The general consensus regarding mortgage banking is that we allowed things to get too easy. The process became so streamlined that verification went by the wayside, that fogging a mirror could get you approved for a loan, and that property was assumed to be worth whatever someone was willing to pay for it. Oops.
Enter the backlash. If we aren’t careful, those who know little about the industry (but happen to run the country) would set us back into the 80s or worse. Think of how expensive it would be to originate a loan if you had to call every employer, bank, and creditor. Picture underwriters looking through all the paperwork by hand and making a decision. Then imagine dealing with the blowback when a tired underwriter makes a different decision on Monday than she would have on Friday — nothing to do with Fair Lending violation and everything to do with simply being human.
I can see a better way. Technology has injected a great deal of efficiency into mortgage lending — what about using it to prevent fraud while making loan approvals even faster? We already have automated real estate valuation (I know it has its limitations but improving it seems pretty doable). When I do my taxes with Turbotax it can access my W-2 information through my company’s payroll service — I don’t even have to type it in. The United States Bureau of Labor statistics provides exstensive income data for thousands of occupations in various regions of the country. Get the depository institutions on board for verifying assets and we should be good to go.
Imagine customers being able to complete a short form and having their income, home value, assets, and liabilities populate the application automatically, already verified, and getting an approval and rate guaranteed in a matter of minutes. Even stated income borrowers can be checked — lenders could automatically run applicants’ occupations against the BLS data and make sure that the income is within a normal range for that occupation. The vast majority of people are comfortable with shopping for and even applying for mortgages online according to Realty Times. With a little more work the system could become even more efficient than it is and lenders / investors could find themselves better protected too. Of course people won’t all fit the neat little box but by freeing up originators from routine data collection and verification those who need it can get better service. And minimizing losses due to fraud could keep rates down for everyone.
Pipe dream? Maybe, but back when the CEO’s biggest status symbol was that ginormous car phone did we really think that cells would get small enough to hang on a keychain and more powerful than the PCs we used back then? And that every 12-years-old would have one?
“Imagine customers being able to complete a short form and having their income, home value, assets, and liabilities populate the application automatically, already verified, and getting an approval and rate guaranteed in a matter of minutes.” for a mortgage in minutes.
Gina, I can imagine it!
I like the idea of streamlining things, but I think there are obstacles that would be extremely difficult to overcome … checking income against what is normal, for example. Labor statistics are notoriously wrong. I was reading some statistics on what doctors make the other day, and they were ridiculously low. These numbers showed the highest paid doctors making only $240k per year. A lot of doctors make many times that with many of them being self-employed. There are plenty of doctors who make over $1M annually. I think it’s virtually impossible to collect accurate labor data.
Agreed. Just as it is difficult to get accurate home valuations online. I just proposed that as a first line of defense only for stated income loans — if you say you’re a doctor and that you make 240k it should fly, If you say that you’re freelancing as a graphic designer and you make 240k it should throw a red flag and trigger a request for more information. That’s all, it could mean anything from requiring a form 4506, a letter of explanation from the borrower or his accountant, to requiring full doc if the discrepency seems very large. Just an extra check, a CYA not a complete decision maker.
I guess my point is that the statistics show the highest paid doctor as making $240k whereas it’s common to make $500k, for example. The statistics — simply because they are wrong — wouldn’t back up a doctor’s income being $500k even though it’s common. I think an automated system like this would not apply to so many folks that we would, in effect, be right back where we are now.
Quote: “Of course people won’t all fit the neat little box but by freeing up originators from routine data collection and verification those who need it can get better service. And minimizing losses due to fraud could keep rates down for everyone.”
Of course no system is perfect . And first iterations always need improvement. But I’m talking about a fundamental shift in thinking that could kill off fraud, restore faith in the system, and provide better service — not an overnight thing but I think worth pursuing.
Hurray, lets automate everything and sacrifice all our privacy for an easy mortgage application.
If u shop online or own a house u already don’t have any — don’t kid yourself.
Agreed. Just as it is difficult to get accurate home valuations online. I just proposed that as a first line of defense only for stated income loans — if you say you're a doctor and that you make 240k it should fly, If you say that you're freelancing as a graphic designer and you make 240k it should throw a red flag and trigger a request for more information. That's all, it could mean anything from requiring a form 4506, a letter of explanation from the borrower or his accountant, to requiring full doc if the discrepency seems very large. Just an extra check, a CYA not a complete decision maker.