New Tech Is Reducing Fall-Out, High Credit Costs And Poaching: How’s That For A Trifecta?

Credit costs are already high, and they are going up again this year, in some cases by more than 100%. Just what our industry doesn’t need at a time when deals are hard to come by, pipeline fall-out is high and margins are razor thin.

As one industry trade journal reported: “The cost for a single borrower tri-merge credit report issued by the three bureaus will be close to $50. A two-person tri-merge will increase to about $100. This will have the same impact on soft credit reports pushing costs for a single tri-merge soft-pull to about $50 [in 2024.]”

These higher costs, of course, are creating new challenges for lenders in a market that continues to be depressed and, as a result, incredibly competitive. The good news, however, is that new technology solutions, like Fannie Mae’s Early Assessment enhancement for its Desktop Underwriter^â (DU^â), are providing some relief in terms of costs and, at the same time, reducing “poaching.”

Fannie Mae announced the enhancement in mid-December, and, I’m pleased to say that our company, Cloudvirga, was one of the first to integrate them. The enhancement is now operational on both our retail and TPO platforms.

The new enhancement improves and streamlines a lender’s pre-qualification process, making it easier for lenders to assess borrowers’ loan eligibility and provide information earlier in the process to make decisions on their mortgage options.

To do true pre-qualifications, lenders often require hard credit pulls and fully completed applications to evaluate credit worthiness. In addition to being expensive, this creates an alert on the borrower’s credit file which can trigger competitive calls and emails. The newly enhanced DU Early Assessment is providing an efficient solution to avoid these onerous elements.

How DU Early Assessment Works

The new solution eliminates the need for a hard credit pull and relies instead on a soft credit pull from a single credit bureau, plus an automated and abbreviated application that allows a reduced dataset to assess borrower qualifications. Lenders get a conditional recommendation from DU, as well as early notice of eligibility information. The process is much faster, less expensive and, because it avoids a hard credit pull, preserves borrowers’ credit scores and prevents borrowers from being bombarded with unwanted marketing solicitations.

While lower credit costs, and less poaching, are welcome ancillary benefits, the primary advantage that the new enhancements deliver, of course, is faster and safer pre-qualifications.

Since the vast majority of all applicants go with the first lender that “qualifies” them, amplifying and streamlining the pre-qualification process gives lenders a competitive advantage. It not only improves the customer experience that they can deliver but, at the same time, lowers their customer acquisition costs by reducing fallout.

By harnessing the power of data-driven insights and automation, new enhancements in the credit space ensure a more efficient, transparent and borrower-friendly mortgage origination process for all stakeholders involved.