Origination software provider Ellie Mae released a package of new services and features this week to promote loan quality and efficiency in the loan file review process for investors and loan aggregators.
One feature of the Total Quality Loan program builds on Ellie Mae technology that serves as a communication medium and delivery channel of third-party underwriting services like document preparation, income and employment verification, and credit checks. When participating lenders order verification services over the Ellie Mae Network, Ellie Mae will hold a copy of that data in a secure server, in addition to delivering it to the lender’s Encompass loan origination system. When an investor or aggregator is reviewing the loan, it can access that first generation verification data with assurance the lender didn’t tamper the data.
Jonathan Corr, chief strategy officer for Pleasanton, Calif.-based Ellie Mae, told Mortgage Technology this service has particular benefit to the correspondent lending channel.
“Because there are two different parties involved and in this dynamic of reps and warrants, the correspondent lender is doing all the checks, running compliance, income, fraud, asset checks, etc., and passing that closed loan on to the investor,” he said. “The investor may trust most of the folks out there, but they have to be consistent in their process and have to go and do it again. They can’t be comfortable with a loan file with copies of the verification.”
With both correspondent lenders and their investors active on the Ellie Mae Network, Corr said the company is “uniquely in the middle of this.”
“It creates a whole bunch of automation benefits for the correspondent lender in the manufacturing process and creates a speed-up process to provide access to that information to investors,” he said.
In developing the new service, Corr said Ellie Mae got feedback from investors and correspondents. He said lenders order a wide variety of borrower verification services during underwriting, while investors typically only reorder a limited number of services. While verification vendors may be getting double orders on the same loan file, Corr doesn’t believe the new Ellie Mae service will cause third-party vendors to see a significant drop in orders, and it also gives investors access to additional, reliable data in an efficient manner.
“It’s an artificial cost that in reality is being borne by the consumer,” Corr said. “Some of these guys may be getting a couple double orders, but is that an efficient model or the right thing for the consumer? I don’t think so.”
It’s not always the case though that investors and aggregators are ordering new verifications from vendors. The Work Number, for example, uses reference numbers to track is income and employment verification reports. Lenders can order reports from Encompass and they are delivered back to the LOS over the Ellie Mae Network. After a correspondent lender sells a loan to an investor, the investor can use that reference number to get its own copy of the verification from the St. Louis-based subsidiary of consumer credit reporting agency Equifax—and the fee to distribute that data to the investor is less than the cost of a new verification report.
Janet Ford, senior vice president of The Work Number, was not aware of the new service until asked about it, but told Mortgage Technology the concept of giving investors access to verification data from multiple vendors in one place seemed like a good idea.
But she was also cautious about how Ellie Mae’s entrance into this space would impact her company’s existing activity with investors and said she would have to explore it further to make sure there weren’t any potential issues that could arise from Ellie Mae storing the sensitive borrower information her companies provides.
The balancing act of further assimilating its technology and services into lender operations while minimizing how much it agitates relationships with other vendors—
In addition to the verification data service, another Total Quality Loan service provides automated ordering and management of Form 4506-T requests of tax return transcripts from the Internal Revenue Service. By providing its Encompass 4506-T Service and an integration into its LOS, Ellie Mae has added another service that competes with the same vendors that it generates revenue from on Ellie Mae Network transactions, including The Work Number’s IRS income and identity verification subsidiary Rapid Reporting.
Ellie Mae also built an integration into Fannie Mae’s EarlyCheck.
