New income calculations for government-backed mortgages now available in Analyze

Government-backed loan programs are invaluable to mortgage lenders, helping them serve more borrowers, reduce risk through guarantees and maintain capital for issuing new mortgages.

Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and United States Department of Agriculture (USDA) loans expand homeownership opportunities for diverse borrower groups, while Freddie Mac and Fannie Mae ensure market stability by purchasing loans from originators.

When done manually, tailoring income calculations to meet these loan programs’ criteria can be a significant pain point for mortgage lenders. Various loan types require specific income calculations, which can be complex and require specialized expertise. For lenders, building a team with experience across these loan types can be a difficult task, and calculating income to meet varying criteria can hinder underwriting teams’ speed and efficiency.

We’re excited to announce that we have expanded income calculation coverage in Ocrolus Analyze for Mortgage to include calculations based on Freddie Mac, FHA, VA and USDA guidelines, in addition to our existing support for Fannie Mae, conventional income calculations and non-QM bank statement loan income calculations.

As a result, lenders can use Ocrolus to minimize the amount of touch points needed for lenders to reach the final income calculation and, in turn, write loans more efficiently.

How it works

Ocrolus Analyze allows users to verify and update the underwriting guidelines used for income calculations based on the specific loan type.

For Encompass customers, this can be done automatically. Ocrolus pulls the program details from the loan and recommends the income calculation type based on the given guidelines.

These features are also available to non-Encompass customers, who can select their loan type in a dropdown within the Ocrolus Dashboard. From there, Ocrolus generates a variety of income calculations that vary in conservativeness while staying within the specific loan guidelines.

Fannie Mae & Freddie Mac income calculations

Agency government-supported enterprises (GSEs) like Fannie Mae and Freddie Mac made up 58% of all loans in Q3 2024, according to the Federal Housing Finance Agency.

Automating income calculations for these loans can dramatically improve mortgage lenders’ efficiency. By minimizing the need for complex, manual calculations – while staying within Freddie Mac or Fannie Mae guidelines – automation makes a game-changing difference in lenders’ workflows.

For both Fannie Mae and Freddie Mac loan types, Ocrolus conducts a series of income calculations to provide lenders with a comprehensive financial assessment. These calculations include Year-To-Date (YTD) Average, YTD plus 1-Year Average and Past 1-Year Average.

Added coverage for VA, FHA & USDA loans

Non-conventional loan types like FHA, VA and USDA accounted for 22% of all mortgages in Q3 2024. Though Fannie Mae and Freddie Mac made up for nearly twice this number, non-conventional loan types remain a significant portion of lenders’ businesses.

Like Fannie Mae and Freddie Mac, each of these loan types come with their own set of income criteria that require unique calculations and expertise. To manually calculate income, lenders often need a team of specialized underwriters with experience in FHA, VA or USDA loans. By automating income calculations for these types of loans, Ocrolus helps lenders optimize their workforce by reducing the need for extensive cross-training across different loan types.

With a wide variety of loan types and the various criteria that come with each one, lenders need to be prepared to handle a large number of potential income calculation scenarios. Ocrolus added calculations for over 200 different scenarios to Analyze, giving lenders the tools they need to address income calculations for each of these non-conventional loan types, in addition to conventional mortgages. With these updates, Ocrolus helps lenders reduce stare-and-compare work and the risk of human error through intelligent automation.

The importance of automated income calculation

Across the financial industry, lenders are seeing an increasing number of applicants with diverse and non-traditional sources of income. This trend, along with the prevalence of non-conventional mortgages, has increased the complexity of income calculations, creating a mountain of error-prone, labor-intensive work.

Lenders can turn to AI-powered automation to simplify even the most complex income calculations quickly and precisely. In turn, this enables lenders to spend more time building customer relationships and making critical financial decisions.

In today’s competitive lending landscape, the efficiencies enabled by AI are no longer optional. Lenders who do not embrace modern, AI-powered mortgage lending risk being left behind.

Book a demo to learn how Ocrolus Analyze for Mortgage helps lenders modernize their workflows.

Key takeaways:

• Ocrolus has added new income calculations to its Analyze solution, enabling mortgage lenders to more easily calculate income for government-backed loan programs such as Freddie Mac, FHA, VA and USDA.
• Government-backed loan programs account for a significant portion of all loans. By automating income calculations for these loan types, lenders can make game-changing improvements in operational efficiency.
• In today’s lending landscape, financial AI is more than a supplement – it’s a requisite for companies looking to remain competitive.