Ongoing economic uncertainty and affordability issues have kept many homebuyers and sellers sidelined for much of 2025, but the Federal Reserve’s decisions to cut interest rates by a total of 50 basis points at its September and October policy meetings could change that. Prior to the Fed’s announcements, investors had already begun to drive rates down, with 30-year fixed mortgage rates approaching 6%.
According to Fannie Mae’s Refinance Application-Level Index, the refinance count for the week ending Oct. 24 was up 14.8% from the previous week and 106.1% over the previous year. This may signal that consumers are finally seeing an opportunity to participate while rates remain relatively low.
Increased activity in the mortgage sector should be a wake-up call for lenders to improve efficiency and offset declining conversion rates. Lenders can start by assessing their current processes and identifying areas of improvement.
Manual processes have long been an obstacle for both lenders and borrowers. Salaries and compensation are the highest expense for lenders, and wasted time chasing paperwork reduces efficiency and increases costs. For borrowers, being required to locate and provide necessary documents such as pay stubs and tax forms delays the application process and is paper-intensive. Similarly, tracking received documents is difficult for lenders, especially if they come in different formats.
“Forward-thinking lenders are already leveraging technology by streamlining processes and adjusting more quickly to abrupt changes in mortgage market demands.”
While some hard-copy documents are required during the mortgage loan origination process, relying too heavily on a paper-based process can quickly become a cumbersome choice that impairs the borrower experience. If rates continue their decline, borrowers will expect a quick and seamless experience when applying for and closing loans. Lenders must be ready to adjust if they want to meet this demand.
To address these challenges, leveraging independent verified data is the most efficient option. This approach helps lenders make more informed decisions and reduces risk by providing income and employment verifications directly from third-party sources, rather than relying on potentially fabricated documents.
Increasingly, lenders are adopting cloud-based solutions with intelligent workflows and artificial intelligence to make more informed decisions while cutting down on operational costs. Cloud-based solutions can help lenders gather, store and process large volumes of data across formats.
Ultimately, access to more data gives lenders real-time insights that can deliver a smoother, more secure digital mortgage experience. Additionally, cloud-based platforms can be a more cost-effective way to manage data, as they can help eliminate the need for expensive in-house infrastructure.
Forward-thinking lenders are already leveraging technology by streamlining processes and adjusting more quickly to abrupt changes in mortgage market demands.
While traditional credit scores remain the gold standard for determining credit history and financial reliability, many lenders are also incorporating data sources to obtain a more holistic view of borrowers’ unique needs or overall financial position, especially for younger demographics and individuals who haven’t used traditional credit extensively.
For mortgage lenders, alternative data provides a means of accessing an untapped pool of creditworthy borrowers pursuing homeownership. Alternative data is comprised of nontraditional financial information that gives a deeper understanding of borrowers’ financial situations and their repayment propensity.
Examples of alternative data include utility and phone bill payments, rent payment history, employment and income data and specialty finance data.
By leveraging alternative data during early-stage originations, lenders can proactively identify and target qualified leads. Lenders can also identify creditworthy borrowers overlooked by traditional credit scoring.
The growing prevalence of artificial intelligence, coupled with the easy availability of fabricated pay stubs and W-2s online, makes it increasingly difficult to discern authenticity without proper due diligence. Cotality’s Mortgage Application Fraud Risk Index increased 6.1% nationally year over year during the second quarter of 2025, and 1 in 116 mortgage applications were estimated to have indications of fraud during the quarter.
Using differentiated and proprietary data can help provide lenders with certainty that the information they’re using to make decisions is valid. This allows lenders to automate workflows for verification of income later in the process, once the consumer has committed to the loan, to avoid spending time chasing or evaluating documents beforehand.
Alternative data, especially early in the mortgage lifecycle, is no longer an “alternative.” It is a competitive necessity that can result in more efficient decisions and captured market share. As the mortgage landscape continues to change, borrower demand will follow suit. Lenders who can responsibly approve more qualified borrowers will find themselves at an advantage and will position themselves for success.
