This piece originally appeared in the June 2022 edition of MReport magazine, online now [1].
Remember the days when customers went into a bank lobby to fill out a loan application? Or when closing that application meant combing through a stack of papers, nearly as high as a shoebox, intently searching every page to ensure all the signatures and initials were secured?
Thankfully, the mortgage lending process looks quite a bit different today.
The COVID-19 pandemic accelerated the need for a digital-centric borrowing experience. Consumers, who do much of their shopping on mobile devices, now expect digital-first interactions in every engagement. They want applications to be available via digital channels, and they need it to be seamless.
They demand a mobile-friendly experience. They want the ability to easily upload documents and, because they are accustomed to getting push notifications about such things as food deliveries and news about their favorite teams, they expect to be consistently updated throughout the homebuying journey.
According to the National Association of Realtors’ 2021 Profile of Home Buyers and Sellers [2], first-time buyers accounted for 34% of all home sales. That was an increase from the previous year’s 31% figure.
The typical first-time buyer was 33 years old. And older generations, often characterized as hesitant to embrace current technologies, are quite accustomed to many of the conveniences of a digital-first shopping experience.
The Keys to an Improved Lending Experience
The mortgage lending process is still measured in days and weeks—not the seconds and minutes benchmark that is the norm in other industries.
Getting from “yes” to having the keys in hand remains a complicated journey that requires plenty of approvals, verifications, and, too often, manual interventions that can lead to higher error rates.
Lenders describe the origination process as cumbersome. The average time to offer is multiple weeks, which can lead to frequent cancellations, unrealized revenue, and poor customer service.
But over the last two years, lenders, aided by advancements in automation and the ability of staffers to work from anywhere, have greatly reduced the time it takes to close. During the pandemic, electronic signatures and virtual meetings for closings became valuable, and necessary, elements of the customer experience.
The homebuying journey is being transformed. Here are some of the key trends that are reshaping the process.
Increased API Adoption
An application programming interface (API) allows software to integrate and interact with other software. It sets the guidelines, limits the scope of available activities, and controls the flow of information.
Mortgage lenders can utilize APIs to get data to flow seamlessly across the organization. Lenders, according to research by Fannie Mae, view APIs as the technology with the greatest potential to streamline business processes.
An increasing number of organizations are using workflow automation tools to improve efficiency and allow employees to focus on high-value tasks, not monotonous work. This reduces costs and errors and leads to a better customer experience.
In conjunction with the right platform, lenders can integrate multiple systems or applications to take advantage of the functionality that best meets their needs.
Customers receive access to statements and loan information much faster, which is in line with the digital-first interactions that are a staple of their day-to-day lives.
By entering information such as a name and Social Security number, the API can supply a borrower’s income, employment history, and credit profile. A home address can produce an appraisal value and comparable residences.
Also of critical importance: APIs can support data accuracy and regulatory compliance.
Artificial Intelligence, Machine Learning, and RPA Provide Real-World Value
Document handling, verifying application forms, pay stubs, and tax returns … for mortgage lenders, repetitive tasks are as sizable a part of the application process as interest rates and closing costs.
Some sectors of the financial services industry had already integrated artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA) in a widespread manner before the pandemic made remote work a necessity. The mortgage industry wasn’t as quick to adopt the technologies but is rapidly trying to make up for lost time.
A Forbes survey of 200 senior executives from the U.S. mortgage industry found that 55% believe AI will make their firm—and the industry overall—more competitive.
A greater percentage of executives (59%) said AI’s impact on the industry is now a key focus in strategic planning.
Augmenting existing solutions with human intelligence, AI, machine learning, and RPA can ease the document-intensive process of applying for a home loan. From the use of chatbots and voice assistants to document organization, risk management, and fraud detection, these technologies are providing value at each stage of the homebuying experience.
During loan origination, a largely manual phase that involves the identification and resolution of errors, RPA can perform high-volume, repetitive tasks that clean up mistakes and lead to faster approvals. That, in turn, enhances customer satisfaction.
The Cloud Moves to the Forefront
The ability to finalize documents remotely is no longer a perk that is only offered by innovative lenders. It’s a necessity.
Employees, many of whom are working from home, require secure, scalable access to files and tools that help them perform their jobs. Enter the cloud, where enterprise content management and content services solutions can be optimized to suit a lender’s unique needs and requirements.
Cloud-based solutions offer easier technology upgrades, greater flexibility, and scalability, and can remove many of the headaches involved in the compliance process.
There’s also this combination (one that is not pie in the sky): working in the cloud can reduce costs and provide revenue-generation
opportunities. The latter is realized when lenders, boosted by improved processes, can move loans from application to funding in a shorter amount of time.
Omnichannel Is Where It’s At
A larger number of homebuyers are young, tech-savvy, and accustomed to digital banking. They might not remember the last time they visited their favorite financial institution.
By effectively deploying the aforementioned technologies, lenders can communicate with them on their preferred channels.
Consumers expect a quick response to their inquiries, whether it’s via chatbot, email, mobile app, social media, or even a phone call (remember those?).
They also prefer a quick preapproval, a locked-in rate, and easy access to documents and online tools such as mortgage and closing cost calculators. An omnichannel experience—one that provides personalized, end-to-end service—isn’t just an effective way to manage the customer relationship.
It’s a competitive advantage.
A consumer lending study by Aite-Novarica Group found that 67% of the respondents who were interested in a one-stop homebuying experience would want to know more about receiving discounts on closing costs and rebates of a real estate agent’s commission that could be applied to such costs. The majority of those respondents were also interested in an omnichannel experience that would allow them to manage everything associated with purchasing a home—from selecting an agent to searching for a home and saving comments on the properties they liked.
Lenders that offer these services, the research showed, can mitigate some of the sticker shock “by saving consumers money across the entire process” and providing “a less stressful experience.”
A Personal Touch: Still Priceless
Every mortgage application is different. Many borrowers have standard, consistent incomes. Some are self-employed. Others might be real estate investors.
Evaluating and selecting the right IT vendor is critical to lenders’ ongoing success. The same goes for finding and assessing gaps in existing processes and developing a plan to address any inefficiencies.
Automation can do a lot of the work, but a human touch will always be needed for exceptions and complex transactions. Today’s lenders, according to an Ellie Mae survey, communicate 20% more with their customers.
Human-led support supplemented with a seamless digital experience is a heck of a tandem for lenders.
The consumer lending study by Aite-Novarica Group found that there is “a widespread lack of knowledge across various aspects of the homeownership process.”
As a result, lenders have a chance to “create additional stickiness” by educating consumers about the homebuying experience. Technology can do a lot of the heavy lifting in the homebuying process, leaving humans to coordinate the most important tasks that make moving day a reality.