The following post is part of a series of blogs written by MeridianLink® Partners who will be attending MeridianLink LIVE! To learn more about instant verification in lending and the event, click here.
Verifying income and employment information is such an integral part of mortgage lending that lenders can easily overlook it as an area ripe for improvement. Dramatic recent changes in the verification marketplace are bringing new options to a process long dominated by a short list of solutions. By stepping back and reconsidering exactly what they want from their income and employment verification methods, lenders may find new tools that yield significant business benefits, including more transparent pricing and greater operational efficiencies.
In September 2024, Arizent Research, parent company of National Mortgage News, surveyed mortgage industry professionals from a mix of nonbank originators, servicers, banks, and credit unions. The research was conducted to better understand income and employment verification methods used during the loan approval process, particularly key factors driving adoption, as well as pain points and preferred methods. The results suggest that addressing common pain points lenders experience when they verify applicants’ income and employment data could improve the consumer experience and generate cost efficiencies throughout the loan production market cycle.
Instant verification offers benefits for consumers and lenders alike
Consumers regularly experience low-friction interactions across industries. Lenders recognize the need to meet these expectations, especially early in the consumer journey. To stand out, 39% of lenders aim for minimal friction, 30% offer white-glove service, 19% focus on fast closings, 6% on low-cost closings, and 5% on minimal work per loan.
Income and employment verification can be cumbersome, with manual methods taking 30 minutes to several days and requiring multiple calls. This friction affects both lenders and consumers, who must gather and provide extensive documentation.
Instant verification offers faster results with less friction, relying on existing consumer data and reducing documentation burdens. These processes also limit lender liability, as most products certify data to comply with federal agency requirements, protecting lenders from loan buybacks due to inaccurate information.
What lenders want from the verification process
Friction is not the only pain point for lenders. They seek verification methods that address multiple priorities. Having the right data is crucial, but how it is delivered matters too. Lenders need actionable data quickly and smoothly.
Cost is also important and can vary widely based on a provider’s pricing policies. Multiple employment records can inflate costs when charged per record. Lenders often pay for partial or low-quality data they don’t need. Nonbank lenders aim to maximize value by only paying for necessary data.
Improving instant verification’s value proposition
As attractive as instant verification products are from a consumer experience point of view, they often fail to meet lenders’ top priorities. Some of the most common pain points identified by respondents also play a key role in deciding which verification method to use.
Data completeness and accuracy are key pain points for lenders, but they’re typically a wash as far as decision-making is concerned. Most verification providers base their offerings on the same base dataset. Given that common foundation, verification providers have two main routes available to make their offerings more valuable: how they present the data and what they charge for it.
Those efforts are important because speed and cost are common pain points. One lender specifically cites “Time and cost of doing the work manually vs. an automated solution” as a key challenge.
Survey respondents indicate that Experian Verify™ meets or exceeds their expectations when it comes to addressing these pain points, as well as a variety of other solution attributes.
Experian Verify users rate its solution highly across a variety of areas
Attributes related to the cost of the service are particularly notable here. Offering the lowest possible cost for receiving data, charging only for the data you need, ensuring the lowest likelihood that lenders will need other methods to complete the verification process and limiting the amount of manual work required all speak directly to cost efficiencies for the lender.
The importance of efficiency throughout market cycles
Cost efficiencies become crucial as lenders scale operations. Increased loan production raises expenses, especially with resource-intensive processes like manual verification. Scaling requires more staff, particularly during refinance booms, leading to potential workforce reductions during slower periods and subsequent rehiring needs. This can constrain growth and add hidden costs. Instant verification products, with lower costs and resource needs, allow lenders to adapt to market changes with less friction and without extensive hiring.
The industry is beginning to recognize that value at scale. More than half of larger organizations doing more than $1billion in origination volume (53%) are using Experian Verify.
