Imagine not having to manually provide income and down payment documents on all of your prime mortgage applications, but rather a process that handles that automatically.
That dream will become reality, guaranteed. It’s merely a matter of when.
And “when” may be sooner than we think as companies like Flinks change how mortgages are processed.
Flinks, backed by heavyweights like National Bank and Desjardins, is a Canadian financial data aggregator. It’s on the leading edge of that “open banking” trend we keep hearing about. That’s the process whereby consumers share their banking info with other institutions, so they can open accounts and get mortgages easier.
Companies like Flinks remove steps from the loan process. Its solution works basically like this.
- The customer enters their banking login in the mortgage application
- Flinks verifies their identity digitally
- Flinks downloads a year or so of their banking transaction history
- The data is analyzed to identify what looks like a down payment deposit and what looks like income
- The total funds available for down payment and the total annualized income is then sent to the lender’s underwriter.
The potential benefits are clear. There’s:
- Less client stress in collecting paperwork, particularly with respect to their income, down payment and void cheque
- Less work for underwriters
- More automation potential (think underwriting bots)
- Far less chance of fraud (since the docs come direct from the source and can’t be fudged), and
- Faster approvals.
As technology like this takes hold, it will undeniably lower lender costs, reduce fraud and eventually lead to lower rates for consumers.
The company says it’s in talks with at least one major mortgage brokerage to integrate with their broker and borrower portals. Whether it’s Flinks or someone else, this sort of technology is simply not optional. Not if brokers hope to compete with the streamlined digital mortgages coming from major financial institutions.
Flinks is currently linked up with most of the top 20 banks in Canada (over 98% of the bank market in terms of customers), with dozens more mortgage lenders coming this year, says Chief Sales Officer Miles Schwartz.
The Hard Part
One big challenge is convincing lenders that Flinks technology is reliable enough to be a standalone income and down payment solution. OSFI’s approval of such would go a long way to addressing that.
It’s also no easy sell to convince a lender to change all their processes and integrate a new technology provider into their backend. There’s programming, cost and security considerations, among others. (Flinks plugs directly into a lender’s underwriting system via API, already works with the largest FIs and is SOC2 certified, meaning it has bank-grade security.)
Ultimately, the company must demonstrate and effectively communicate how reliable its income and down payment detection algorithms are. Schwartz tells us, for example, that “Flinks’ artificial intelligence is smart…smart enough to detect a borrower making fake electronic funds transfers from one account to another to simulate income.” But the company doesn’t release its detection failure rates.
That said, in the minority of cases where income or down payment cannot be verified, he says lenders will use an alternate source of documentation—as they do today.
Equitable Bank was an early adopter of the technology, allowing broker clients to send bank statements (for down payment and income verification ) directly from their FI to Equitable’s underwriting system. It takes about 2-3 minutes and the broker and client are notified when it’s done.
“We’re seeing interest in our capability build rapidly,” said Paul von Martels, VP, Prime and Reverse Mortgage Credit at Equitable. “Brokers love having options, applicants love the convenience and underwriters love the efficiency. An early concern was that applicants would be reluctant to use it, however we aren’t seeing that in market. The completion rates are very high and early feedback is positive (i.e., it’s faster and more secure than downloading and emailing bank statements from 2 or 3 institutions).”
Decision Logic, Plaid, Yodlee are examples of other players in the North American space, but they’re U.S. firms. Flinks appears to lead the way in Canada, for now at least.
The good news here is that, as online consumers increasingly demand faster and easier digital approvals, this sort of tech will make it possible. And it’ll make it possible for broker clients too.
The item that is always forgotten in articles focusing on digital mortgages is consumer acceptance. How many consumers will give consent for their financial information to be distributed electronically? This question being asked after the much reported Facebook, equifax etc. etc. breaches.
Also how any of these platforms have been announced to much fanfare and then are never heard from again? quite a few…
The reason? These platforms are extremely expensive to build and are a reflection of the demands of the market which we know, from being in the industry, is always changing. If you had a platform built previous to B20 (V1 even) the changes in the code/logic/algorithms of the system would have been a major rewrite for the engineers behind them. As brokers we now have to go through a mental flow chart which each client we work with.
Until applicants fall into a standardized bucket and the regulations are static these platforms are a ways off yet.
Lenders should look to cut brokers with low close rates if they want to save money.
Td had a problem with privacy and credit cards where it chose to ignore the legilsation until media blew a whistel$further read the scc decision on what is consent dourez vs Facebook Inc the globe had quite a bit of discussion on this from a lawyers point of view
Further another item also ignored by those claiming to protect consumers (investors are also consumers) and what they are consenting to…when they open accounts with application to this….Hrynew vs bhAsrin
Further Were nt we the public and media also up in arms about stats Canada wanting to cull big data via the banks?
Equitable bank’s downpayment policy is a nightmare. Why would I encourage my client to use Equitable bank’s tool to retrieve their bank account statements? So that Equitable bank can ask more questions and make it more difficult for the client? No way. I am wondering how many brokers are actually encourage their client to use that tool?