when you're working as a team, and you have the ability for your processors, your LOs,
06:39and your underwriters to all work in one tool, is that you have a log of all the changes made by all
06:47the people going into the loan. It's very handy, provides an excellent audit trail for
06:52your QC group. And then also, anyone on the team can go in and see any adjustments that anyone's made
06:57to the loan. So that is your guide here. I was just in here before this demo, switching back and
07:04forth between investors, you can see that action being taken here in the log. Okay, so that is just
07:12the general orientation and view on here. Now, once you get in here, automatically, I can see kind of
07:18where my calculations are at. And then if I go into my drill downs, this is where, you know,
07:27we go deep as well as wide. As an underwriter, underwriters need the ability to see every
07:32calculation to be able to make adjustments if they need to. So as I drill into, for example,
07:37this cotality wage employer, and I can see I have both a P-PACE W-2 on it. When I come in here,
07:43I've got all of my income categories. I have some, you know, initial calculations for current and year
07:49to date that I can view. And then I have the ability to go into any one of these with a full
07:55calculator and decide if I want to do a blended calculation with a W-2, if I want to update some
08:03current period calculations. Here's an example of the drill down where you can pick
08:09an alternative calc, document that and save that. So in a similar fashion, we have drill downs that
08:16show you, for example, on self-employment, you'll see a full cash flow. On rental, you can see a full
08:24rental worksheet view that you'd expect. And that's basically our theme throughout here is that you can
08:30drill down to the level necessary to, you know, view the details and get to the income you're looking for.
08:37So now we've talked about just a general orientation on how we organize work here and allow you to do
08:44your thing. Now let's talk about the two new programs that we're participating in. So as Allison had
08:51mentioned, we are in May, we rolled out an integrated version of Fannie Mae Income Calculators, our rental
08:59program for Schedule E. And on this particular loan, I've got one Schedule E property here in the details.
09:06And now what I'm going to do is I'm going to switch over to
09:14my investor drop down. I'm going to go over to Fannie Mae. And when I do that, in real time, we are
09:20connecting from income analysis out to Fannie Mae's Income Calculator API. We're submitting all the required
09:28data to do an analysis on a rental property. They're doing those calculations and giving us back a response.
09:34And now you can see something new has appeared in our adjusted column here. We have what we call a
09:41surround around that adjusted number. So this is going to be the number that came back from Fannie Mae.
09:47You're going to notice that we have a little red exclamation mark here on this. Okay. And what that's
09:52indicating is that there's a number, but there's further action required. And spoiler alert, I'm going to tell you
09:59that there are items that you need to attest to in order to complete your Fannie Mae rep and warrant.
10:07For example, they want to know if this is a subject property, just as an example.
10:10Is there any kind of like border income involved? So just some things, some edge cases that they just
10:19want to make sure you attest to before you send that. You also need to update your PITIA to have
10:25you know, the most up-to-date PITIA in that transmission to Fannie. We're not going to have
10:30that information if we are not integrated to your particular LOS. The good news is, for example,
10:38with Encompass or some of our other integrations, we will get that information and be able to
10:43pre-populate that information if it's available in the LOS about both the property and the PITIA.
10:52So what's going to happen is as you make the attestations and re-send to Fannie, and we provide
10:58one easy screen in order for you to do all those attestations. You re-send to Fannie in real time.
11:04This will turn green. The other item we're looking for is your Fannie Mae DU case file ID.
11:09That case file ID is going to bind this calculation to the actual loan on their side.
11:16Until you provide that case file ID, you're in what we call preview mode with Fannie Mae, and it's written
11:22all over your output report and everywhere so that you can't, you know, mistakenly take that number.
11:28So very powerful to have Fannie Mae able to tell you that your rental property, it doesn't matter
11:34whether you have one or 10, has that rep and warrant coverage if you choose to accept their
11:40calculation. So this is an addition to the program offering we already have, which covers all of
11:46self-employment, all entities, your 1120S, your 1120, your 1065, your Schedule C. Those are all
11:53covered in a similar fashion where we do complete cash flows. We'll accept those back from Fannie,
11:59allow for adjustments, and still getting rep and warrant relief. All right, so that is our Fannie Mae.
