Lending Industry: Here’s Something More Than Shiny and New
If you are engaged with the loan origination side of the mortgage or other industries, it is likely that, lately you have seen a lot of coverage about new entrants to the verifications space. Even some less-new players seem to be ramping up their focus on helping lenders verify potential borrower employment and income information. There is quite a bit of new. Some might call it a lot of upstart activity and wonder how we, at Workforce Solutions (the unit of Equifax that delivers income and employment verification services), feel about all the buzz. I’ll tell you: we’re here for it.
The value of the new guy
We argue that the newcomers to the world of income and employment verifications are a good thing. Their attempt to penetrate the industry signals that the market is alive and well. Lenders seeking to verify employment and/or income as part of their business, understand how important these verifications can be. Verifications can help when a business is ready to make any number of decisions – especially when it comes to loan originations. Industries as varied as auto and mortgage to consumer finance and account management, use verifications to help them make informed decisions about a borrower or potential borrower’s ability to repay a loan.
Savvy lenders have long appreciated the value of real-time insight into the employment and income history of their consumers. Recent economic fluctuations only served to reinforce that value. Our research shows that the economic effects of the COVID-19 pandemic impacted even the coveted prime borrower cohort’s ability to repay loans. Before the pandemic, lenders might have automatically qualified a potential borrower with a 750 or better credit score for a loan. Now, lenders who are shown a high credit score have learned they might not have enough information to make an informed lending decision.
Also, new market entrants help keep established businesses on their toes and spurs innovation. Nobody has all the good ideas at once. The dynamism of the income and employment verification industry keeps everyone highly focused on new product and service offerings. Continuous improvement means better solutions to benefit businesses and the consumers they serve.
The entrance of new players means businesses believe the economy will continue to improve. This will lead to more opportunities for businesses to offer financing for their products and services. That is good news for all of us.
But there is always a “But”
Any successful business realizes it is not always a smart decision to go along with something just because it feels shiny and new. No matter how good it looks.
For example, one of the new entrants to the verification space touts its connection to payroll provider data for instant access to income and employment information. BUT, when you look closer, it is clear their coverage is limited. The Work Number® provides access to millions of records. You can save yourself the time, effort and expense of having to waterfall from one provider to another to get the information you need.
Some new third party verifiers try to address the issue of coverage by requiring consumer credentials to access payroll. This access allows the verifier to back into consumers’ income and employment history. BUT collecting information this way can be a hassle for consumers. The Work Number can be 100% frictionless for consumers. It generally does not require the consumer to do anything other than have the business need that gives the lender permissible purpose to pull their employment or income information.
Another issue to consider is record availability and access. It is valuable to understand what providers offer in terms of other key features such as security, solution variety, scalability and accessibility options. More about that later.
Here’s the plug
I’ll just go ahead and say it. This is a proud promotion for the verification solutions made possible via The Work Number from Equifax.
The Work Number platform was purpose-built to address the income and employment verification needs of business. It was developed with the singular purpose of reducing the burden on companies and consumers to verify employment and income when consumers applied for certain things. These included car or mortgage loans, purchasing consumer goods, or when opening a credit card or mobile phone account.
Even with a clear employer value proposition, getting employers to provide access to their sensitive employee data is not easy. Employers must be assured that their employees’ information is protected. Employee information should only be made available to credentialed verifiers that demonstrate that they have permissible purpose to obtain the information. Only verifiers that show they have the legal (as allowed under the Fair Credit Reporting Act (FCRA),) permission to access a potential borrower’s employment or income are able to obtain it.
At a time when both consumers and businesses are thinking more about the idea of equality and concepts like unconscious bias, The Work Number can be viewed as a way to support the goal of fairness in business. As an automated source for verifying consumer data, there is no human (with or without their own conscious or unconscious biases or agenda,) involved in making the decision about when or what information is shared. And no data is manipulated. If available, a borrower or potential borrower’s employment can be verified instantly.
That’s why the over 1 million employer contributors to The Work Number (representing over 114 million consumer employment and income records,) is a significant achievement. Your business needs to verify as many of your borrowers and potential borrowers as possible. You have to decide if you are willing to take a chance on the shiny and new, or if your business deserves what has been tried and true.
When new IS better
Don’t get me wrong. As a business leader or owner, I would always opt for the long-proven product or service. I would also expect continuous innovation. The Work Number has you covered there, as well.
The type and size of employers making data available via The Work Number platform is changing. Fortune 500 organizations have been a mainstay of The Work Number contributors. In addition to these large companies, now more medium and small businesses contribute to The Work Number than ever before. Employers make their payroll information available to credentialed verifiers via the platform with the goal of easing their employees’ access to the consumer products and services they want.
There are a number of new Verification of Employment and Verification of Income product enhancements available through The Work Number. For example, options like All Employers Within 24 Months, Mortgage Ultimate and Employment Select were specifically designed to provide the employment and income verifications needed at key milestones in the mortgage origination process. They may also allow lenders to take advantage of certain GSE (government sponsored enterprise) validation programs. (Did you know that on the Fannie Mae website, only Equifax is listed as an Authorized Income and Employment Report provider?) The Work Number ID validation solution was developed for consumer finance lenders. Several solutions were created to help clear lender stipulations were developed for the auto space.
New and shiny. And valuable to verifiers in their respective industry.
So now what?
Since you already know the ability to verify consumer employment and income is a critical component to making ideal lending decisions, the real question becomes: “How do I choose the best third-party verifications provider for my business?” I am glad you asked. Here are five key factors to consider when making that decision:
- HISTORY AND EXPERIENCE
How long has the firm been in business and worked in your industry?
- A VARIETY OF SOLUTIONS
Not just the number of products or services, but was the product or service being considered purpose-built to address industry-specific needs?
- SOLUTION SCALE
How far-reaching is the data the provider offers?
- CONSUMER PROTECTIONS
Are policies in place to vet and credential users?
- DELIVERY OPTIONS
Can the provider’s solution be accessed in a way th.at best fits your needs?
Some things get better with time
Just like a good bottle of wine, over time, some of the new verification providers joining the marketplace will get better. They will learn about your industry, add more employer contributions and provide access to more records. But, you have verifications to perform and loans to close now.
The Work Number has 114 million ways we can help. Now.
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