Faster Payments

How Responsibly Accelerated Mortgage Underwriting Can Save Consumers, Lenders Money

When financing a first home, a complicated mortgage process can confuse buyers, and draw out loan underwriting timelines — costing time and money. Yet, lenders often lack the information they need to close loans sooner, and reduce costs for borrowers, Eric Bloomquist, chief product officer of finance management platform FinLocker, tells PYMNTS. In the latest Faster Payments Tracker, he explains how data aggregation, storage and validation tools can safely accelerate mortgage underwriting.

Homeownership has long symbolized financial success and stability, but a first purchase can be notoriously tricky.

Consumers often find the experience to be dauntingly complex and may struggle to understand the full scope of payment obligations. Providing consumers with sufficient supports can address these potential obstacles and speed up loan underwriting timelines, benefiting both borrowers and lenders.

Consumers approaching significant financial undertakings, such as applying for mortgages, are often cautious, yet they still expect their loans to close quickly. Excessive back and forth between consumers and lenders can lengthen the time loans take to close. Borrowers unfamiliar with lenders’ due diligence procedures may not understand why certain financial details are requested and thus may be reluctant to provide them.

The good news is that FIs and solution providers are exploring ways to both simplify and accelerate the process.

PYMNTS recently spoke with Eric Bloomquist, chief product officer of loan-focused personal finance tool FinLocker, and Jamie Rhodes, the company’s product owner, to discuss how the mortgage lending process can be streamlined while safe underwriting practices are maintained.

Bloomquist explained measures that safely and securely accelerate processes protect both borrowers and lenders, as shorter timelines frequently result in better rates when lenders sell loans on the secondary market, allowing FIs to pass lower interest rates on to borrowers.

“As it relate[s] to mortgage lending, time is money,” Bloomquist said. “If a loan takes 90 days to close, that’s a tremendous cost to mortgage lenders. [It’s also] costly to the borrower… If a loan can be closed in less than 45 days … the borrower will receive a better rate and lower cost overall.”

Informed Consumers are Responsive, Receptive

FinLocker provides resources like financial tools and educational supports to familiarize consumers with home mortgages before they interact with lenders. The materials explain the full scope of costs — such as homeowners insurance and property taxes on top of the loan principals and interest that consumers often expect — as well as the specific information applicants need to provide.

Would-be homebuyers who read up ahead of time are often better prepared to take advantage of loan opportunities and avoid lengthy back-and-forths with lenders.

“All the aspects of [FinLocker’s product] work to help the consumer be more informed about one of the most complex financial transactions that they’ll encounter in their lifetime,” Rhodes said. “[Then,] when they do get that call from their loan officers or processors saying, ‘Hey, I need this,’ or ‘I need to understand this,’ the consumers are not as caught off guard, and they’re more cooperative. They’re expecting these kinds of calls and [conversations] from their lenders.”

Additional customer supports, such as credit monitoring and down payment assistance information, can also help consumers assess available opportunities and understand their readiness.

Saving Data to Save Time and Money

Consumers who feel they are well-informed about home mortgages are the best prepared to start their loan applications. Bloomquist and Rhodes said they believe businesses can assist by giving customers access to secure financial information storage products that ensure applicants have their personal details — such as tax returns, pay stubs and asset information — ready to supply.

The FinLocker service allows them to quickly and electronically provide information to their lenders, who can then bypass error-prone manual data entry processes.

FinLocker bolsters this service by leveraging AllData Aggregation, a data aggregation and verification service from Fiserv that draws from 18,000 sources to provide lenders with comprehensive information about customers’ financial situations. Consumers must give approval to have these details sent, which helps lending FIs quickly assess potential borrowers and determine whether to offer loans. The pre-verified data spares time.

“One fraud scheme [in the space] is to alter or manufacture bank statements,” Bloomquist said, explaining that the FinLocker tool mitigates that threat because “[the data is] untampered, straight from the source. It can’t be misrepresented.”

Strategies to hasten consumers’ loan applications and lenders’ data reception can shorten loan timelines and lock in favorable rates. Most FIs sell their loans on the secondary market to Fannie Mae and Freddie Mac, after all, both of which offer better prices for loans that close sooner, Bloomquist said.

These two government-sponsored entities partially base their offer prices on the current financial conditions, whose high rate of change make the institutions likely to offer higher prices for quickly closing loans. Both manage interest rate fluctuation risks on loans that take longer to close by hedging and offering lower prices to lenders for such loans, Bloomquist and Rhodes explained.

Home purchasing is a milestone for many consumers, but the mortgage experience can be daunting. Organizations working to alleviate those pains need to ensure they can boost underwriting speed while carefully protecting consumers’ and FIs’ safety. Companies like FinLocker that offer consumer education supports and reliable data solutions help to streamline the home buying process, making it smoother and safer.

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