12:04Well, guess what? This borrower, John P. Homeowner, he also happens to have wage. And so what we're going
12:10to do is we're going to now want to go take a look and say, hey, what's Freddie doing on this loan for
12:17wage income? So we're going to go ahead and change our guideline again. And we just have some warnings,
12:22making sure that, you know, letting you know to go ahead and update and run LP on that side if you want
12:31to sync the calculations, maybe a little more on that later. But right now you can see that we
12:38transmitted to Freddie Mac. We've switched our cash flow. You're going to see if we go back to the
12:43Schedule E section, guess what disappeared? Our Fannie surround here for our rep and warrant on
12:48Fannie coverage and their number went away. And now we're in Freddie land and they're doing wage.
12:54And what you'll see is we'll handle everything the exact same way for every income type as programs
13:00become available to us via each of the GSEs. So here we have a very similar surround on a wage source
13:06for quotality. And you can see it's a, we've got a Freddie icon here. And what they've done,
13:11which is incredible is they've taken, um, a single pay stub with W-2s and they're able to offer rep and
13:20warrant cover calculations for both base pay and for variable pay. This is a huge, huge, um, development
13:29in our industry. Why is that? Well, today, if you wanted to do a commission, um, calculation,
13:36you need to go get that two year verification of income because you require to, to verify the
13:43stability of that commission for the past few years. Now, the guidelines will tell you that,
13:48hey, all we need is a pay stub and a W-2. However, at the same time, you're required to make sure that
13:53that commission income is consistent. And of course, a W-2 doesn't break down income into commission
13:59versus base. So you can't really do that, right? So Freddie has solved for that with this solution by,
14:06um, building a whole rules engine that takes into account the distribution of income across the pay
14:12stub details, all the individual earning types, then looking at your total W-2s for the past years
14:17for this employer and doing some trend adjustment based on what they feel comfortable with in terms
14:24of their assumptions. So in this particular case, as a perfect example, if I drill into cotality and look
14:31at these, uh, calculations here, you'll see that we went ahead and sent them a base pay calculation,
14:37both current and year to date look pristine, 6,000 bucks. It looks fantastic. We've sent them bonus income
14:44and here we have, you know, these are just, uh, the different calculations that are available.
14:49We typically do a 12 month calculation, uh, by default here. And here's the interesting
14:54thing that you'll note is that Freddie Mac actually adjusted the base income down a bit from 6,000
15:01based most likely on what they're seeing in our W-2 history here. Okay. And then they made some,
15:10uh, they actually accepted and came to the exact same 12 month calc for bonus that, that we had come
15:15to with our default calculation and accepted that. And now you have rep and warrant on this number
15:20from Freddie Mac ready to go. That is just the first level of coolness involved in this program.
15:26Your second level of coolness is that verification of employment is also rep and warranted. So if you
15:32have the correct vintage of pay stubs, meaning that they're within 30 days of that application date or
15:38within 10 days of, uh, of that, uh, closing date for re-verification, Freddie Mac will accept, uh, through this
15:46program, they're going to give you verification employment certification as well. So you don't
15:50have to call the employer, you know, obviously if those pay stubs or documents looks are suspicious
15:56or fraudulent, you want to make sure you're, you know, you're, you're reaching out to your, to your
16:01bar on that. But assuming you've got good pay stubs and a fresh pay stub, um, they will give you rep
16:06and warrant coverage both for the income calculation and your verification employment. Now, this is a huge
16:11development in terms of what you can save in terms of, uh, going to, you know, all the traditional
16:17sources out there, digital data sources that you need to, uh, to confirm variable pay. So, um, the last
16:25feature I'm going to show you here is that when Freddie does this and remember they're doing an automated
16:31calculation. So they're making their adjustments. They know nothing about your borrowing. You know,
16:35they might've just got a fabulous raise and it's for sure. And the, and the employer swears up and down.
16:40This is their income for the next two years. Don't worry about it. It's got a promotion.
16:45Allison is a star. So now she's, you know, going to get a, get a $5,000 a month bump.
