Colbert White and Diane Stuckey | Data Solutions Group, FIS
February 24, 2020
Loan issuing and underwriting are fraught with risk, and an antiquated tax review process doesn’t make things better. In fact, across the board lenders and underwriters have been stuck with decades old technology that relies on printouts or pdfs for receiving IRS transcript data, followed by manual handling by staff. The work is slow, inefficient, less accurate and includes more risk than it should. But this is changing fast with modern hooks into IRS data.
It’s stunning to think that in just the past decade we’ve seen artificial intelligence, machine learning, and smart phones become ubiquitous symbols of progress that we often now take for granted. But at the same time lenders, underwriters and others that require a review of tax records are still spending days and, in some cases, weeks retrieving tax records. On top of that there is less documentation to review than what is on file at the IRS, and staff must be trained to manually comb through it all, collect details, compile information, evaluate, interpret and decide on what can be complex decisions of risk assessment. Sound exhausting? It is, but, I’ll repeat, this is changing quickly!
Lenders and underwriters are currently only requesting income verification. And as of April 16, 2018, credit bureaus removed all IRS tax lien and related information from consumer credit files. But now with a direct hook into IRS data we can see income and wages, along with compliance history (details around late and missing returns), tax debt balances, and most importantly IRS liens, levies and seizure details.
There are other problems tied to manual tax checks. The most glaring is the very first step of the process: verification. The process begins with the “simple” task of linking the applicants name to their social security number or EIN for a business. Simple? No, not when we’re still doing things like it’s still 2005. An astounding 20% on average come back as “no match.” And it takes days to find that out.
So, the lender goes back to the beginning, identifies the problem, submits a new request, and waits a few more days to get the correct verification and tax records. A week or more of time is lost and an extra fee paid all at the beginning of the process.
Finally, the problem of checking tax records is about to change substantively, and this modernization provides a clear win to every lending and underwriting institution, as well as many others. Using an online portal, it’s now possible to bypass the manual process to get real-time identity verification, as well as tax records, plus analytic dashboard summaries.
As part of an enterprise wide effort to bring end to end modernization to clients, FIS is tackling this problem with ties directly into IRS data stores. This tax insights solution not only automates, but also simplifies in real-time and provide much deeper information. It’s a game changer for all, but for those institutions who move first this can be an opportunity to gain competitive advantage from the new-found speed, efficiency, insights and scoring that is now available. Clients will no long need to dig through tax records but can review reports that include a tax insights score, which is powered by an algorithm created by tax experts.
When speed is critical for your customer and you can deliver the speed required, you both win. That customer is more likely to get what they want and provide referrals or repeat business. Imagine the home buyer who finds their dream home after months of anguished searching. If your process cannot move them forward within hours, they could lose the entire deal. Cash moves fast in a tight real estate market where inventory is low. Those who rely on loan approvals are at a disadvantage. Now you can change that for your customers.