Believe it or not, there are still some consumers who remember a time when getting a home mortgage started with a friendly conversation with a local lender who knew them well and ended with a firm handshake and an approved loan.
A New Lending Landscape
Today, the highly competitive housing market, frequently changing regulatory requirements, unforgiving timelines, and the sheer number of steps involved have made obtaining a mortgage not only more complicated but also less personal than it once was. Noncompliance penalties, which can quickly eat into a lender’s already-thin profit margins, and the high risks of buyers losing their dream homes have pushed many mortgage lenders to prioritize process over the people they serve.
Not only is this an unsustainable model, but perhaps more importantly, it’s not what either homebuyers or lenders want. Borrowers obviously need their mortgages to be completed quickly and in an error-free manner. And, of course, borrowers—especially millennials—also expect a high-tech experience with the ability to research and seek education online, all while gaining transparency into the process in a way that is automated and accessible to them anytime, anywhere, and on any device. These borrowers, even millennials, do not expect or want these needs to be addressed by technology alone.
It is important to remember that nobody sets out in life to get a mortgage. Rather what we all dream of is owning a home. Buyers want someone to help alleviate the anxiety that comes along with the responsibilities and commitment of a mortgage. They want someone to walk them through all of their options and take the time to answer their questions. They want an expert to guide them through their choices and help them make smart financial commitments.
Though it’s true, they may search for a home online and even look up potential loan rates on the web, but when it comes time to make decisions, today’s borrowers want a high-touch experience. They want the friendly conversation and firm handshake of decades past.
Preferring a Personal Touch
Interestingly, despite their comfort and familiarity with technology, millennial homebuyers are driving the demand for more personalized service. Earlier this year, the inaugural Ellie Mae Borrower Insights Survey  found that 44 percent of millennial homebuyers completed their mortgage application entirely in-person with a lender. Another 30 percent started the process online but finished in-person. Surprisingly, one-quarter of millennial homeowners said more face-to-face interaction with their lender would have improved their mortgage experience.
This generation has grown up accustomed to ordering anything they want online or from a smartphone. In their minds, getting a mortgage should be as fast and convenient as placing an order on Amazon, so in addition to the high-touch, they do also expect high-tech. The difference? It needs to be high-tech with purpose. Borrowers want information and updates that are relevant to them and their specific situation.
How can residential mortgage lenders, already feeling squeezed for time and profit, meet these demands for higher-touch customer service, while finding origination efficiencies in this hyper-competitive, zero-tolerance industry? Many who have struck the right balance rely on mortgage automation technology.
Automating the American Dream
The good news for lenders is that many of the workflows needed to take a mortgage from origination to closing have been automated, including CRM, point of sale, processing, underwriting, closing, funding, post-closing, and shipping. Using this automation allows the lender to focus more of their efforts on engaging and interacting with the borrower. In addition to reducing complexity, by removing the likelihood of human error, lenders are better able to ensure loan quality, compliance, and efficiency. For example, these technology solutions can automatically flag loans that could violate ATR/QM, HOEPA, HMDA, FHA, TILA, and NMLS requirements. Catching potential violations early means they can be resolved before they jeopardize closing dates, which will really negatively impact the borrower’s experience and satisfaction. Some automation solutions also provide electronic document management capabilities, which can make it easier for a lending firm to demonstrate regulatory compliance in the event of an audit.
Another advantage that automation provides to lenders is cost-savings. According to the Mortgage Bankers Association, origination costs are more than $7,000 per loan. That makes efficiency closely linked to profitability. The faster a loan can be processed, the fewer costs are incurred, the more money flows to the lender’s bottom line, and the fewer mistakes in the manufacturing process. This leads to faster delivery to investors and more liquidity for the lender to help the next homebuyer reach their American Dream.
But, what many lenders are finding is that by leveraging automation to manage the parts of the process that are data-centric or routine, there is more time freed up for lenders to have the meaningful face-to-face interaction that homebuyers want. For the homebuyer, new, simple solutions are now available to enable the entire loan application to be completed online, regardless of device.
Opening the Gates
While some mortgage automation has existed in pockets of the process, it has barely scratched the surface of what is possible. The real opportunity is a move toward open platforms that provide lenders, loan officers, brokers, third-party investors, technology developers—really, anyone involved in the mortgage business—greater flexibility to innovate and to incorporate automation throughout the entire origination process.
Rather than be constrained by what technology providers develop, with open application programming interfaces (APIs), any lender or partner connected to the platform can build whatever tools they want to become more competitive. These new tools are supported by the core system of record, the lending operating system, which assures their compliance with the vast list of state, federal, and investor regulations, as well as ensures a seamless integration with other automated workflows which they can leverage. Everything is consistent and compliant.
As platforms evolve, developers will be able to fully leverage data, using machine learning, artificial intelligence, and other cutting-edge technologies to configure workflow automations to increase pull-through rates, improve cycle times, and increase efficiency and profitability.
It's All About the Customer
While many lenders may dream of a day when compliance is not all-consuming for their business, the reality is that whether they are faced with new regulation or de-regulation, change is a constant in the mortgage business. By embracing mortgage automation technology, lenders can prevent these changes from becoming a problem for the homebuyer or for their bottom line. It is through the proper use of data and automation that lenders can close more loans, more efficiently, more compliantly, and with the value-focused outcome of helping borrowers get from interest, to application, to their dream homes faster.