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Lending, Open Banking

How lenders can harness the digital revolution

By Nick Thomas, Executive VP

At the end of last year, The Financial Brand did a survey to determine the top 10 trends for retail banking in 2017. The number one concern for industry leaders and experts was reducing friction from the customer journey (54%), the next was using big data, AI, advanced analytics and cognitive computing (53%)…and one of our favorites came in at number 4, open APIs (32%).   Why is this important?  Because it speaks to the ongoing digitization of banking processes.  And as far as mortgage lenders are concerned, the big question is how can they harness technology to embrace digital lending? Digitizing the lending process, not only speeds it up, but also provides better insights, increased efficiency, decreases fraud, and it can actually create a larger credit pool,

First step – verification solutions

One of the most significant opportunities is digitizing the verification process. The first two solutions which dramatically improve the loan origination process are Verification of Income (VoI) and Verification of Assets (VoA). Both of these solutions utilize borrower-permissioned financial transaction data. VoI allows lenders to confirm a borrower’s income for up to two years.  When done right, it utilizes data intelligence to identify, track and extract sources of income from an account’s data. VoA offers similar functionality for the borrower’s assets by accessing checking, savings, retirement and brokerage account information to create an accurate and real-time picture of assets.

Benefits to lenders

We explored the ways our VoA solution enhances the borrower’s experience of applying for a mortgage in this post. So here’s a closer look at how both solutions improve the process of originating loans for lenders.

Increase efficiency

Manually inputting and verifying documents is time-consuming and labor-intensive. Automating these activities increases the speed of loan origination by up to eight days in the case of one mortgage provider. Lenders also make better decisions, as they have access to deeper and more accurate data. Improving speed and accuracy frees up loan capital which can be deployed elsewhere. Then there’s the regulatory regime to take into account. With the requirements imposed by the Home Mortgage Disclosure Act set to become tougher in 2018, VoI and VoA solutions can help lenders remain compliant by automating the reporting process.

Reduce costs

Becoming more efficient doesn’t only save time, it saves money too. This is a serious consideration for lenders, as the cost of loan origination is rising. According to the Mortgage Bankers Association, it jumped from $5,779 in 2013 to $7,845 in 2016. Meanwhile, the net income per loan dropped from $1,772 to $8252. So lenders can also use VoI and VoA solutions to cut costs and boost their bottom line.

Lower the risk of fraud

One of the biggest problems with the manual process, where a borrower provides paper (or .pdf, etc) copies of documents to support a loan application, is that doctoring them is easy. According to CoreLogic’s latest Mortgage Fraud Trends Report, 12,718 mortgage applications were considered fraudulent in the second quarter of 2016 alone and the risk of income fraud rose by 12.5% from a year earlier. Lenders can combat fraud by using VoI and VoA solutions, as these pull data straight from the financial institution.

If you’d like to discuss how Finicity’s solutions can help your company cut costs and streamline the loan origination process, please let us know.