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What Lenders Can Do Now to Prepare for an Increase in Mortgage Applications

Find out how lenders can leverage automation, user-permissioned data sharing, and other solutions to prepare for an increase in mortgage applications.
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How Lenders Can Prepare for a Mortgage Applications Increase
Table of Contents
Table of Contents

The mortgage market has been nothing if not volatile in 2023, and it looks as though lenders have more uncertainty to weather. While the Federal Reserve chose to keep interest rates steady in September, policymakers hinted at another possible rate hike before year-end.

On the one hand, housing demand has remained high compared to supply, while lower inflation rates and increased GDP signal positive economic growth. On the other hand, officials have also predicted fewer rate cuts in 2024, which could point to a continuation of this year’s high-rate market.

Mortgage demand, however, has already reached the lowest level since 1996 in recent weeks. Macro-economic market conditions may help slow rate hikes in the future, helping the mortgage market recover.

Nevertheless, the future remains unclear, and lenders must be ready for a potential housing boom or a longer period of high interest rates. 

How automation helps lenders win in high-interest markets

With mortgage rates rising since April of this year and September’s average rate for 30-year fixed-rate mortgages hitting 7.92%, market indicators point to a need for lenders to find efficient and cost-effective ways to respond to a high-rate market. 

High interest rates have created substantial uncertainty in the mortgage market. Yet despite interest rates rising since April, overall lending activity in Q2 of 2023 increased by 20.8% compared to Q1. That said, loan origination in Q2 of this year was still down 37.6% compared to the same quarter last year.

Shrinking margins are another challenge presented by high-rate markets. One study by Wolters Kluwer found that the average mortgage lender lost $1,972 per loan in Q1 of 2023, which is not sustainable for any business. 

While demand isn’t something that lenders can control, costs are. Leveraging strategies like business automation becomes vital for lenders who want to maximize profit margins during a period marked by high-rates and even greater uncertainty.

To achieve that, lenders can look to automate as much “busy-work” as possible, giving them more time to spend with borrowers and maximize the number of loans funded. To ensure minimal business disruption and maximum cost-savings, lenders should prioritize solutions that have; 

  • Business customization
  • Easy integrations
  • Borrower experience improvements
  • Instant scalability
Truework Encompass® integration.

Business Customization

When measuring the success of any automation platform, look at the number of manual tasks reduced and the total hours saved each month. To maximize these two metrics, it’s crucial to have a solution that can be customized to work around your business, not the other way around. 

When it comes to loan applications, lenders need to be able to easily turn different verification methods on or off to help maintain a balance between automation, risk management and team preference. 

For example, you may want to use instant verification to reduce friction and expedite items like pre-approvals and smaller loans. Then, you can opt to use a different method for home mortgages and high-value purchase loans.

In both scenarios, lenders need the flexibility to easily leverage different types of verification methods without needing technical resources. Additionally, each use case of the platform needs to maintain as much automation as possible. Lenders can achieve this by customizing workflows for different teams with a platform like Truework. 

Truework is the only platform that orchestrates income verification requests across multiple methods while making it easy to customize which methods are used and when. 

Another key factor related to configurability is transparency. A solution may offer an easy integration, but if you don’t have visibility into every request, it’s hard to know when something isn’t working. A lack of operating transparency can cause delays, hurting the borrower experience and increasing the likelihood of churn. 

Too many legacy income verification methods operate like a black box where a request goes in, and lenders have no idea what actions have been taken. When that’s the case, it’s difficult for teams to ensure the best borrower experience.

Truework provides real-time status updates on all verification requests, giving lender teams maximum visibility and enabling them to ensure each applicant has exactly what they need to get through the process as fast as possible.

Superior borrower experience

To maximize profit margins, lenders must create a fast and transparent borrower experience that keeps applicants engaged throughout the process. Otherwise, lenders risk wasting significant resources on borrower’s that don’t make it all the way through to loan funding.

One way to ensure a smooth borrower experience is to eliminate delays during the verification process. Ensuring your underwriting team has access to the right borrower data is key in accelerating applications through to the final loan funded stage.

