Freddie Mac's Loan Prospector® Celebrates 20 Million Loans
June 11, 2002
Product Re-engineered Mortgage Loan Underwriting Process
McLean, VA - Freddie Mac's Loan Prospector® automated underwriting service reached a milestone of evaluating its 20 millionth loan on June 7. It took six years, from January 1995 to January 2001, for Loan Prospector volumes to reach 10 million loans, and only another 17 months for that volume to double to 20 million loans.
"Since coming to market in the mid-1990s, automated underwriting systems have dramatically improved the mortgage approval process for thousands of lenders and millions of homebuyers," said Tricia McClung, Freddie Mac vice president of Loan Prospector. "Automated underwriting has become a standard process for the mortgage industry."
Freddie Mac was also the first to use technology to re-engineer the underwriting of government loans. In the late 1990s, the time savings and efficiencies used by the conventional market were applied to FHA and VA loans.
"When first introduced, automated underwriting represented a major change for real estate finance," McClung added. "Mortgage bankers and financial institutions gave serious thought to how they would employ the on-line technology to evaluate a borrower's creditworthiness in minutes. Manually underwriting every loan is now a distant memory."
When Loan Prospector was first available, nine lending and mortgage brokerage companies used it. A year later, more than 350 lenders and 5,000 mortgage industry professionals used the service. Now, more than 14,000 lenders and mortgage brokers use it.
"Our next step as an industry is to simplify the rest of the mortgage origination process," McClung added. "New web-based tools need to be developed to streamline additional mortgage processes lenders and brokers use to originate home loans. That means leveraging automated underwriting to create a fully online origination process."
In a typical transaction, a lender or broker enters credit, loan and property information into a computer or web site linked to Loan Prospector. The automated underwriting service evaluates the data, and returns a Freddie Mac purchase decision to the lender or broker who then could approve the loan. The entire process takes only a few minutes.
Freddie Mac uses Loan Prospector to manage the credit risk of the home loans the company purchases. Loan Prospector contains statistical models that evaluate a borrower's credit, capacity and collateral, and provides quick assessments based on the historical performance of home loans with similar characteristics. Roughly two-thirds of all newly originated mortgages that Freddie Mac purchases are evaluated through Loan Prospector.
Key Dates in Loan Prospector History
On Valentine's Day Freddie Mac begins transforming the mortgage process by making Loan Prospector commercially available, primarily to retail lenders. Loan Prospector is the first statistically-based automated underwriting service for residential mortgages.
Loan Prospector evaluates 38,248 loans in 1995.
Freddie Mac made Loan Prospector available to lenders to underwrite jumbo loans (Freddie doesn't purchase jumbo loans) and subprime loans; and to receive real-time mortgage insurance decisions in one-step. Loan Prospector gives lenders on-line access to mortgage insurers and the ability to receive a mortgage insurance decision, certificate number and premium amount within minutes.
Loan Prospector evaluates 203,424 loans in 1996.
Loan Prospector is the first underwriting service to receive Veteran's Administration (VA) approval to automate and re-engineer the underwriting of VA loans. Freddie Mac is using technology to speed up the mortgage process for veterans, reduce documentation and other credit requirements traditionally needed to make VA loans.
Loan Prospector evaluates 528,809 loans in 1997.
Loan Prospector is the first electronic loan evaluation service to receive FHA approval for use in processing FHA loans.
Loan Prospector evaluates 2.07 million loans in 1998.
Freddie Mac makes Loan Prospector available on the Internet for use by mortgage brokers and wholesale lenders. Loan Prospector on the Internet is the first automated underwriting system available at the point of sale via the Internet.
Loan Prospector on the Internet is first automated underwriting service to gain approval of the three major credit repositories for the transmission of credit reports prepared by the repositories via the Internet. Equifax, Experian and TransUnion reviews and certifies Loan Prospector on the Internet's security standards around the transmission of credit data via the Internet.
Loan Prospector evaluates 3.03 million loans in 1999.
Freddie Mac and the National Association of Hispanic Real Estate Professionals (NAHREP) announce agreement to work together to get NAHREP members to use Loan Prospector on the Internet. The mortgage broker members of NAHREP will leverage the speed and efficiencies of Loan Prospector on the Internet so its members can provide Hispanic homebuyers with a superior customer service experience.
Loan Prospector evaluates 3.80 million loans in 2000.
January 28, Loan Prospector scores its 10 millionth mortgage loan since it's original launch in 1995.
Freddie Mac evaluates the performance of some loans on the prime/subprime border and determines they perform well over several years. Based on these findings, Loan Prospector is adjusted to provide more Accept evaluations. Approximately 1.5 million borrowers will benefit from Loan Prospector's expanded Accept rate over the next five years.
Loan Prospector evaluates 7.38 million loans in 2001.
Freddie Mac and mortgage technology developer Mortgagebot team to offer small- to mid-size mortgage lenders the ability to enhance their websites to deliver online mortgage loan approvals. Mortgagebot will custom-build, host and maintain a lender-controlled and lender-branded website, and link it to Loan Prospector.
June 7, Loan Prospector evaluates it 20 millionth loan since it first became available in 1995.
Source: Freddie Mac