Q/A with Brent Chandler of FormFree Holdings

MBA NewsLink recently posed questions to Brent Chandler, founder and CEO of FormFree Holdings Corp., Athens, Ga. The company’s AccountChek automated asset verification system allows lenders to order, analyze and certify an individual’s bank statement data electronically, rather than requiring the borrower to produce paper copies of bank statements. Chandler can be reached at brent@formfree.com.

MBA NEWSLINK: We’ve been talking about the paperless mortgage for more than 20 years. Are we finally there?

BRENT CHANDLER: While the adoption rate for both mobile and online banking is rising, paperless lending is not yet the norm. Banking resources are being tied up with regulatory compliance issues, so there’s not a lot of money left to invest in paperless technology or to train staff. I think we will continue to see growth in paperless mortgages but it will take quite a while before it becomes this standard operating procedure.

Having said that, it’s important to understand that paperless is the only way to achieve the kind of security investors in the secondary market need. There are tools today tool that utilize data obtained directly from the source, which makes it impossible to forge or fabricate the data needed to make a sound and compliant lending decision.

NEWSLINK: Rocket Mortgage from Quicken Loans generated a lot of talk–and some skepticism–about its mortgage approval in eight minutes claim. Your product, AccountChek, promises income and asset verification in minutes. Are we now in an age where most data can be confirmed–safely and accurately–within minutes?

CHANDLER: We’ve gotten to the point where most data are available in the cloud or through Internet portals. That allows you to obtain clean data, direct from the source. When you apply analytics to clean data, you can be confident in the outcome because there’s no opportunity to corrupt the data. And with the technology we have today, the results can often be returned in a matter of seconds.

NEWSLINK: How do these processes aid lenders–and give them confidence–in areas such as fraud prevention and compliance?

CHANDLER: We used to say “garbage in, garbage out” to explain bad test results. Fannie Mae’s most recent defects report indicates that misrepresented assets are its single biggest problem. That is due in part to the easy availability of vendors who will fabricate bank statements for loan officers or borrowers to support an application. When you use direct source data you eliminate the possibility of garbage getting into your system, regardless of whether the garbage is a result of intentional or accidental conduct.

AccountChek has direct access to thousands of depository institutions. It can automatically analyze a borrower’s electronic bank statements and show an underwriter who owns the account and whether there are unusual deposits. Through analysis of ACH deposits, AccountChek can also help verify a borrower’s actual income. Directly sourced data pretty much eliminates the opportunity for deception and errors.

This is an obvious advantage when trying to comply with the Qualified Mortgage Ability to Repay (ATR) rule, and it’s a time saver as well. Should a loan’s status as a Qualified Mortgage be challenged sometime in the future, AccountChek reports are evidence of a lender’s due diligence and good faith effort to assess ATR. Since we keep all source data on file, these reports show exactly what the borrower’s financials looked like when the loan was originated, which will help the lender defend itself if challenged with HMDA or Fair Lending violations.

NEWSLINK: While some lenders are finally embracing paperless mortgages, they might be unaware of newer trends that earlier adopters are already pursuing. What should they be looking ahead to?

CHANDLER: Over the past couple of years, we’ve seen a number of new entrants to the consumer finance industry that have little or no experience making loans yet are using technology in new and interesting ways. SoFi and Lenda are two examples. I definitely expect this to continue. It remains to be seen what long-term impact these new entrants may have on the market. However, one thing they have in common is that they are each reinventing the lending process for consumers and making it more convenient and simpler. Rocket Mortgage is emblematic of this change in how lenders engage borrowers. It will be exciting to see how things evolve.

NEWSLINK: What should lenders be doing now to attract Millennial borrowers?

CHANDLER: Millennials are digital natives, and they’re accustomed to having instant, 24/7/365 access to products and services. That means that lenders need to have a presence in mobile and online environments. By implication, this also means that lenders should be transitioning to a paperless process and a document-less office.

Lastly, Millennials often want to do business with companies that show a social conscience, whether that be supporting the environment by doing business in a “green” fashion or by supporting worthy local groups that do good in the community. The mortgage industry’s reputation was badly tarnished during the economic crisis, and this is a small way to start regaining our customers’ trust.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions; articles and/or Q/A inquiries should be sent to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)