How Lenders Can Use Technology to Stay Competitive in the Mortgage Industry
Lenders in the mortgage industry have an opportunity to revamp the way they do business by moving to a digital lending process. Embracing this change allows for a more streamlined process that has benefits for both the lender and the borrower.
Michael Hammond, author and founder of NexLevel Advisors from Fintech Hunting recently spoke with Joel Rickman, Senior Vice President of Verification Services at Equifax, about the changing landscape for lenders and borrowers in the mortgage industry.
Michael Hammond: How can lenders address more financial inclusion through mortgage lending?
Joel Rickman: In today's world, there are different programs and different loans for individuals with different credit backgrounds and also for those that are improving. But the thing that always is a constant is you [consumers] have to be able to prove you have the ability to pay back that loan. When you take that information with a thin file, with a proven track record of income and employment, and a tenure, you start to see someone that absolutely qualifies for a mortgage.
MH: How can lenders leverage technology to stay competitive as the housing market continues to shift and the customer expectations shift?
JR: As Fintechs have grown over the last few years, it's based on convenience. I had one client mention wanting to be able to approve and issue that loan while the fingers are still on the keyboard or the thumbs are still on the phone, so they want it to be that instant. And so your question about technology and tying that together is critical. As we look at some of the numbers and the performance, you can see that the conversion rates, where digital information is available, is much higher than those where it is not.
If they [loan applicants] have to wait for a few days to get that initial answer, or they have to upload a lot of documents, they'll often try a couple of other websites or lenders to see if it's easier before they commit to that much work. The simpler you can make it for your consumer and potential customer to get the information needed for you as a lender to make that decision and verify and commit to that loan, with them providing the least amount of data possible, increases your odds of conversion much higher.
MH: In the midst of all of this competition, the pressure to compete in a larger market space, customer expectations, as we've talked about, have gone on through the roof, how can The Work Number® help alleviate some of that fatigue and burnout on lenders?
JR: It is very much about how much you can take off of the plate of the individuals. Every business, the most valuable resource is the individual that is working for you. So the underwriters and your quality assurance agents and everybody that's touching that loan folder is critical to your process. But the more you can simplify their job and get the right information to them from a verified source, you simplify what they have to do instead of pulling together each one of these documents on a regular basis. So we help them from the automation point of view. We also help from the compliance point of view.
Fraud continues to be a problem. When you [lenders] have a trusted source that's getting the data from the actual source of where that data is being generated, and delivering it securely to you-- and doing it in a very methodical and procedural oriented way, you know that you're protected and you can trust what you've got. And that is another real differentiator in the space as you bring digital income and digital employment to the lending process, it's that trust.
So it's not just The Work Number®. There's other players out there that are also providing similar services. But the real quality is knowing that from point A, when that data was originated to pay an employee to the time you receive it as a lender, that it's been secure, properly managed and hasn't been manipulated, because otherwise you're taking that risk. So that's one of the things we take a lot of pride in is making sure that we're getting that data exactly as the employers generated it originally, delivered to the lenders in its same form.
MH: What are some of the other things you see on the horizon for the industry?
JR: I believe you'll see some new products coming to life in 2022 & 2023, that are going to help those thin file or lower credit folks secure loans. I think that as we move away from the high volume refis of prime borrowers, that lenders will be working together to help find new products to help those that aren't a full prime or super prime borrower still get into a house and do it in a way that the lender knows it's safe and less risk to them.