Day One Certainty (And Why You Should Care)
A lot of people for a lot of years have made a lot of money in the mortgage and real estate industries without relying too much on technology. "All I need are my relationships!" is a common refrain. "This is a people business!" is another. And while both are true, those not using modern technology in their 'people businesses' are about to get left behind.
Back in 2018 I first wrote about Day One Certainty (D1C) and how it can improve the loan process for customers. To summarize, D1C mitigates risk for a lender - if a loan file is offered D1C by Fannie Mae or Freddie Mac, a lender is not liable down teh line for anything the lender validated with D1C technology - this means an easier burden on underwriters, and a more streamlined process. At the time, the tech was still new to the industry, but it was clear then where we were heading. Today, it's arrived.
Fannie Mae & Freddie Mac accepting single source data has effectively changed the game and given lenders that embrace the technology an edge. How so? In today's world, here are a list of documents we no longer need on many conventional loans: bank statements, paystubs, W2s, Verifications of Employment, Transaction histories showing deposits/inspections clearing/final funds to close, and in many cases we don't even need an appraisal.
What does this mean for real estate agents and their clients? Preapprovals at lightspeed, loan turn times days (sometimes weeks) faster, and an easier overall process for consumers. What does that gain in speed mean? More competitive offers with flexibility on closing dates & shorter loan lock periods which result in better rates for customers. Lenders using the technology can scale volume without sacrificing service, serving more people and serving them better.
Many lenders, for some reason or another, are not adopting this technology, and many more are not embracing it. That's good news for people like myself, my team at MasonMac, and similar entities - it means that while our competition is "waiting on bank statements and paystubs", our customers are already in the house prepping their offer. When the other lender needs 30 days, we're good to go in 2 weeks. Guess who's getting the house when it's our client VS their client, all other things like price and contingencies being equal?
For agents, it means less chance of a transaction failing - the information needed for an underwriting approval is validated and accepted by Fannie Mae/Freddie Mac before an underwriter even sees the loan file through their automated underwriting system. It means less time with an underwriter, and in some cases, less time waiting on an appraisal if an appraisal waiver is received.
In the coming years when the market is expected to remain tight due to inventory, it's going to be those who have embraced this technology that will thrive, providing a higher level of customer service to an ever-growing demographic of millenials and gen-Zers who demand it. Lenders requesting borrowers accommodate their old school way of doing things will be left for truly greener pastures by both customers and high level loan officers.
Using Day 1 Certainty (and for agents, working with a lender that uses it) is a no brainer in providing the best customer experience, offering great pricing, and making a once tedious process a streamlined one with limited work from a borrower beyond an initial application.
In just 3 years, D1C has gone from market-entry to the best way of doing business, with full asset validation available for nearly every financial institution in the US, and now income validation having a reach of nearly 80% of salaried/W2 employees in the US. And while this is all great news and reaches an immense audience, it's only the beginning - FHA/VA are always slower to adopt new technologies, but they'll be on the way in the years to come for those products as well. If you're not using D1C as a lender, you need to start. And if you're not working with a lender using D1C as an agent, well, you too, need to start.