Reducing Borrower Friction to Win the Busy Spring Season
Jarod Jones is Senior Director of Mortgage Verifications Services with Equifax Workforce Solutions, responsible for client management, project management, strategic planning, solution sales, market analysis and negotiations.
As we approach the spring season, traditionally a hot period for the mortgage market, lenders are gearing up for increased activity. According to MBA, mortgage applications in February saw a 2.3% increase from one week earlier, signaling a possible uptick in demand. Meanwhile, mortgage rates have reached their lowest levels in recent months, dropping to 6.78%, which could potentially stimulate more mortgage applications and home purchases.
However, the financial strain on borrowers is evident, with more than 2 in 3 Americans (69%) worried they wouldn’t be able to cover their living expenses over the next month if their primary source of income were lost. This statistic underscores the precarious financial situation many individuals find themselves in, highlighting the importance of stability and security in their financial planning. For lenders, this means that leveraging the latest data to develop a clear view of the applicant’s current financial situation and ability to pay is more important than ever, while also providing a seamless and efficient mortgage experience.
With ongoing competition for every loan, lenders must focus on reducing borrower friction to win customer loyalty. By reducing borrower friction and leveraging advanced technologies like instant income and employment verification, lenders can help alleviate some of the financial stress borrowers feel. This not only enhances the borrowing experience but also fosters trust and loyalty among customers, ultimately benefiting both lenders and borrowers.
Eliminating Barriers for Borrowers
One of the key challenges borrowers often face in the homebuying process is friction during the verification of employment and income. Some lenders are still using traditional methods to verify income, such as contacting the loan applicant’s employer or asking the applicant to provide paystubs or W-2s. Applicants get bogged down as they are required to find, access, and then upload — or worse — print and mail documents at the time of application and before closing. This process can be time-consuming and cumbersome, leading to delays and frustration for both lenders and borrowers. It may also open the lender up to risk from misrepresented or even falsified documentation, and can increase the chances of the applicant’s personal information falling into the wrong hands.
However, with instant employment and income verification services, lenders now have better options to offer a more efficient and reliable experience that truly meets consumer expectations. By leveraging these services, lenders can instantly obtain reliable and up-to-date employment and income data directly from employer payroll systems. This not only speeds up the verification process but also reduces the need for multiple document requests from applicants, resulting in a smoother and quicker mortgage process.
Additionally, lenders can leverage verification of employment and income throughout the lending process to gain more confidence in debt-to-income assessments and more seamlessly fulfill GSE requirements. With instant verifications, lenders can more easily re-verify employment and income information at different steps of the lending process to highlight any potential changes and help increase speed to close.
Alternative Data May Expand Opportunities
Instant employment and income verification, when used alongside NCTUE (National Consumer Telecom & Utilities Exchange) telecommunications, pay TV, and utilities payment history information, can further enhance the mortgage process while also responsibly expanding consumer access and supporting a healthier, more inclusive economy. The majority of U.S. adults have at least one utility bill or cell phone in their name, making utility data a widespread and powerful indicator of past financial reliability. Tapping these alternative data sources not included in a traditional credit report can provide a fuller picture of a borrower’s financial profile, especially those who may have limited traditional credit history.
By incorporating instant employment and income verification alongside NCTUE data, lenders can reduce borrower friction and ultimately enhance customer loyalty. These technologies not only streamline the mortgage process but support a more inclusive approach to lending, helping to expand the availability of credit to more borrowers.
(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)
