BLOG VIEW: As the housing market moves toward one characterized by rising home prices, increasing interest rates and decreased consumer demand, lenders may feel more pressure to meet borrower expectations of a more efficient, seamless and secure origination process – or risk losing those borrowers to the competition.
In today’s lending environment, the goal is to get borrowers to the closing table as quickly as possible. In response, many lenders are taking a hard look at their internal processes to find ways to gain meaningful operational efficiencies. One key tool in achieving a faster time-to-close lies in a lender’s use of automated income and employment verification data. When leveraged early on and throughout loan origination, it can help lenders drive revenue by supporting faster, more informed lending decisions. Still, there are some things lenders should consider when choosing a data provider.
First, the onus of due diligence lies with the lender to confirm that their income and employment verifications provider has the proper controls in place to meet standards and requirements related to data security and data quality.
Because income and employment data helps lenders better determine a borrower’s ability to repay a loan, it is essential that the lender understands where the data originates (is it sourced directly from employers?), how current the data is, and how often it is refreshed. In the competitive housing market that we see today, having direct access to high quality income and employment data in real-time (or near-real-time) can successfully accelerate the origination process to closing. Additionally, lenders can find value in automated data at any stage in the loan origination process, whether at application, underwriting or even again prior to closing as a risk mitigation strategy.
With increasing competition, income and employment data can also play a key role in expanding the borrower pool to include those consumers with little or no established credit history, who may otherwise be overlooked. Not every consumer behaves as their credit scores might indicate and by relying solely on credit scores, it may not give a comprehensive view of a borrower’s credit risk – particularly in light of recent economic conditions that may trigger unavoidable setbacks that may impair credit. When layered with traditional credit data, income and employment data that is directly sourced from employers can deliver a far more holistic and comprehensive view of a borrower’s true financial picture.
The shift to more digital interactions with borrowers requires a new level of stability and uptime. Therefore, when evaluating potential partners, lenders should identify ones that can meet this challenge and that leverage the latest in cloud-based technology to ensure the highest levels of security, consistency and accessibility, regardless of time of day. By intelligently automating back-office processes, it creates much needed efficiencies while also freeing up resources to be redirected to manage more complex deals, often resulting in increased revenue for lenders over time.
Ashley Wood is vice president of mortgage verification services at Equifax.