BLOG VIEW: At first glance, there has never been an easier time to get a loan. Financial institutions and lenders saturate the market with offers of low-cost credit – all promising quick approval.
For many consumers, however, it sounds too good to be true. Despite ads for near-instant credit decisions, the perception remains that it is simply flashy language to get them in the door and that the actual process of securing a car, home or business loan will be long and arduous. For potential clients without recent borrowing experience, such as homeowners who haven’t bought or refinanced in decades, memories of a 60-plus-day manual underwriting process might still be the fuel of nightmares.
With advances in technology, the promise of a more streamlined loan process isn’t just smoke and mirrors. Lenders can use today’s automated verification systems to provide near-instantaneous loan approval or denial decisions, saving a considerable amount of time for both the client and themselves.
As follows, there are two primary developments driving faster, easier processes for borrowers and lenders alike: direct-from-source data verification and consumer-ordered verification services:
- Direct-from-source data verification: During or after their application submission, consumers are able to access and pull in data directly from “trusted sources,” such as the institutions hosting their financial accounts (checking, savings, mortgage, retirement and investment), online tax platforms, or payroll providers.
- Consumer-ordered verification services: During the application process, consumers are able to initiate third-party verification services (e.g., employer verification services). Those findings can be delivered directly to the lender.
These new capabilities don’t just make life easier for consumers – they drive several benefits for lenders, as well, including the following:
- Faster approval decisions: Lenders can establish a high-integrity, verified debt-to-income ratio to inform credit approval on a real-time basis. This means potential borrowers can get a decision faster and lenders can process more applications.
- Smoother underwriting process: Automated underwriting captures consumer application information in a digital format up front, allowing immediate reconciliation of the consumer’s data against underwriting guidelines. Many potential conditions can be automatically removed based on information the consumer provides up front in the process. Other conditions can be quickly and automatically addressed, later in the process, by a consumer or another party.
- Higher-quality loans: Allowing consumers to bring in information from other online sources can improve the data quality used to make a decision. The data that is brought in from trusted sources can be stamped, which then travels with the loan file through its lifecycle, potentially into secondary markets.
- Automatic process documentation: Digitizing the interaction between the consumer, loan officer and third parties creates a fairly data-intensive audit log of all of the activities. This can save valuable time if any issues arise later in the process.
Automatic verification isn’t a magic bullet, of course – as with any automation, there remains some downsides. Any change to the conditions of the deal (such as down payment, adjustment or price, etc.) or the discovery of “forgotten” credit problems will require a completely new run of the verification system. Still, the inconvenience can be minor compared with the time required for a manual process.
As consumers and the industry continue to move to electronic, automated loan applications, including mobile applications, the need for trusted data and improved loan processing is as great as ever. New automated verification capabilities will lead to improved decision-making, faster approval times and, ultimately, greater client satisfaction.
Rajesh Bhat is CEO of Roostify, a Bay Area technology company focused on simplifying the mortgage and real estate experience. With 13 years of experience in management consulting, Bhat co-founded Roostify, which is backed by private investors, including Wells Fargo and USAA. A proven negotiator and technologist, Bhat previously led numerous Fortune 500 companies in IT, outsourcing deals ranging from $2 million to $1 billion in total contract value.