Freddie Mac has announced plans to launch a new service that will allow lenders to determine a prospective borrower’s income based on direct deposits.

The company said this income assessment capability will “reduce the paper documentation burden on borrowers” so lenders can “close loans faster and simplify the lending process.”

According to the American Payroll Association, more than 93% of workers are paid through direct deposit. Borrowers are typically required to provide bank statements confirming income from direct deposits during the application process.

“Our direct deposit solution is an innovative, data-driven approach that takes minutes, not days, to assess income so our clients can serve more borrowers more efficiently,” said Matt Vincent, vice president of credit and capacity at Freddie Mac Single-Family. “Sourcing data directly from the mortgage applicant’s bank account increases accuracy, removes subjectivity, reduces manual underwriting errors and delivers a better experience for borrowers and lenders.”

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The new service will be available to mortgage lenders nationwide via Freddie Mac’s Loan Product Advisor (LPASM) asset and income modeler (AIM). Freddie noted that, with borrower permission, AIM can also determine an applicant’s income from employer data as well as tax return data for self-employed individuals.

“We are thrilled to announce another first-of-its-kind solution to help bring greater loan origination efficiencies,” said Kevin Kauffman, vice president of client and partner delivery at Freddie Mac Single-Family. “Working alongside our partners, we’re offering tremendous value to our lender clients and their borrowers while leading the industry on its digital journey to modernize the mortgage process.”

The government-sponsored enterprise will announce additional requirements and the effective date in an upcoming March Guide Bulletin.