Bringing Automation To Asset Location And Verification

Contributors
Written by Ravi Loganathan
on March 16, 2016 No Comments
Categories : Blog View, Featured

BLOG VIEW: The mortgage industry continues to make significant strides toward innovation. Across the board, lenders and their various partners have automated several key processes in an effort to remain compliant, become more efficient, reduce costs and better serve the nation’s borrowers with a simpler, more convenient loan experience.

However, even with the industry’s collective progress, there are still critical functions relying on outdated, manual practices. For the home loan market, referred to by many as the backbone of this economy, falling behind in technology has become more than an issue of time and money – it has now escalated to matters of fraud prevention and borrower frustration.

Each year, 85% of the approximately 8.7 million mortgages originated in the U.S. are sold into the secondary market and securitized. This constant, high volume of underwriting activity begs for automation; however, modern practices and technology are largely missing from this process.

Instead, the loan market’s ongoing dependence on manual and paper-based methods for establishing home loans, such as qualified residential mortgages, make for a tedious, lengthy asset verification process, during which potential loan capital is tied up and revenue is lost. In addition to becoming notoriously time intensive, this creates a significant hindrance and headache for all parties involved, particularly the borrower.

It is well understood that fielding underwriting requests for assets, identity and income are of the utmost importance. Yet, relying on borrowers to submit documentation presents two issues. First, it puts a considerable burden on them to research and collect the correct information, leading to a poor customer experience. Second, requiring this of borrowers often prevents lenders from having complete confidence in the asset and identity data they receive and leaves them at a higher risk for fraud and financial misrepresentation.

In essence, the challenge has become cyclical. At the onset, the onus is placed on the borrower; then, responsibility transfers to the lenders, requiring them to use valuable resources to verify the data points provided. The burden then trickles down to the government-sponsored enterprises (GSEs) to aggregate the manual requests received from hundreds of disparate organizations.

Why does this archaic process and reliance on borrower-reported data persist? After all, the insight lenders and the GSEs need is not solely possessed by consumers – it is bank intelligence in its truest form. The key to closing loans faster and reducing the fraud risk that accompanies traditional practices lies in lenders’ ability to access this bank data. They must begin leaning on a combination of technology and contributed, cross-bank data to truly promote change. Established, collaborative efforts of banks to share deposit data are already helping institutions of all sizes better understand borrower identity and mitigate fraud from misrepresentation. The same methodology should be applied to data verification for home loans.

In an environment made increasingly competitive by emerging non-bank lenders, the ability to gain data directly from borrowers’ financial institutions accomplishes multiple objectives. It virtually eliminates the need for borrowers to locate and provide bank statements, improving their impression of the process, which currently tends to make them feel as though they have stepped back in time. Additionally, automated, systematic processes for managing quality control requests and validating liquid asset information ensures lenders are obtaining accurate data, and quickly.

The mortgage industry is now largely electronic but still has room for improvement. Expediting and simplifying how we collectively approach identity and asset verification can bring on change that borrowers and lenders’ bottom lines will each appreciate.

Ravi Loganathan is chief market development officer of regulatory solutions for Early Warning, a provider of automated asset verification solutions.

Register here to receive our Latest Headlines email newsletter

Leave a Comment