With many Verification of Income and Employment (VOIE) vendors to choose from, how do you know which solution is best for you?
The following post is part of a series of blogs written by MeridianLink Partners who will be attending the MeridianLink LIVE! User Forum in May 2022. To learn more about the event, click here.
A Picture of the Current Mortgage Landscape
Professionals from every reach of the mortgage industry enjoyed a soaring market over the past few years. But interest rates have since climbed to heights we haven’t seen since 2009, shrinking the pool of eligible buyers and forcing lenders to cut operational costs wherever possible. For many lending institutions, this has come in the form of layoffs.
The 2020-2021 boom also meant lenders were happy to ignore operational inefficiencies that have been mounting for years. To wit, the average cost to originate a mortgage has increased for six consecutive quarters, reaching almost $9,500 per loan by the end of 2021.
There are multiple reasons for the rise in origination costs. One is increased regulatory scrutiny of governing institutions. Another was the surge in demand for skilled professionals brought about by high mortgage volumes due to low-interest rates during the pandemic – a trend that quickly reversed. Both of these factors required lenders to hire more personnel, adding to the cost of loan origination.
A smarter, less short-sighted approach that lenders could’ve taken – and still have the opportunity to take – would've been to invest in tech and automation that streamline the origination process to close loans more effectively.
Traditional Lenders Need To Set Long-Term Goals
During this downturn, it is important for traditional lenders to retool their operations to become more efficient and appeal to a new generation of borrowers. But there are many digital lending solutions on the market, and given the economic strains put on lenders at this time, many might be hung up on adopting expensive new tech.
Lenders may therefore be tempted toward solutions that appear cost-effective but only address specific pain points in the lending cycle. These solutions can actually add to lenders’ operational costs and leave them vulnerable to fraud.
A recent Forbes article examines the increase in fraud as a result of the mortgage industry’s digital transformation, but also makes a case for technology’s role in the future of the industry. The takeaway from this data is that lending technology must be seen as a long-term investment that not only reduces paper-laden processes, but also ensures data accuracy and thoroughly vets borrowers’ income and employment to enhance decision-making.
What The Perfect VOIE Solution Should Do
As lenders transition to digital processes, it is more important than ever to vet their applicants. So what does the perfect solution look like?
The perfect VOIE solution should:
1. Have maximum coverage of employable people with the right vendors
It’s not about having the most vendors, but the right combination that provides the most enriched data at the best price.
2. Be embedded into the Point-of-Sale (POS) where the transaction occurs
Rather than having separate software for each step of the origination process, which can quickly add to operational costs, it is more efficient to have a complete end-to-end solution.
3. Be available inside the Loan Origination System (LOS) as a post-origination tool
Again, these digital solutions should integrate seamlessly to provide an all-in-one tool.
4. Deliver maximum chances of Fannie Mae Day 1 Certainty (D1C)
Using the right tools gives you the best chance of D1C, which can significantly speed up the lending cycle.
5. Deliver the maximum dataset required to completely satisfy the Form 1005
Satisfying the Form 1005 is a necessary step in compliance. The more you can automate this step, the less money you need to spend on trained personnel.
6. Configure easily to strike the right balance of strategy, cost and data
Every lending institution has its own “secret sauce” when it comes to operational processes, so software can’t be a one-size-fits-all solution. It should configure to your requirements without the need for expert coders.
The BeSmartee Methodology
BeSmartee uses a three-tier waterfall methodology to ensure the accuracy.
Waterfall 1: Instantaneous
BeSmartee’s VOIE solution uses keyed-in application information from the borrower to automatically retrieve income and employment data.
The vendors available in the first “instantaneous” waterfall are Truework, EmpInfo and The Work Number. You can configure the vendors in any order you’d like, as well as pick and choose which vendors you want based on cost.
If a borrower’s employment and income information can’t be found in these sources, BeSmartee will move to waterfall two…
Waterfall 2: Credentialed
In this step, borrowers will be prompted to select their company name and provide credentials to retrieve income and employment data.
If you can’t find the borrower's employment and income information through these sources, BeSmartee will move on to waterfall three…
Waterfall 3: Manual
At this stage, borrowers will be prompted to provide income and employment documentation that is unique to your requirements.
As stated above, you can choose to configure waterfall steps and vendors in any order to strike the right balance between cost and data coverage.
The Value of a Robust VOIE Solution
As a lender, you operate under a microscope of regulatory scrutiny. Rather than spending money on trained professionals, the demand of whom will ebb and flow with the ups and downs of the market, look into automating your processes with the right digital solutions.
VOIE should be a major component of any end-to-end digital mortgage POS. Automating the verification process with the most efficient tools on the market can thoroughly vet borrowers’ creditworthiness to reduce fraud and ensure compliance. It can also significantly reduce the time it takes to close loans, maximizing the revenue you can generate from the current pool of eligible borrowers.
Interested in learning more about how you can maximize your operational efficiency? Contact BeSmartee to speak with a representative.