16:51And so you have the ability because they just have, uh, basically a faceless calculator on the
16:57other side, making its assumptions. You do not have to accept that Freddie me, that Freddie Mac rep and
17:02warranted calculation in order to some submit and sell to Freddie. And in our tool, you can simply
17:09unaccept, uh, the Freddie Mac calculations here, right? And then that will unlock the cash flow
17:18and allow you to go with what you're seeing on your pay stub very easily. So here we, we now just
17:23bumped our income back up to 6,000 for, uh, that base pay based on that current period from what Freddie
17:28had. And you're perfectly fine using this and selling that to Freddie Mac and, and, uh, and, and making
17:36Allison a happy home buyer. All right. So that is all I need to cover with you guys today. I hope
17:43you enjoyed the presentation, Allison. All right. Thank you for taking us through what automatic
17:48borrower income analysis brings to the table. Let's dig in a little bit deeper.
17:55What do I need to do to ensure that I get the Freddie rep and warrant NLP?
18:00Okay. Yeah. So what happens is that the aim check interface for the, uh, digitized pay stub and W2
18:08program, um, is a, is a separate system underneath, you know, the Freddie Mac umbrella of technology,
18:15and it's doing all the detailed calculations here and providing output. So there is a necessity to link
18:20that this calculation that you've done out here with LP so that when you run LP, it brings that in and you
18:27enforce your rep and warrant and you see it in your LP messaging. And what that entails is that, um,
18:33you can go into our task list here, which I didn't show you. The task list is a, is a handy dandy area
18:39where we basically dynamically show you all the things you should be reviewing on, on this, on this
18:45particular loan. Uh, in our, in our task list here in the wage section, there's a name check reference
18:51ID. And there are other places where you can get this throughout the tool too. Note that if we are
18:56integrated with your LOS, we're automatically going to put this in the necessary spot where it goes.
19:00But let's just say you're, you're not integrated with us. You come in here and you can click this
19:04little icon to copy that aim check reference ID. There's, uh, locations to paste that into directly
19:11into LP or into your LOS and then you rerun LP. So, uh, that's documented in our user guides,
19:18but it is a step that you need to take to make sure you get that report and enforced.
19:23Good to know. And let's talk a little bit more about the Freddie verification of employment
19:33rep and warrant. Yeah. So, um, this is, this is something that, you know, is a little difficult
19:39to explain because people are just looking at the tool as, Oh, I'm giving you that pace of W2.
19:46You're pulling out all of the details, right? Like every single earning item on the pay stub,
19:52assigning it to the right category, digitizing all that data, sending that all to the Freddie interface,
19:57letting them work their motor and give it back. And I've got a great calculation, but yeah,
20:01in order to get that verification of employment, it happens automatically through the exact same
20:06program. And really what they're going to do is again, they're going to look at the vintage of
20:11those pay stubs and ensure that, um, those paste updates are within their limitations for both
20:18initial verification and re-verification. So with our tool, you can send us those initial
20:24pay stubs. You can also send us your latest pay stub. As you get close to closing, we will go ahead and,
20:29and update your calculations, send them to Freddie. Again, that date on that pay stub is going to be,
20:35um, you know, in tolerance relative to your closing date and you're going to get your verification of
20:41employment, uh, rep and warrant with no need to make a phone call. I know it's hard to believe,
20:45but you do get it. I love not having to make a phone call.
20:50So my final question for you today, Eric, is what does the Fannie Mae program, um,
20:58or does the Fannie Mae program cover business rental income?
21:02Yeah. So Fannie Mae has been working on a business, uh, rental, uh, calculate income
21:10calculation, verification using 8825s and the appropriate, uh, business returns. Um, we are
21:17getting ready and working with them to, to be able to offer that. Um, I'd say that, you know,
21:21what we're seeing as a priority in the market, it's not as high up obviously as getting your
21:25schedule e-rental income properties handled, but it is definitely on the roadmap and something,
21:30uh, something we'll be, uh, probably looking to do this year.
21:35So something to look forward to capability wise. Eric, thank you for taking us through automatic
21:41borrower income analysis to our audience for more information about Quotality's automatic
21:46borrower income analysis. Click the link below.
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