June 10, 2024
3 mins
Unlock the Power of Day Zero Certainty for Bank Statement Loans
Prudent AI

For lenders offering bank statement loans, imagine having something akin to Fannie Mae's Day 1 Certainty—where you can verify borrower creditworthiness from day zero.

Why is Borrower Income Certainty Crucial for lenders?

In today's challenging lending environment, borrower income certainty is not a luxury; it's an absolute necessity. What leads lenders to prioritize borrower income certainty over other factors? There are three main reasons:  

  1. The slowdown of the economy: The economy has slowed down after the pandemic and has resulted in many borrowers losing their jobs or facing reduced income. This has increased the risk profile of potential borrowers, making it essential for lenders to ensure income certainty from the offset.
  1. Stricter lending guidelines: According to the Federal Reserve’s latest Quarterly Senior Loan Officer Survey (SLOOS), 51% of financial institutions have tightened the credit terms for C&I loans to medium and large businesses. This means lenders should thoroughly evaluate borrower creditworthiness and give out loans only to those who qualify under the new guidelines.
  1. Increase in loan fraud: With the rise of digital lending comes an increased risk of loan fraud. Fraudsters have become more sophisticated in their methods, using tactics such as identity theft and misrepresentation of income and employment history. To guard against these risks, lenders must validate borrowers and their creditworthiness at the earliest and using sophisticated technologies.  

The current economic climate has pushed lenders to tread with caution. Lenders today are expected to minimize the risk of bad loans as much as possible while growing their business as usual.

Here’s where a thorough analysis and understanding of the borrower's bank statements helps. Getting to know the borrowers’ income, spending habits, and other loans, allows lenders to make informed lending decisions, while adhering to the strict compliance standards. To achieve that, lenders need to be able to evaluate borrower creditworthiness from day zero.  

Introducing Day Zero Certainty

Most of you would know about Day 1 Certainty® - Fannie Mae's revolutionary program that helps the mortgage industry confirm the appraised value of a property.  

Lenders specializing in bank statement loans need a similar program to help them analyze borrower creditworthiness. This is where the concept of Day Zero Certainty comes into play. Day zero certainty refers to analyzing and reporting borrower creditworthiness or ‘borrower P&L’ the moment a lender receives a loan application.  

Sounds too good to be true? It’s possible with Prudent AI.  

Prudent AI: The Tech That Powers Certainty

We at Prudent AI have built a robust AI system that uses state-of-the-art lending intelligence models to provide critical insights on borrower creditworthiness from their bank statements. The insights offered by Prudent AI instill a new level of confidence to your lending process, right from the get-go.

Every time a set of bank statements is uploaded, Prudent AI sifts through transactions, classifies them, and calculates borrowers’ qualified income—all in under 15 minutes. Our platform is also designed to flag potential document tampering and fraudulent transactions in real-time. This enables you to not only pre-approve loans faster, but to do so with the utmost confidence.

Why is Day Zero Certainty a game changer?

The following are the benefits of Day Zero Certainty:  

  • Loan officers don’t have to chase documents: Day Zero Certainty minimizes the need for back-and-forth between loan officers and borrowers as it notifies about any missing or incomplete documents, soon after an application is received.
  • 360-degree borrower intelligence: With Day Zero Certainty, not only the income, but also a borrower's expenses, debt ratios, and existing loans can be evaluated. This holistic view of a borrower's financial status gives the lender deeper insights and a greater level of confidence on a borrower's ability to repay the loan.
  • Reduced time-to-decision: Borrower creditworthiness can be assessed the moment a loan application is received. This speeds up the decision process.  
  • Enhanced fraud detection: The real-time fraud detection capability can alert lenders to potential risks before they turn into costly mistakes.
  • Improved regulatory compliance: Day Zero Certainty helps lenders maintain strict compliance with lending regulations.

Impact of Prudent AI

Lenders along the likes of AngelOak, NewFi, Logan Finance, American Heritage, Clearedge, Lendsure, and many others have experienced the benefit of Prudent AI. On average, our customers saved 4 hours per loan application and have increased their loan volumes by 3X. In an industry where every minute counts, these efficiencies can be a game-changer.

The Future is Now

In a fiercely competitive lending landscape, Day Zero Certainty isn't just an edge; it's a necessity. With Prudent AI, you're not just keeping pace with the industry; you're defining its future.

Ready to step into the future of lending? Schedule a personalized demo.

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