Lenders across the country are trying to build their own versions of the evolutionary, if not revolutionary, Rocket Mortgage.
But there’s one problem. Unlike in the U.S. where automated income/employment verification services are already available, Canada hasn’t had a good solution.
That has now changed. Equifax has formally launched Verification Exchange, a product it’s been piloting since May.
In short, Verification Exchange electronically “verifies someone is working where they say they work, and that they make what they say they make,” says John Russo, Equifax’s VP, Legal International Workforce Solutions, & Privacy Officer.
By the end of this quarter, Verification Exchange will let lenders automatically verify both basic employment information and detailed compensation numbers via an API.
“We believe it is a one-stop solution for income and employment verification,” Russo explains. “We worked with OSFI in development of this product and solicited feedback from OSFI in its creation…We believe it’s in line with the spirit of regulations and guideline B-20.”
He stopped short of saying it was OSFI compliant, however, so users will have to get their own legal opinions if they want to replace their processes (of collecting pay stubs, T4s and employer letters) with this solution.
The benefits of this technology are obvious. It is:
Verification takes a few seconds, which means lenders can conditionally approve borrowers online while they wait
Applicants can avoid the hassle of requesting job letters from their employers (although lenders may still call the employer as extra verification)
It’s “difficult to falsify the data since we’re getting it directly from employers,” Russo said.
But Equifax has gaps to fill. For one thing, its coverage is small (less than a half million Canadians are in its income database). The income/employment of most Canadians can’t be verified by Equifax because the company doesn’t get data from their employer or payroll company.
That said, “80% of Fortune 500 companies in North America contribute to this database,” Russo says. “We’re looking to cover almost every employee in Canada [eventually].”
In the meantime, if Verification Exchange cannot confirm an applicant’s data, Equifax can do so manually within a business day or two.
Secondly, the system is not yet a reliable source of self-employment data. Equifax says it’s working with the Canada Revenue Agency to obtain borrowers’ tax information, which could address this limitation. (Other providers are also in talks with the CRA.)
Once coupled with automation like asset/down payment verification (which the company is working on), the system will be able to support lenders who want to fully automate their approval process. Someday, it’ll be routine for customers to visit a lender’s website, enter their data and get approved (with a rate hold) in seconds.
We know lenders are building such systems. The question is, will mortgage brokers be able to offer this convenience too? If the likes of D+H, Newton and MortgageBOSS are smart, they’ll make sure brokers can.