Keeping Pace

It’s no secret that the housing market is expected to shift. While no one knows exactly what the future of the market will hold, there are ways lenders can help prepare now for whatever is in store. And, a few things are certain.

For one, we can likely expect a leveling off of activity across the board. While it’s hard to say what this will look like—and when it will occur—as the mortgage industry emerges from a year characterized by bidding wars, inflated home prices, and low interest rates, we can anticipate eventual increased interest rates and decreased demand.

We also know that consumer demands have changed. Homebuyers expect a fast, seamless, and secure mortgage loan application process that matches today’s e-commerce experiences. There’s also more competition for lenders—and a growing need for lenders to help facilitate a faster-time-to close. If the current housing boom has taught us anything, it’s the importance of finding efficiencies to more quickly get to the closing table—otherwise, borrowers may risk losing out on a house. If lenders can’t get borrowers to the closing table in a timely manner, both the lender and borrower may risk missing out.

Faced with an expected leveling off of activity, increased competition, and changing consumer demands, what can lenders do to prepare? As the market flattens, here are a few ways lenders can stay competitive and manage costs.

Leverage Verified Data Throughout the Process
In many ways, managing costs in an ever-changing market can be boiled down to lenders constantly reevaluating and challenging internal processes to determine what works best and where technology can be optimized. For example, verifying an applicant’s income and employment to better help determine ability to pay is a necessary but often tedious part of the loan process. Leveraging automated data provided by employers can help speed up the lending process.

With an average loan origination cycle time of 40-50 days—and with more pressure than ever for lenders to facilitate a faster time-to-close—lenders should leverage technologies to improve efficiencies. Some legacy methods for income and employment verification are becoming outdated, and evaluating more data in a compressed time frame demands greater levels of automation. Automated processes throughout the lending cycle, such as real-time income and employment verification, can help boost efficiency and free up internal resources that can then be focused on closing more complex deals with the potential to create more revenue for the lender.

Having access to data provided directly by employers—and leveraging automated verifications—can help speed up the lending process as a whole. Further efficiencies can be gained by leveraging data through any part of the process—from as early as the pre-qualification stage to reverifying income and employment prior to close. Some of the fastest and smoothest origination processes verify potential borrower employment as early as the application stage and check employment again prior to close. Having access to income and employment data early on helps lenders speed up time-to-close by helping to ensure this box is checked possibly before the loan even gets to the underwriting process. This helps create a smoother process from start to finish, allowing lenders to make faster, more informed decisions on borrower qualification, helping mitigate risk, and cutting down on wasted time and resources. This not only helps make the lender more competitive but also benefits the consumer, too, by getting them to the closing table faster.

Engage Third-Party Vendors to Help Streamline Investments
Amid the pandemic, many lenders have had to adopt new technologies to facilitate processes that were typically conducted face-to-face. While it may sound counterintuitive, investing in new technologies can help lenders manage costs in the long run. Streamlining emergent technologies alongside existing ones can help lenders future-proof their investments. By partnering with vendors that offer a full suite of solutions, lenders gain efficiencies in the long-term. When it comes to verifications, for example, lenders can partner with vendors that offer a full suite of solutions designed to address the needs of each milestone in the loan origination process, from verification of assets to verification of income and employment.

Increased competition and changing consumer demands are expediting the need for a faster and more seamless lending experience. Tedious, paper-intensive, time-consuming loan origination processes are becoming more and more digital, and lenders that do not embrace digitization risk falling behind. Lenders can also benefit from leveraging loan origination

platforms to drive better process flow internally. Third-party technology providers can help streamline the entire digital lending process, from loan origination to the closing table. Rather than using dated underwriting processes, integrating standardized solutions to create an easier and more efficient experience throughout the loan cycle can get the borrower to the closing table faster.

Adopt a Consumer-First Mindset
It’s clear that consumer demand is playing an increasingly important role in lenders’ ability to stay competitive. With the potential of demand fluctuations, lenders that adopt a consumer-first mindset—considering the needs of the current borrower pool, as well as consumers with little or no credit history who may have been overlooked—will come out on top. Consumers are demanding a faster, more efficient mortgage loan approval process, but it’s important to prioritize customer service to help lenders stay competitive too. As lenders adopt new technologies to help meet consumer demands, they should ensure their teams are fully trained to take advantage of such technologies.

To fully embrace a consumer-first mindset—in the ever-changing market—lenders should broaden their approach when determining creditworthiness. As they look to stay competitive and manage costs, lenders can also benefit by adopting practices that empower them to be more inclusive in their lending. To really support financial inclusion, lenders would be wise to supplement traditional credit data with expanded, third-party income and employment data. By layering automated income and employment data with credit scores, lenders can get a more extensive view of the consumer’s creditworthiness and potentially provide a better overall experience to consumers who have historically been excluded.

Lenders need to be prepared to make fast, informed decisions that address the changing needs of the industry and the consumers they serve. Streamlining and reevaluating processes for efficiencies to be gained is key to staying competitive—and technology plays a vital role. Through all of this, it’s important to think about the consumer first, constantly working to meet shifting consumer demands while also helping to expand the borrower pool.