The combination of low affordability and limited inventory is a major obstacle facing the housing industry. There are signs of improvement, with housing inventory levels reaching a four-month supply at the end of March, representing a 19.8% increase from the same month a year ago, according to the National Association of Realtors.
A balanced market, however, is typically characterized by a five- or six-month supply of housing. Buyers are still battling for available inventory while bracing for further uncertainty caused by fluctuating interest rates and ongoing economic disruptions. Concerns surrounding affordability and inventory are being exacerbated by recent labor market volatility, along with growing consumer demand for faster mortgage approvals. .
Now more than ever, lenders advance solutions that streamline the mortgage process from origination to closing — all while meeting homebuyers’ evolving expectations. Because mortgage rates are shifting rapidly, as shown by mid-April’s near-record jump from 6.62% to 6.83% on the 30-year fixed rate, lenders must act fast. Locking clients in could help them get a rate before it changes.
Burdensome steps
During periods of uncertainty, reducing borrower friction should be a top priority. Verification of income and employment (VOIE), when handled manually, can be burdensome for borrowers. Many lenders still rely on outdated processes that place unnecessary stress on the borrower, such as requesting physical paystubs or W-2s.
These physical processes are time-consuming and tedious, resulting in delays that stall progress at the time of application and before closing. Ultimately, borrowers will look to lenders that offer easier ways of doing business.
Additionally, relying on manual processes exposes lenders to greater risk, as the chance of falsified or incorrect documentation increases along with the likelihood of an applicant’s personal information falling into the wrong hands. To mitigate potential risks, lenders can equip themselves with solutions that offer greater levels of visibility into a consumer’s financial health while streamlining the mortgage underwriting process. With the right tools in place, lenders can help open the doors to homeownership, even during uncertain times.
Clear solution
So, how can lenders provide a more efficient and reliable experience that meets consumer expectations in a risk-responsible way? Advanced technologies like automated VOIE offer a clear solution. This approach not only simplifies the borrower’s experience but also enables lenders to conduct thorough and timely assessments of a borrower’s financial situation.
By leveraging instant verifications, lenders gain real-time access to verified income data, allowing for more confident evaluation of debt-to-income (DTI) ratios during underwriting. When seeking third-party verification solutions, lenders can consider the following capabilities:
- Early access to income and employment insights, strengthening decision-making and risk assessment.
- The ability to manage verification expenses and predict closing costs more effectively.
- Faster segmentation of borrowers to streamline loan processing.
- A focus on prioritizing the borrower’s needs earlier in the process, while improving confidence in DTI ratio calculations.
- A reduction in documentation requests, creating a smoother, frictionless path for the applicant.
Real-time verification also supports compliance with the government- sponsored enterprises. Lenders have the flexibility to recheck a borrower’s employment status at various stages of the loan process, helping to identify any sudden changes that might impact loan eligibility.
By embedding automated VOIE, lenders can access real-time, comprehensive insights beyond credit scores alone. That can empower them to make smarter, more confident lending decisions in an unpredictable market.
Alternative data
Traditional credit reports have long been the standard for evaluating credit-worthiness, but in today’s hyper-competitive and evolving lending environment, they may not tell the full story. Many consumers — especially those with limited or non-traditional credit histories — are underserved by conventional credit scoring models. This is where alternative data can play a transformative role.
Alternative data includes financial indicators not typically found in traditional credit reports, such as payment histories for utility bills, rent, cell phone service and pay television. These data points offer meaningful insight into a consumer’s financial reliability. Given that most U.S. adults have at least one utility or cell phone bill in their name, these sources can be particularly valuable in assessing the creditworthiness of those with thin or no credit files.
By incorporating alternative data into the verification process, lenders can expand access to credit while still managing risk effectively. Pairing VOIE capabilities with alternative data from the National Consumer Telecom & Utilities Exchange allows lenders to gain a more complete picture of an applicant’s financial behavior, enabling them to identify qualified borrowers who might otherwise be overlooked. This approach supports more inclusive lending decisions without sacrificing accuracy or compliance.
The lending landscape is shifting, and the use of alternative data and instant verification is gaining momentum across the industry. For lenders and the originators who work with them, embracing these expanded data sets can enhance decision-making, improve borrower experience and ultimately contribute to a more equitable housing market.
