Thanks to a combination of factors, first mortgages have seen two consecutive years of growth: regulatory guidelines and smarter lending have strengthened the quality of loans; the unemployment rate in the U.S. is at its lowest point in a decade, wage growth is emerging, consumer confidence in the economy is up. Data from the Equifax National Consumer Credit Trends report showed that 8.46 million new first mortgages were originated in 2016, a year-over-year increase of 13.7 percent. In that same time, the total balance of first mortgage originations in that time was 2.08 trillion, an 18.8 percent increase. In one of its U.S. Economic Outlooks, the National Association of Realtors (NAR) revealed year-over-year increases for:
Existing Home Prices: 6.9 percent
Existing Home Sales: 4.9 percent;
New Single-Family Sales: 17.1 percent;
Housing Starts: 7.7 percent;
Since being introduced, Day-1 Certainty has demonstrated the power of workflow efficiency and lenders have caught on quickly. The ability to get a borrower into the workflow – over the phone or on a website – and confirm that they are a W-2 employee, pull credit, verify all of the essential information and see bank statements has revolutionized the origination process because it moves qualified borrowers down the pipeline much faster. It’s something we’re still all getting used to, but so far, these capabilities have established a couple of key takeaways for lenders:
A Matter of “Good, Better, Best” (not “Right or Wrong”)
Lenders are still trying to figure out where verifications should fit in their respective workflows and processes and they’re having a tough time. Some have never used manual verifications and many of those using instant verifications are applying it within operations, some use it, but not until 14-20 days in the loan cycle. Paystubs and W-2’s are still being requested up front. Make no mistake, lenders want to get rep and warrant relief as fast as possible and they truly desire to make the borrower happy by providing a seamless mortgage process, but there’s a lot of concern with how to roll this out across branches and origination channels.
The good news: workflows can be modeled to fit a specific business. Granted, the application of verifications will differ between online, consumer-direct and retail and each lender will need to determine the best approach; figuring out where the right place is for you in your processes is what is important. Generally speaking, pulling verification earlier in the process is better than doing it later in the process, as many lenders still do today.
Although there’s going to be a learning curve, verifications will make things easier for lenders and borrowers, which brings me to the next point…
The Borrower Experience Determines Success
Lenders have historically had to ask borrowers, sometimes repeatedly, to produce document after document after document. Thankfully, the mortgage industry has gained so many efficiencies as a result of Day-1 Certainty, annihilating those inconveniences. Lenders that are performing verifications earlier in process are helping boost customer service, which is a very effective selling point. As you’ve likely seen, some lenders’ advertisements focus on telling the prospective borrowers that all they have to do is go online and apply; no need to deal with all of the paperwork, it’s all up front. Without the need to collect paystubs, bank statements or W-2s, lenders are closing faster and consumers are happier.
Telling a customer they don’t have to go home and gather multiple documents makes for a better lending experience and earns you the reputation of being a lender that caters to the borrower, which leads to more referrals.
Moving in the Right Direction
Data and analytics are changing the way the mortgage industry functions and everything is moving faster – prospecting, qualifying, verifying, buying and selling. Improved access to essential verification data is helping lenders connect with borrowers through every channel earlier than ever. It’s impressive to think that today, all a prospective borrower needs to do is download an app, provide some basic information, and, within minutes, be approved for a residential mortgage.
Because of these developments, we also need to speed up the learning process for where verifications will appropriately fit in lenders’ respective models. A workflow that suits one origination strategy won’t necessarily fit another, so focus internally to reveal the best way verifications can be implemented to deliver faster ROI and an unparalleled borrower experience.
About The Author
Seth Kronemeyer is vice president and vertical-marketing leader at Equifax Mortgage Services. He is responsible for pricing, product management, product marketing, campaign management, and mergers and acquisitions. Kronemeyer brings more than 15 years of industry experience to his position at Equifax, including marketing, sales, business-development and e-commerce expertise. He can be reached firstname.lastname@example.org.