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Demand for All-Digital Mortgages Grows

ICE Mortgage Technology’s latest Borrower and Lender Insights Survey found that more borrowers and homebuyers are taking advantage of tech tools to simplify the homebuying and search process.

The survey found that 99.3% of lenders believe technology can help improve the mortgage application process in at least one way, with the most commonly cited benefits including simplifying the entire process (74%), reducing time to close (70%) and minimizing data entry (67%).

“Last year brought our industry a perfect storm,” said Joe Tyrrell, President, ICE Mortgage Technology. “You not only had COVID, which required lenders to shift to virtual workforces, but you also had to conduct business in a safe and socially distanced way with borrowers; at the same time, we were experiencing a historical increase in loan volume. This caused many lenders to reevaluate their technology partners, how they were leveraging technology, the systems that they employed, and the tools that they relied on. We heard many stories from our lenders across the country that had to completely and permanently shift the way they served borrowers.”

According to the survey, the importance of lenders offering digital solutions to borrowers increased in 2020, with 58% saying the availability of an online application would likely impact their lender decision (up from 50% in 2018). The offering of a mobile app was found to less likely to influence a borrowers’ lender selection, with 47% saying the availability of one would factor into their decision in 2020, compared to 40% in 2018.

Social distancing and virtual meetings became the new practice in 2020, as pandemic-related fears pushed more homebuyers to a more digital and less hand-on process.

“From a borrower’s perspective, the pandemic has accelerated the demand for a consistent, digital first borrowing experience,” said Tyrrell. “Signing documents electronically is quickly becoming the minimum, and borrowers expect a seamless experience from start to finish. In 2020, many lenders cobbled together different solutions to meet borrower demands, but that often led to a more confusing, fragmented process. COVID highlighted the need for a single consistent digital experience for borrowers.”

The report found that homeowners who used an online application appreciated the simpler application process (55%), reduced time to close (53%), and resulted in fewer in-person interactions (49%). Not surprisingly, decreased in-person interactions grew in importance in 2020, as just 37% of consumers in 2018 cited ‘no need to meet in person’ as something they liked about their online application process. Whether they had been through the mortgage loan process or not, 62.5% of consumers surveyed believe that an online mortgage process would make buying a home easier than an in-person process.

The adoption of more digital tools caused lenders to pivot and develop new solutions to meet this growing need for a more “hands-off” process.

“Due to the large scale of volume happening and an increase in consumer demand and expectations, a number of lenders in 2020 had to piece together different electronic closing solutions to keep up,” said Nancy Alley, Vice President of product strategy, ICE Mortgage Technology. “The survey results completely align with the growing need for one consistent and seamless automated platform that connects borrowers to lenders all the way to e-signing, and saves lenders time and money along the way.”

Currently, online applications and online portals are the digital tools most offered among lenders, with more than nine in 10 offering both options to borrowers (91%), respectively. Of lenders who offer online applications, 60% said more than half of all loan applications are submitted online, while 38% said more than 80% of their applications were completed online in 2020. However, traditional loan application methods may be more common at larger organizations. Half of large institutional lenders, or those with 200 or more employees, indicated that less than 50% of their loan applications were submitted online.

In addition to satisfying borrowers, ICE found that technology played a major role in the time to close all loans in Q1, from 58 days in January to 52 days in March. The time to close all purchase loans decreased over the quarter, from 57 days in January, to 53 days in February, and down to 51 days in March.

A recent Zillow survey found that a majority of millennials (59%) said they would be at least somewhat confident making an offer on a home they toured virtually, while 39% would be comfortable buying a home online. The same survey found that more want digital tools available during the home shopping process.

"It's clear that strong demand from the next generation of buyers will keep real estate technology in place long after the pandemic is over," said Zillow SVP of Product Matt Daimler. "Digital tools rapidly adopted during the pandemic not only make home shopping safer, they make it faster and easier."

Additional findings by the ICE Borrower and Lender Insights Survey included:

  • Nearly nine in 10 lenders (86%) said borrowers should spend less than 30 minutes filling out a loan application, but 68% of borrowers said they actually spent 30 minutes or more completing their application.
  • The majority of lenders (72%) felt borrowers were satisfied with the amount of communication from them. More than half of lenders (74.8%) said they contacted borrowers at least once per week to update them on the status of their loan after the application was filed.
  • If they were to apply for a new mortgage within the next year, borrowers would most appreciate interacting with their lender through an equal blend of traditional and digital methods (26%), closely followed by interactions that have a more traditional focus (e.g., telephone) (25%), and purely traditional interactions (e.g., in-person) (24%).
  • Homeowners who used an online application appreciated the simpler application process (55%), reduced time to close (53%), and fewer in-person interactions (49%)–a significant rise due to the pandemic. In 2018, only 37% of consumers cited ‘No need to meet in person’ as something they liked about their online application process.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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