Verifying Information in Mortgage Lending Process: Supporting Documents vs. Data Sources?

Verifying Information

The UK mortgage lending industry has come a long way in utilizing digital means to transform traditional and manual lending methods to modern automated ways. However, this well-meaning technology is not immune to its fair share of misuse.

Fraud and counterfeit documents are a huge area of concern for all lenders. This is why now, more than ever, underwriters need to verify all mortgage-related documents accurately.

In this blog, the area of focus will be on the necessity for more stringent document checking, the difference between verifying using supporting documents and data sources, and ways through which underwriters and lenders can deliver more accurate results.

The Document Forging Status

Mortgage fraud occurs when the mortgage applicant either alters the numbers in the document or submits a false document like pay slips, bank statements, etc. Mortgage fraud generally occurs when the applicant feels they can strike a better deal on a mortgage with better numbers in their application.

In mid-2019, Cifas, a leading fraud prevention service in the UK, revealed that the rate of fraud had increased by 5% from July 2018 to June 2019. Production of false documents had risen by 14%, and submission of altered documents by 32%

UK Finance’s overview on frauds in the payment industry also stated that many people committed fraud by upgrading their bank accounts to a business one to qualify for mortgages under the Coronavirus Bounce Back Loan Scheme, a scheme that benefits SMEs in times of the COVID-19 pandemic.

The high amount of altered document submission can also be linked to the fact that 1 in 10 people in the UK think it is reasonable to exaggerate their income in the mortgage application. Due to such cases, it is vital to develop a more stringent document-checking methodology.

The Information Verification Process

Verifying the borrower’s application and financial information is one of the most important mortgage loan origination system tasks.

In addition, the underwriter checks the borrower’s income, expenses, assets and assesses their creditworthiness. For SME loans, the underwriter also checks the SME business performance.

There are two methods through which underwriters verify the information they need to.

Through Supporting Documents

Documents like pay slips, bank statements, tax returns, balance sheets for SME loans, and proof of deposit for home loans come in handy for the underwriter to make loan approval decisions.

Some lenders even require an audit trail to check the sources through which the applicant receives money in their bank account.

With the help of such documents, the underwriter calculates the borrower’s gross savings in a month to find out if they can pay monthly mortgage dues promptly.

Some underwriters manually perform these checks. Unfortunately, as humans are prone to errors and fail to see things that don’t directly meet the eye, counterfeit document production becomes an easy way out for mortgage borrowers.

Through Data Sources

Data sources take the idea of open banking and integrate it with the mortgage origination process to help underwriters verify information more efficiently.

Open banking lets UK banks share their financial data with authorized third-party platforms with your permission. These platforms can then utilize this data to calculate your monthly spending and saving patterns which helps lenders assess your creditworthiness.

In 2020, around 6 billion calls were made from such platforms to the bank servers, and over 4 million open banking transactions were completed for various purposes.

UK citizens under the age of 35 are also willing to share their open banking data to prove their creditworthiness to loan origination platforms.

There are many data sources in the UK like AccountScore, Onfido, HooYu, The Work Number etc. With the help of various data sources, listed below are few things that underwriters can perform with ease:

  • Verify borrower income and other details directly from the bank - AccountScore
  • Assess if the applicant can afford the mortgage through predictive analytics, insights, and reports - AccountScore
  • Provide better and more apt mortgage deals to the borrower
  • Accurately check ID-related details like name, address, etc. through the Know Your Customer (KYC) process - HooYu
  • Check the authenticity of physical documents - Onfido
  • Digitally verify the borrower’s employment data – The Work Number
  • Complete the underwriting process more quickly and accurately

Data sources are also advantageous to borrowers when they are unable to submit complete or properly maintained documents. This is the case with many people applying for home loans as well as in certain SME businesses.

Key Difference Between Supporting Documents and Data Sources

Utilizing data sources to make decisions on loan approvals eliminates the need for most documents from the borrower, which eventually reduces the number of counterfeit documents submitted.

Verifying information through supporting documents can also get paper-intensive and time-consuming. Data sources eliminate these problems as well through automated online processes.

Digilytics – Your One-Stop Verification Destination

Loan origination software companies utilize AI mortgage lending tools to automate the origination process. Digilytics AI is one such company that uses Artificial Intelligence (AI) and machine learning tools to make lending more efficient. With Digilytics, you can perform information verification through both the approaches effectively. rces to make decisions on loan approvals eliminates the need for most documents from the borrower, which eventually reduces the number of counterfeit documents submitted.

RevEl, a Digilytics automated mortgage lending product, converts manual document verification and underwriting processes to a cloud-based loan origination system. RevEl helps you verify applications and documents submitted by the borrower.

3C Check on Supporting Documents

1. Completeness

RevEl checks the completeness of applications and supporting documents using the one-shot learning technology and ensures all the required data fields are filled properly.

2. Correctness

RevEl is capable of analyzing the correctness of the documents as well. With the help of computer vision, Machine Learning (ML), and Natural Language Processing (NLP), RevEl performs intelligent data capture. Through this approach, it can read structured as well as unstructured documents with high levels of accuracy

3. Consistency

Checking the consistency in the documents is one way of catching and stopping attempted fraud. In this check, Digilytics RevEl can compare common yet important information of the borrower, like their name, address, etc., with various documents that are submitted. Its AI and ML tools can also easily find any discrepancies in the information.

Apart from this, the Digilytics Oculyse platform of the RevEl application can extract data from the documents and classify them based on their type. This makes the loan origination and underwriting process more streamlined for the lender.

Verifying Information through Data Sources with Digilytics

AccountScore, an Equifax company, is a data source platform that provides access to the customer’s bank transaction history. Using predictive analytics, AccountScore also provides meaningful insights and spending patterns based on the customer’s transactions. By partnering with AccountScore, Digilytics has integrated information verification through the data sources approach into its artificial intelligence dashboard.

Conclusion

Submitting counterfeit documents is a crime. Even if the borrower makes honest mistakes in their mortgage applications, there are chances of loan rejections in the manual loan origination process.

Artificial Intelligence and Machine Learning eliminate this challenge by automating mortgage origination and increasing its efficiency. In addition, Digilytics RevEl assist underwriters and lenders in verifying the information through both supporting documents and data sources and makes this job hassle-free for them.

About Digilytics AI

Digilytics is a fintech company that leverages the power of Artificial Intelligence to revolutionize and automate the UK mortgage lending industry. With Digilytics, lenders can produce more first-time-right applications and deliver mortgage funds quickly and efficiently.

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