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What lenders can do about rising data costs

Learn how lenders can combat rising data costs and decrease the cost of loan production by simplifying income verifications in 2024.
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How Lenders Can Prepare for a Mortgage Applications Increase
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Table of Contents
Table of Contents

An Uphill Battle

The cost of consumer data, critical to underwriting, is increasing across the board. Lenders are still reeling from last year's credit price hikes that resulted in a 400% increase for some FICO scores. 

Not far behind are changes to income verification. Instant income data is getting more expensive and lenders are more restricted in how they can filter for active vs. inactive employment data. 

Last week, Truework CEO Ryan Sandler joined The Chrisman Daily mortgage podcast to talk about what options lenders have to combat the increasing cost of consumer data. 

Read the takeaways and summary below, or listen to the podcast here

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Rising data costs pose significant risk to lenders

Increasing costs of consumer data, particularly in the credit and income verification space, pose significant challenges and risks to lenders. The situation has been made worse by the consistency of these annual price hikes.

Ryan Sandler noted, "There has been an insane rise in the cost of consumer data over the past decade and it's getting pretty challenging for lenders to maintain healthy margins, especially in these low volume times." Sandler also pointed out that, "It's one thing to raise prices, it's a whole different beast when you raise prices without making any improvements to the product or service."


Lenders need to consider total cost, not just price

While the cost of consumer data has been a major concern for lenders, Sandler encouraged lenders to look beyond just the price of data. He argued that the total cost of verification, which takes into account price, volume and process, should be considered instead.

Sandler explained, "To really determine total cost, you need to look beyond the price of instant data. For example, you could have a low price, but if your team ends up ordering a bunch of duplicate verifications, your total cost is going to be a lot higher."


One-stop verification platforms can reduce total cost 

The emergence of one-stop verification platforms such as Truework help lenders effectively manage their costs. These platforms combine old and new technologies to deliver a comprehensive verification solution that reduces disruptions, improves the borrower experience and reduces the fiscal impact of income verification.

Sandler added, "Truework is really the only platform that makes the process as easy as clicking a button. We do this by connecting every verification method into one solution, allowing lenders to increase completion rates, reduce manual tasks and effectively manage costs."


Bold Prediction for 2024

Despite rising data costs and lower loan volumes, Sandler predicted that the cost of loan production could decrease by more than 20% in 2024. He believes lenders will take advantage of the current market conditions to make foundational changes to their business and optimize their costs.

He concluded, "My bullish prediction is that the cost of loan production is actually going to go down by more than 20% in 2024. And this is despite rising data costs we just talked about and low volumes in the market."


Summary

- The average loan production cost last year was over $11,000 for independent mortgage banks.

- To manage total cost, lenders need to consider not only price, but volume and process as well.

- New verification solutions like Truework can help lenders improve completion rates and lower their total verification cost.

- As a one-stop platform, Truework is the only solution making the process as easy as clicking a button, allowing lenders to increase coverage, reduce manual tasks, and effectively manage costs.

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Lenders don't need a faster horse. They need a car. And one with a personal driver that will take them exactly where they need to go."

Ryan Sandler,Co-Founder & CEOat Truework

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