It’s true. Technology has afforded us many things. It saves us time, makes tasking more efficient, improves the way we bank, helps monitor our health, and the list goes on!
So why not let technology calculate a mortgage loan and handle the process all together? Cut out the middle man and everything will go faster and our loans are funded quicker. There a have been a whole host of automated lenders to come on the scene lately and it’s the coolest, hippest new thing to try! But, does it work seamlessly with out computer error and without risk? The answer is a resounding, NO.
Even with the best software for filling out a 1003 or running a DTI ratio or simply a credit check, the hard truth is that lending is not just a rote exercise. It often time requires a modicum of emotional intelligence. In other words, no matter how refined an algorithm is it can’t as of yet compete with human intuition and the an interaction and conversation will need to happen and be of paramount importance to the borrower obtaining or losing the loans.
This is especially true of those borrowers in situation that require an LOE. Algorithms are not great at deciphering the authentic or genuine disposition of a human borrower.
Once a borrow fills out a mortgage application, it goes through a process known as underwriting. In underwriting there is a bunch of due diligence performed to verify the borrower who is trying to purchase a property or refinance a loan.
Stipulations are collected such as pay stubs, bank statements, tax returns, etc.. depending on the particular program that the borrower has been identified as receiving. Once these “stips” are collected and verified, an appraisal of the property is scheduled and performed. On rare occasions a BPO (Brokers Price Opinion) is scheduled in lieu of an appraisal. The cost of a BPO is several hundreds of dollars less than an appraisal and usually can be completed in a few days rather than a week.
While there is a good deal of software involved in accessing and inspecting the many documents involved in the loan process, without an underwriter speaking to the borrower and understanding the various unique situations of each applicant, the approval process can’t march forward. Software is just not advanced enough to determine a borrowers strength and weakness in character.
Crunching algorithms can only bring so many results on a borrower’s ability to pay back a loan. Speaking to a borrower and learning about their budget habits, etc.. allows lenders to make a fully integrated decision on the borrower’s credit worthiness.