Getting a mortgage has traditionally been a long and challenging process. Customers have had to dig up paystubs and bank statements to hand off to loan officers. Loan officers and processors then manually uploaded the paperwork into the lender’s database for review and then hope for the best. When a borrower sent an incomplete document or a processor made an error in data transposition, it could delay the loan approval process by days, even weeks.
But in today’s climate of rising interest rates and low inventory, those long wait times have gone from just annoying to potentially costing house hunters the chance to close on the homes they desire. For example, serious buyers should arrive at each showing with a pre-approval letter in hand, in order to be competitive. Even those just browsing will need to move quickly if the right house comes up. And those refinancing—yes, even as rates are climbing, there are borrowers who could save by refinancing—must act fast to nail the lower rate in place.
These inefficiencies and delays were troubling to Guaranteed Rate, who, as the second-largest retail lender in the U.S., has been helping to make the mortgage process easier since 2000.
Two years ago the company decided to look into taking its underwriting process digital. There was a lot on the line. The mortgage industry sets a high bar for the financial data used to underwrite loans, requiring documents from verified institutions. What’s more, borrowers share some of their most sensitive financial information to secure a loan. Guaranteed Rate was committed to protecting the consumer’s privacy and financial data.
What Guaranteed Rate came up with is a platform that enables customers to go online or use a mobile app to grant permission for the lender via a third-party service to access their financial and payroll accounts. That lets the lender quickly and accurately verify assets, income and employment.
If everything checks out, the lender can give the borrower a quick thumbs-up. In some cases, that’s all the data the lender needs for the mortgage to go forward. This digital verification process can cut up to eight days off the underwriting process. “From an efficiency standpoint, our underwriters don’t have to manually verify income and assets for every loan, so we can scale up,” says Brad Lando, Senior Vice President of Strategic Development, Guaranteed Rate.
The company protects borrowers’ sensitive data by using Mastercard’s open banking platform. When a borrower grants a lender access to their data, Mastercard’s technology issues a token. The token allows the lender to see the data, but never house it. Nor does the lender receive login credentials. The risk of those credentials being hacked during the mortgage process is reduced, and the customer gets a better experience.
Another advantage is that borrowers can grant ongoing account access for prolonged periods of time, such as 60 days. That means the lender can refresh the data as needed without having to go back and ask for renewed permission to track down more documents, alleviating the burden on the consumer. “It’s cut down on risk, in addition to bringing a better customer experience,” says Lando.
Loan officers and processors have been quick to adapt to this digital-first method. The automated verification system allows them to sign off faster on more straightforward loans, which frees them up to focus on the more complicated ones.
And while there’s still some trepidation among consumers, they’re also starting to see the benefits. When offered a choice to manually upload their documents or grant permission for the lender to pull their information, 83% of borrowers who chose the digital path said their loan processing time was shorter than they expected it to be, or that it met their expectations.
As digital verification becomes more prevalent, the mortgage process will speed up, from application to close. And that means more people can look forward to a smoother process on the way to landing in the homes they want to live in.