While too early to see the full scope of “Big Data” and how it will alter the mortgage industry, we can already see it influencing the lending process. Big data is a generic term that refers to massive amounts of info that vary in format, can be quite complex, and are transmitted at high speed. In terms of big data in the mortgage industry, it covers everything from bank statements to credit scores to tax returns and everything in between (and beyond!).
At first impression, the usefulness of big data for lending is the instantaneous capturing, organizing, analyzing, and transmission of data. Essentially, lenders can asses and draw more accurate conclusions incredibly fast.
But there are unexpected benefits –particularly for Millennials, the fastest growing sect of borrowers who also prove challenging in creating an accurate financial profile by traditional means.
Unlike Baby Boomers, Millennials are not building credit in typical ways. Instead of salaried employment, they have multiple sources of income from side gigs, freelancing, employment, and perhaps royalties. Instead of traditional banking, they have digital banking and mobile payment apps. Analyzing this new type of credit profile is a challenge for lenders when attempting to do it in the “old school” way, but big data processing give lenders the insight they need to go beyond tax returns and credit scores.
Big data in the mortgage industry is not a passing fad, but a response to today’s borrowers. The demand, necessity, and technology to process big data are here and it’s up to the mortgage industry as well as the individual mortgage service provider to keep up. Are you ready?