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Shrinking profit margins, resource constraints, and growing revenue goals are forcing lenders to rethink their mortgage application process. If you’re reading this, you’ve likely been considering (or doing) ways to automate some or all your application process. Some parts have been easier than others, (e.g., credit scoring) but others, such as income assessment, have been more elusive. But, if you are still looking for reasons to automate your income assessment, here are some compelling reasons to jump on it right away!
Do more work with less
In a recent industry survey, 87% of executives said that “ technology helped employees grow and accept new positions and responsibilities within their respective firm.” Income calculation tools, such as LoanBeam Tax and Wage, automate the laborious and error-prone process of extracting, imputing, and calculating income data, simplifying risk decisioning and lightening operational burden. The reduction of manual effort through technology provides the operational efficiency to do more deals with less and affords staff the time to focus their skills on the more complex deals. Taking it a step further , the standardization of income automation technologies provides important regulatory and compliance protections that you can’t get with human decisioning alone. Technology can complement any lenders’ workflow and minimize manual tasks. But more importantly, even if lenders can’t go fully digital, automation can still reduce the paperwork and costs involved in determining whether a borrower qualifies for a mortgage.
Convert variable payroll costs into predictable expenses
According to the MBA’s 2021 Annual Mortgage Bankers Performance Report, production expenses have risen to their highest level since 2008. A major contributor to the rising origination costs are the rising cost of personnel, accounting for more than $700 per loan! But, the statistics no one ever talks about are the losses not found on a spreadsheet i.e., non-productive hours, vacation time, sick time, etc. These hours cost you greatly, but don’t’ always make their way to an individual loan. Instead, they are treated as just a “cost of doing business.” Which is why automation makes sense. Automating operational tasks, such as income assessment so can convert variable payroll costs into a predictably fixed per/loan expenses. Everyone knows that technology is more scalable than human resources, so automation can help optimize the number of staff needed to qualify a mortgage – all while accounting for loan volume volatility in the process. Better to shift the balance to a fixed cost per loan file that is predictable, rather than an $80 an hour resource that is sitting idle.
Work around the clock
Everything is at our fingertips these days (literally). From takeout to a new house, consumers can get everything with just a few taps on their cell phone. A behavior which was exacerbated by the COVID pandemic. In fact, a recent consumer survey revealed that approximately 61% of borrowers originated their mortgage process using an online application. To capture this new tech-savvy audience, lenders must design application tools which make it easy to get an application started, regardless of operating hours. Whether it’s on a Saturday morning at child’s soccer match, late night at the office, or from a lounge chair on a tropical island in another time zone, when the opportunity strikes, your system needs to be ready. That’s why it’s important to integrate automated income calculation tools with other digital technologies to move the process along at any hour of the day.
Safeguard against unconscious bias
A recent study published in the Journal of Financial Economics argued that FinTech and it’s machine learning technology can improve of prevent implicate bias present in consumer lending. Unlike people, who are prone to bias (conscious or unconscious), technology focuses only on the merits of an application (e.g., is the borrower’s credit score satisfactory?). Automation tools – especially those used in income assessment – offer a methodically consistent risk assessment which ensures every deal is judged purely on its financial merits.
Reduce repurchase risk
According to a STRATMOR survey, ~25% of loans sent to aggregators were not immediately purchased because of “issues.” One way to improve loan quality is to standardize the validation and calculation of income. This is especially true given Freddie Mac cited income calculated incorrectly was the number one defect during the session “Approaches to Ensuring Loan Quality to Minimize Purchase Risk,” at the 2021 MBA RMQA Forum. “ Not only do solutions like LoanBeam Tax and LoanBeam Transcripts automate income assessment but they also offer representations and warranty relief that’s certified by the GSEs, something no other product can match to reduce purchase risk.
To summarize, application automation technology – especially those related to income – offer many operational, financial, and regulatory benefits. They offer lenders a simpler and safer way to process applications, while simultaneously reducing overhead and improving client engagement.
If these reasons have piqued your interest in learning more about LoanLogics’ suite of income calculation solutions, you can learn more on our website or complete our Product Introduction form and a LoanBeam product expert will get in touch.
