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Late 2021 LoanLogics, a leader in loan quality technology, acquired LoanBeam. This was a natural acquisition for LoanLogics as they look to expand their technology platform to include income calculation. And for LoanBeam, it made sense to align itself with one of the mortgage industries smartest document classification platforms, improving overall turn-time and quality of our output.
As the Head of Product for LoanBeam, I couldn’t be more excited about what lies ahead as for the combined company as our mutual technologies come together. And I thought I’d take the opportunity to highlight the reasons lenders should take note of these tools in the year ahead. I hope this strikes a chord with the b-logics audience and helps you get familiarized with this topic.
First, the mortgage market is expected to feel a pinch.
Industry analysts, such as the Mortgage Bankers Association (MBA), suggest that the strong refi market that helped produce record high volume in 2020 and 2021 will cool off as interest rates rise and the market meets its saturation point. Suggesting that the purchase market will overtake mortgage lending again in 2022. These loans are more complex to underwrite, are more susceptible to fraud, and drive greater risk for lenders. Coupled with Underwriters working at capacity and new hires being difficult to come by, this creates significant production hurdles, making it more difficult to complete loan files quickly and with accurate income calculations.
Along those same lines, competition this year will be fierce among lenders jockeying for business. Rate hikes, limited inventory, and competition between mortgage and cash buyers will have borrowers on edge — and pressing their lenders for loan pre-approval and rapid turn times to obtain a loan. The more loan officers can do up front to get the ball rolling on income calculation/validation, puts lenders in a better position to quickly qualify borrowers, improve their process flow efficiency, and beat the competition.
Second, the market opportunity for non-QM products is expected to expand.
Indications suggest that non-QM products will grow twofold in 2022. Supporting factors include;
- growth of gig workers in our economy, who have diverse, intermittent sources of income
- a vast number of underserved borrowers across the country that could benefit from homeownership
- GSEs tighten the credit profile on qualified loans
Given the market potential, lenders who add non-QM to their product mix can gain a first-mover advantage and capture new business. Leveraging standardized tools makes decision-making a more confident, consistent, and efficient process, even helping to control for bias.
Finally, I expect concerns around defects to compound in 2022.
According to recent Freddie Mac statistics shared at the 2021 RMQA conference, the number one deficiency they see is income calculated incorrectly. Getting it right up front, across any income source, will help guard against future re-purchase requests.
With all that in front of the industry, let me summarize how automated income tools can help.
Income calculators can synthesize analysis in seconds rather than hours, improving process flow. Underwriters can rely on confidence scoring features to discern whether a loan needs a more in-depth analysis. Automating income calculation also helps bridge the gap with new hires and reduces risk for the entire team. A tertiary benefit is faster time to close or at a minimum faster approval of borrowers for eligible loan products.
On the secondary marketing front, making loans more attractive and less risky in the eyes of the GSEs makes good business sense. Automation can turn tax documents into consumable data points that can be relied upon in both underwriting and sale. It’s also helpful that for self-employed borrowers provides GSE rep and warrant relief to lenders who adopt it.
When it comes to creating more process efficiencies that help lenders turn around loan files more quickly and reversing the income related defect trends prominent in the industry, automation innately reduces the chance for human errors and increases speed.
If you’d like to see how our automated income calculation tools can help you navigate these trends in 2022, join one of our weekly LoanBeam product demos by filling out this form.
