Sponsored Content from First American Data & Analytics: Upgrading Your Tech Stack–Don’t Overlook Data Quality

By Paul W. Harris – General Manager, Mortgage Analytics at First American Data & Analytics

Conventional wisdom suggests that the mortgage industry has a timing issue when it comes to technology adoption. When business is strong, many lenders are often too busy to take on transformative projects, and when business slows there may be more bandwidth for new projects but, unfortunately, no money. However, many lenders are taking a different approach during the current downturn. Lenders we work with are increasingly taking advantage of the current environment to implement solutions that will help them capture business in the current market and help them scale when the next upcycle arrives. As part of this process, forward-looking lenders are examining not only available technology, but also the quality of the data that is powering that technology and how efficiently their organizations are consuming that data.

Low Quality Data Can Lead to Increased Risk

Data plays a critical role in virtually every aspect of a mortgage lending decision. It supports underwriting decisions and helps detect risks, uncover opportunities, and value properties and assets, all while feeding the analytics that help reduce the time and cost involved in each of these processes. Few lenders would agree that data quality is not important, yet there is a persistent belief among some lenders that data is the same no matter the source. What often changes this opinion is an expensive problem – or a major missed opportunity – that can be traced back to stale or incomplete data or data integrity issues.

Let’s consider a few relevant examples.

• Undisclosed debt is currently a leading cause of government-sponsored enterprise (GSE) repurchase demands. Outdated data is one of the most frequent reasons that lenders miss open trade lines or private party loans, which can result in expensive buybacks.

• The GSEs are also increasingly cracking down on investment property and second homes purporting to be primary residences. New data sources that monitor rental and Airbnb-like sites can help lenders protect themselves against misrepresentations.

• In super lien states, delinquent homeowner association (HOA) payments can put a lender in second-lien position behind an HOA. Prudent lenders will identify which properties are in one of the many HOAs across the country. Not all data providers have this type of specialty information, so it is important to find a provider who does.

• Identifying all the liens against a property, including municipal and PACE liens, is another critical component for both underwriting and portfolio surveillance. This is particularly true in certain states, like Florida, where municipal liens require a separate search.

• As home equity lending continues to grow, lenders are looking for ways to originate these no-cost-to-the-consumer products efficiently, while minimizing risk. When originating a home equity loan, if lenders opt for a property report instead of a full title policy, it can pay to understand the source and depth of the ownership and lien data, how the data was curated, and how current the data is.

First American Data & Analytics goes to great lengths to maintain superior data quality. This includes the extensive use of advanced optical character recognition and data extraction technologies for the majority of data collected and employing double-blind data entry for the remainder. Collecting data quickly and accurately means we can provide this information faster to clients, whether it is through platform solutions, like automated valuation models and fraud detection, or in bulk to help lenders identify client acquisition opportunities and conduct portfolio analysis. Additionally, optical character recognition technologies have enabled First American to capture, and make searchable, all of the text from more than 8 billion document images of property and ownership records.

Thorough Due Diligence Can Identify Data Cost Savings

Sub-standard data quality and integrity can create issues for lenders, so it is critical to understand the source, depth, and timeliness of the data that is being consumed. How can a lender ensure it is getting the best data at the right time? Due diligence. Start with a quick audit to understand what data licenses your organization has and whether or not your organization is maximizing those data licenses. Following this type of review, lenders may discover redundant data sources are being used by different divisions, providing an opportunity to reduce their data costs.

Carefully Evaluate Data Providers

Evaluating data providers can be a challenging process and some lenders overlook some key criteria during their evaluation process. It’s important to develop a comprehensive approach to how you vet and compare data and analytics providers. For example, some key areas to examine when evaluating data providers include the following:

Content, Currency, Reliability

• What is the breadth and depth of data available? Can it be tailored to your needs?
• What kind of unique datasets are available?
• How current is the data? What’s the lag time between the transaction recording date and when the transaction data can be fed into your platform or updated in analytic modeling workflows?
• Does the provider rely on its own data to make business decisions?

Expertise

• How much experience does the data provider have in managing and curating comprehensive, nationwide property and ownership datasets?

Delivery

• Will they deliver data in a way that is most consumable by your organization? For example, via data-as-a-service (DaaS) channels, including APIs, cloud delivery (such as Snowflake or AWS), or bulk file delivery.

Ultimately, when it comes to mortgage lending decisions, data plays an essential role in streamlining processes and optimizing outcomes. From detecting risks to uncovering opportunities, data is an invaluable tool in making successful and informed decisions. And having the most accurate, complete and current data can make all the difference. Bottom line: if you are considering taking your data stack to the next level, find a provider that delivers the most comprehensive data through the best channels to meet your unique business needs.

Learn more about First American Data & Analytics.

(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at bill@jlfarmakis.com or 203/834-8832.)