Unfortunately, legacy verification providers recently eliminated the ability for lenders to choose which employment and income data is verified. This inability to filter data often gives underwriting teams troves of unnecessary information, creating delays in the process. 

With new verification methods like user-permissioned data sharing, borrowers can now share income directly with lenders directly from their source-of-truth payroll system. Borrowers are able to provide only the required information and rest easy by knowing exactly what information is being shared with other parties. User-permissioned data sharing gives borrower transparency without the ability to alter documents, helping reduce income fraud risk. 

As a result, lenders are no longer at the mercy of legacy providers and aren’t bridled with too much borrower data during underwriting. Instead, loan teams can complete verifications at a fraction of the cost and reduce the risk of income fraud, all while giving potential homeowners more control over how their information is used. 

Truework connects every major verification method into one seamless borrower experience, including user-permissioned data-sharing through Truework Credentials, helping increase trust and speed up transactions.

Truework Credentials user-permissioned data.

Easy integration

When interest rates are high, engagement teams may find themselves understaffed and spread thin, trying to achieve more with less. In this environment, lenders need technology that can easily integrate into existing processes, enabling borrower-facing teams to increase productivity and get more loans funded. 

Choosing a provider that doesn’t work seamlessly with existing processes can result in more work, less productivity, and negative customer experiences. As such, it’s best to look for a provider that can offer multiple integration options, ensuring every branch and every team member can access solutions in a way that best suits them, minimizing process change.

With Truework, lenders can quickly get started by creating an account and running verification requests through the online web portal. Also available is the option to set up a backend integration with Truework API or integrate Truework directly with your loan origination or point-of-sale system, like Encompass®, Vesta, or Revvin. 

Lenders can also use Truework Direct to verify any applicant at any point in your digital application process, simplifying the borrower experience and reducing turnaround times.

Solutions that scale

As the market continues through its cycle, this high-rate environment will eventually give over to increased demand. Freddie Mac predicts that overall loan originations will start growing again in 2024 as more existing homes enter the market and interest rate hikes slow down. 

As such, finding a solution that will work for your business now and in the future is crucial. When mortgage demand increases, scalability will become the critical success factor for lenders.

Aggregate platforms like credit resellers add a middleman between lenders and verifiers. As mortgage loan application volume goes up, reliance on resellers can slow down the verification process and increase the risk of poor borrower experiences. If issues ever arise with a reseller vendor, resolutions are slowed because lenders lack relationships with the primary data vendors.

Instead, lenders are choosing solutions like Truework that connect multiple, primary data sources together in one easy-to-use platform. In addition to user-permissioned data sharing, Truework also provides lenders with instantly verified data through partnerships with leading payroll platforms like Gusto and Rippling, adding additional improvements to the borrower experience through speed and convenience.  

Leveraging automation is another way lenders can scale efficiently. With tools like Truework Smart Outreach, lenders can use the Truework Income platform as a one-stop shop for any applicant. Smart Outreach automatically routes non-instant verifications for hard-to-reach employers through the most efficient channel so lenders can reduce manual work while increasing productivity and accelerating decisions.

Truework’s flexibility helps teams leverage our platform as an extension of their own team. If applications spike tomorrow, (and we hope they do!) Truework is here to ensure each file is processed as efficiently as possible, without having to hire and train new operations staff.

ALT: Truework Smart Outreach status updates.

Prepare for the future, benefit today

The same tools that can help lenders prepare for a high-rate market also provide strategic value when the housing market demand increases. 

With Truework, lenders get a one-stop platform that’s easy to integrate, enabling any team to reduce manual work and create a superior borrower experience in minutes. This increase in productivity helps teams focus every ounce of attention on creating a superb borrower experience, helping increase application conversion. 

When origination volumes inevitably increase, loan teams won’t need to handle any new integrations or vendor selections to manage the increased workload. Truework is an extension of your team, whenever you need us. 

To learn more about how Truework can help you prepare for any market environment, speak with a member of our team today.

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