The home mortgage process can still be very painful and painstaking. Borrowers fill out paper applications, provide their W-2 forms and a recent pay stub, as well as lists of all their other assets and bank accounts. Several weeks later, the bank will request another pay stub and an updated list of assets. And again, several weeks after that. And then again. What seems like an easy decision, at least to the borrower, has become a long and complicated process for the banks. In their quest to reduce their risk and comply with new federal banking regulations, as well as ensure they're making solid loans to people with the ability to repay them, banks often need to run the decision past several people, which means they need to see the latest, most up-to-date financial information.
All of this extra work has reduced the number of loans over the years, even as increased demands for compliance and transparency have created more paperwork and longer wait times. In many cases, borrowers just abandon the application process, and all that time and energy the lender put into that process is lost. These days, banks need to have a digital lending process in order to catch people's attention, especially Millennial borrowers who are more tech savvy and want to do everything online. This means lenders need to be able to retrieve and verify information quickly, including from outside sources. They need to increase their security and fraud prevention by verifying account holder data. And they need to be able to give a decision quickly. That weeks- and months-long process can been eliminated, or at least greatly reduced, thanks to the use of artificial intelligence and Envestnet | Yodlee APIs, which let borrowers get a decision in seconds and minutes. Applicants fill out all the necessary information online, or even on their mobile phones, and lenders are able to make a decision quickly. It's been the non-banking lenders who are taking advantage of this technology, and now we're seeing more alternative lenders than traditional banks in the mortgage lending space.
Digital lending has created several benefits for lenders who use artificial intelligence and instant account verification (IAV) to make their lending decisions. For one thing, they're able to serve more borrowers in less time. Rather than being limited on the number of people loan assessors can manage in a single day, the AI system can evaluate an entire loan in a matter of seconds. And since the borrowers are filling out all the necessary forms online, it's not a problem for our API to tap right into their account and provide you with the most up-to-date information. Even if you decide you want several days to make the decision, you can always update their data without asking the borrowers to provide more — just one click and the API will call up the new data immediately. Digital lending reduces costs associated with lending. Instead of asking several people to evaluate applications, an AI system can make that decision, which reduces the costs associated with making the loan, letting you reassign staff to other areas where they're needed more. It also improves profitability, because not only are costs lower, but you're able to make more loans with less risk, which ends up making more money for the bank. Additionally, it allows you to reach "credit invisibles" — people who have insufficient credit history, but actually have the cash and earnings to replay loans. They can look at cash flow, transactional data, assets and liabilities, as well as separate non-income and deposits information. Contact us for a free demonstration and to learn more about how you can reduce costs, reduce risk, and best of all, improve approval time.