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How Will Big Data Transform the Mortgage Lending Industry?

Today, lenders and consumers spend up to six weeks from loan application to closing. Soon, the entire process will be complete in mere daysif not hoursresulting in a more cost-effective, consumer-centric approach. On-demand access to granular data on active loans, accrued equity, and the ability to more quickly and accurately generate appraisals are driving important changes for lending.

Instantly Qualifying and Approving Borrowers

Predictive analytics has changed the way many industries manage and derive insights. Retailers have retooled how they staff locations, banks have become proficient at detecting fraud, and insurance companies have begun to offer personalized services—all based on deep data and intelligent algorithms. These insights have largely been missing from the lending industry—until now.

Availability of APIs allows lenders to engage prospects with all the critical data points at their fingertips—including details that enable the lender to create an individualized and direct appeal that captures information critical to conversion. By accessing data that pinpoints current equity and collateral valuation; shows loan history, payment information, equity; and provides a definitive view of the current and future value, lenders can intelligently pre-qualify leads and create their best loan offer on the spot.

Reducing Rework, Closing More Loans

Today, more than 30 percent of loans fall short of the collateral valuation agreed to between customer and loan officer. In fact, this disparity is routinely not identified until weeks, if not months, later. This means time and effort wasted for both parties.

The industry’s leading data and predictive analytics companies incorporate and test hundreds of factors. This allows lenders to pre-approve with greater confidence that the value aligns on the back end and ensure lenders recapture those loans that fall short in valuation.

Using decades of historical data, hundreds of trending macroeconomics, and local insights, sophisticated algorithms mimic the experience of the appraiser. Weighted to the most locally relevant factors, they also capture property trends the human eye rarely sees. The availability of industry-specific APIs means lenders can integrate data to not only streamline workflow and expedite the qualification of borrowers but close more loans.

Appraising More Accurately

Today’s appraisal process is the source of pain and frustration. Regulations, compliance issues, and a fragmented suite of solutions have contributed to significant increases in cost and the time it takes to complete a thorough appraisal. Appraisers have been bombarded with new requirements, and the population of active appraisers isn’t keeping up with the demands of the markets. Appraisals take anywhere from 15 to 45 days to complete, and frequently don’t align with transaction perceived values.

Powerful predictive analytics are now available. New end-to-end, cloud-based appraisal platforms on desktop and mobile devices are radically reducing time to completion—from weeks to as quick as two hours. These tools can suggest adjustments, select optimal comparable homes, and inform the valuation process with predictive algorithms, while increasing objectivity and accuracy. For example, the best data analytics providers are able to flag where the data is different than MLS or public records data and identify possible errors while in flight—allowing the appraiser to more confidently portray the value without unknown risks cropping up during the AMC, lender, or GSE review process.

Innovation is changing the way and pace at which appraisers work. Pre-populated forms and the integration of MLS, public records, permitting databases, plat maps, and flood maps mean laborious data entry is eliminated. The result allows appraisers to cut the time required to aggregate data, conduct baseline analyses, and increase time spent actually assessing value.

Accurate appraisals improve the likelihood of valuations aligning with the collateral assessment used in the upfront borrower engagement. Accurate collateral underwriting means less rework and a better client experience at lower cost to the lender, resulting in reduced prospect leakage, more loans, and a bigger bottom line.

The future of lending is about speed driven by analytics and new technology. Consumers have been trained by other industries to expect speed, accuracy, and the best offer. Mortgage lenders and consumers stand to benefit from the industry shift to on-demand accurate data available through the entire lending experience.

Source: HouseCanary



About Author: Jeremy Sicklick

Jeremy Sicklick is the Co-Founder and CEO at HouseCanary, where he drives the company's vision, strategy, and growth to identify interesting and unique ways for leading corporations, investors, and individual homeowners to use data to maximize their value in real estate. Sicklick was previously a Partner & Managing Director at The Boston Consulting Group, where he helped leading real estate investors deploy billions in capital. In looking for ways to better predict real estate prices he began collaborating with Chris and Key in 2013. Sicklick received his MBA from The Wharton School and his B.S. in Accounting from the University of Southern California with highest honors.

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