Automated technologies, such as platforms that instantly verify income and employment, present mortgage lenders and originators with a broader perspective of creditworthiness in a secure and seamless manner. This winds up benefiting both the borrower and the lender.
The adaptive nature of these tech tools serves digital-savvy consumers without impacting the offline borrower experience. All financial institutions, including mortgage companies, need to be ready for a digital and autonomous lending experience, because many of their clients are. Technology that can instantly verify income and employment when the consumer permits access through their bank or employer is at the forefront of this movement.
Driven in part by an increased need to manage costs, lenders are looking toward technology as one solution to prepare themselves for future competition. The goal of this approach is to fully digitize what was once an entirely analog, paper-based process. A loan origination process that is completely digital would drive down time spent on loan applications while helping to improve efficiency across all departments. This efficiency can translate to increased borrower satisfaction and, ultimately, more loans funded.
If this shift doesn’t happen in the near future, however, many consumers will go elsewhere. Some consumers are already turning away from traditional financial institutions when it comes to loans and lines of credit. But the good news is that lenders of any size and structure (brick and mortar, or online) have an opportunity to compete in a dynamic lending environment by leveraging technology, embracing innovation and adopting processes that empower flexibility.
The technology and data needed to meet growing borrower expectations and stay on par with industry trends are already available. As the battle heats up between traditional banks and alternative lenders, how can front-line originators keep pace?
With the emergence of cloud-based technologies, there are many ways to use data and leverage automation to make more informed and secure decisions about mortgage approvals. One philosophy on the horizon is the concept of “self-driving” credit.
The premise behind self-driving or autonomous credit is that borrowers set their own destinations and preferences for the lending experience without unnecessary bottlenecks (such as outdated lending processes and workflows) that slow down their access to credit. Similar to a shopping experience, today’s consumers can craft their own journey — whether they prefer to shop online or in-store, have their items delivered or available for pickup, or have touch-free interactions.
Consumers may not be aware of all the moving parts that give them their preferred experiences. But they do recognize the ease, convenience and speed they’ve come to expect. It’s simply a matter of time before these expectations spill over into mortgage lending.
Self-driving credit has two components: automation and optimization. Automation is about reducing human dependency across multiple processes (e.g., consumer-provided documents to verify general information such as income and employment prior to extending a loan). Optimization is about leveraging data to help lenders make faster, more informed decisions. For example, imagine the possibility of an applicant receiving funding for a home within 24 hours of requesting it.
That’s incredible — and it’s where the mortgage industry is slowly headed. This expedited time to close will be attributed to low-friction, back-end processes and fast access to the data needed to move a loan further toward funding. This also involves offering high levels of service, no matter the applicant’s preferred lending experience.
There are consumers who still like walking into a local bank branch and seeing a familiar face. And there also are people who prefer the convenience of online transactions. Some financial institutions may find it difficult to strike a balance between adapting to new processes and technologies while retaining personal relationships with clients. Technology advancements can actually help lenders enhance their product and service offerings while automating back-office functions to allow more time for personalized service.
Leveraging technology to digitize key steps (such as income and employment verification) can reduce time-consuming, manual processes and increase the focus on closing the deal. Not every borrower will want a fully digital lending experience, but back-office digitization can assist consumers who prefer a digital process over an analog one. Just as it simplifies as many steps for as many borrowers as possible, a technology solution with access to instant income and employment data can assist in driving lender efficiency.
The added costs, delays and burdens caused by manual processes may put some lenders and the originators who work with them at a disadvantage when it comes to achieving growth and efficiency objectives. Loan applications can be rife with incorrect information. This includes overestimates (and even underestimates) of income, as well as inaccuracies that impede processes and jeopardize approvals.
For traditional credit score-based decisions, borrowers are often tasked with providing additional documentation, including W-2 forms, pay stubs or proof of residency. Having applicants provide these documents — or worse, tracking them down yourself — increases friction. It’s cumbersome, time-consuming and may lead to lost opportunities for the lender, originator and borrower alike.
The more that a lender relies on applicant-provided documentation, the more they open themselves up to uncertainty. While this analog process is sometimes necessary, relying solely on it is outdated in the current digital age. The exponentially more reliable and faster way to verify income and employment is through third-party verifications, using data provided directly from employers, as long as the consumer gives permission.
Ultimately, instant income and employment verifications enable lenders to make fast, informed decisions and instantly see the most up-to-date information. They will have a broader understanding of the borrower’s financial history that includes insight beyond the stated income or credit score. In turn, lenders and originators can provide the immediacy and convenience consumers have come to expect.
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All consumers — whether they are buying in person, over the phone or online — want a hassle-free experience. Mortgage companies should invest in tech-based solutions to improve the lending process for all types of borrowers.
To do this, lenders and originators should establish partnerships with third-party innovators that can provide automated income and employment data. This will help to accelerate the origination process by reducing the need for drawn-out, paper-based processes or requests for sensitive login credentials to verify an applicant’s creditworthiness through their bank. ●