As the mortgage industry faces the realities of rising interest rates, savvy lenders are shifting gears towards the potential profitability of home equity lending. HousingWire recently spoke with Paul Harris, SVP of sales at DataVerify, about capitalizing on the home equity market with the help of automated tech solutions and mutually beneficial partnerships.

HousingWire: In a rising rate environment where a large percentage of homeowners have record-low mortgage rates secured, the lending industry is turning an eye to home equity. What should lenders expect when navigating these waters? 

Paul Harris: Home equity lending can look different for many reasons. The type of validations needed are different, the approval process must be quicker and the costs should be as low as possible. This is where automation can become key. 

Lenders should turn to an automated tool that is easily configurable and tailored to validate the specific data for home equity lending. The risk level is also different, so the lender needs to be able to adjust the severity levels on the alerts they receive specific to home equity.    

HW: Automation has been reshaping the mortgage industry over many years. Which parts of the home equity process can benefit most from the move toward automation?

PH: Data validation is a very time-consuming, often manual process, and one that can save lenders critical time and money when they switch to a more automated solution. Also, home equity lending and mortgage lending have slightly different validation requirements. 

The ability to instantly validate simple, redundant data points like property value, ownership, phone numbers, identity and internal watchlist becomes crucial to saving time. Using a solution that has unique verification options such as employment or homeowners insurance (HOI) can help give some lenders a competitive edge over others. Until recently, HOI was only available manually and sometimes can be difficult to track down but now solutions exist that offer this type of verification.

Whether a lender is newly entering the home equity space or just placing more focus on it, my biggest piece of advice is to look at what you are already using and see if it can be adjusted to work specifically for home equity. If it can’t, look for a solution that can be configured to work for multiple channels. That way you aren’t always taking on new solutions but rather working with one that you know and love and using it efficiently across the board.

HW: With lenders in the home equity space facing such stiff competition, what strategies and solutions should businesses focus on to stay ahead of their competitors?

PH: Obviously, cost is going to be top of mind for most lenders. But I would also suggest lenders use this opportunity to consider the use of technology and automation. 

Strategically align with partners that are innovative, consultative and looking to help solve challenges. Lenders should be looking for solutions that are not only going to help them right now but will also be nimble enough to scale and can be easily configured as needs evolve.

 As I said in the previous question, the solution should be able to work across multiple channels while being tailored to each need. Getting set up with a solution that can do this is going to save lenders so much time, money, and effort in the short and long run.   

HW: What is DataVerify doing to stay competitive in the home equity space and what strategies are being employed to mitigate risk for lenders?

PH: Home equity comes with a different level of risk and different data validation needs, so we know the risk appetite is different for each lender. It’s important to scale so that bottlenecks don’t become a problem in home equity because of how crucial speed is in this process. 

We are constantly reviewing emerging fraud schemes while keeping a pulse on new technology that will help drive down cycle times. Cycle times are always important in lending but home equity may be where it matters most because borrowers are not prepared for it to take a long time or require a lot of involvement from them. So, if lenders are looking to cut costs by keeping more manual processes in place, they may not realize that this could have potential negative effects on the borrower experience. It may end up costing the lender more time and money in the long run.

We have been able to add quite a few features to our DRIVE platform over the past couple of years that we believe could give lenders that desperately needed competitive edge. Through a connection to The Work Number, we can verify employment and income in seconds. We also offer automated HOI verification through a solution called Clear HOI. And recently, we announced our new AI solution, DataVerify Assist, which helps lenders with document classification, versioning and data extraction.

We find that the mix of mitigating risk with automation verification and highly configurable solutions is a unique and powerful combination for lenders—especially now as resources have to be maximized to get the most “juice from the squeeze”. All that to say, at DataVerify we believe in helping lenders get the most out of their solutions right now while also setting them up for success in the future.

Learn more about the future of home equity and developing your competitive edge at dataverify.com.