In an era when writing checks at the grocery store is an anomaly and having cash available is something people have to plan ahead for, many borrowers are jumping at the chance for a more digital mortgage process. When Fannie Mae rolled out Day 1 Certainty™ just over a year ago, it brought with it an industry-changing standard for a more efficient and certain loan origination process, plus freedom from paper-based processes with digital validation of income, assets, and employment.
A couple of decades ago, applying for a mortgage meant gathering up paper paystubs and bank statements and delivering them to the lender by hand. Even today, most borrowers are still scanning hard copies or collecting electronic documents and emailing them to their loan officers or uploading them to web portals. The Desktop Underwriter® (DU®) validation service is making all of that obsolete for many loan applications. Instead, borrowers can consent to digital validation, avoiding the task of amassing either electronic or paper documents, and speeding up the approval process.
“This is a win-win,” said one Fannie Mae mortgage lender. “The customer’s experience is improved through reduced documentation and accelerated closing dates while we receive reps & warrant [relief] and operational efficiencies.”
The user experience is now not unlike the online financial tasks that have become routine for most of us: banking, paying bills, filing our taxes, sending money to a friend or relative, and budgeting.
Whether you’re just starting to think about digital data validation or already using it every day, here are five DU validation service tips and tricks to make sure that both you and your borrowers are getting the maximum benefits of digital validation:
1. Know the benefits; share the benefits.
You know that digital data validation supports rapid loan closing, reduces non-data documentation, minimizes the back-and-forth between the processor and the underwriter, and may even support shorter rate lock periods – and you know how those improvements benefit you and your loan officers. But make sure your borrowers know how digital validation can benefit them, too. Loans with income and/or employment validation close 13 percent faster than loans without validation.
2. Figure out your process.
To make the most of digital validation of borrower data, you’ll need to determine where it fits in your origination process. Many lenders are obtaining borrower consent and ordering validation services very early in the loan application process: if employment, income, and/or assets can be digitally validated, your borrower won’t need to submit or upload non-required documents.
“We are seeing an increase in customer satisfaction driven primarily by ease of use, less paperwork needs, and accelerated turn times,” said one Fannie Mae mortgage lender.
The best way to figure out what works for you might be to start small. For example, try the process out with online applicants because they are comfortable with technology, or maybe with existing banking customers only. See what works and what doesn’t, and make changes to make the process work best for you and your borrowers.
3. Look to your validation vendors for resources to help educate borrowers.
Remember that you’re working with third-party service providers to validate the borrower’s information. Work with your vendors to see what information they can provide to help educate your borrowers about the digital validation process.
4. Make sure your loan officers are in the know.
Adopting digital validation will only help you and your borrowers if your loan officers are on board and ready to roll. Empower them to succeed with best practices, tips and tricks, and rules of the road – and create a feedback loop so they can help you analyze what’s working and what needs attention.
5. Be prepared to talk the borrower through the process.
First, set proper expectations. Your loan officers should be able to help borrowers understand the value of digital validation, what they’re consenting to, and what to expect. For example, asset validation involves providing personal login information for digital access to financial accounts. The process is similar to online banking, but if the borrower is unprepared it may disrupt the process and delay – instead of speed up – the loan process.
Someday soon, supporting loan applications with paper or uploaded documents will be a thing of the past. Use these best practices to be one of the first in the industry to adapt to digital data validation and get ahead of your competition by offering a better borrower experience.
Visit Fannie Mae's website for more information and resources.
TMC - Chief Operating Officer