Editor's Note: This feature originally appeared in the December issue of MReport, click here  to view the full issue.
In today’s on-the-go, need-it-now world, consumers expect to manage their finances when, where, and how they want. Rarely is the need for accessibility and information greater than when preparing to make one of the biggest purchases of their lives—a new home.
While the digital mortgage is not new, it is evolving—and just in the nick of time. When consumers are at work on their desktop, they want to be able to reach their lender. If they’re running to lunch and new conditions arise that apply to their mortgage, they expect a text message or an email on their mobile phone that alerts them.
However, it’s not enough to have a great consumer experience. All the pieces of the process have to fit and work together, and that is only achieved through integration. Without tight integration between the online origination portal and borrower engagement portal and backend processing, efficiency is lost, along with business and revenue. “Digital mortgage” now means everything from origination, all the way through to delivery.
Know Your Borrower
A borrower’s current financial institution has the inside track at winning their business, but only if the bank or credit union can deliver the right mix of loan costs, services, and experience. Borrowers want an Amazon-like experience, where the knowledge gained from their past activity with a financial institution is kept and incorporated into subsequent interactions, including mortgage applications. They do not want to start from scratch when applying for a mortgage. They expect their financial institution to use the data it already has to provide a better, more intelligent experience for them. The real advantage comes if the financial institution is able to integrate essential services to create intuitive experiences that bring financial lending products under one umbrella as one branded experience.
Partnering with multiple third parties can make it difficult to achieve this outcome. Working with a single technology source can help ensure a complete, integrated lending ecosystem, which in turn delivers a better experience for borrowers.
Consumers also seem willing to do things differently, if it helps to expedite the loan process, according to the most recent quarterly consumer trends survey from Fiserv. The “Expectations & Experiences: Borrowing and Wealth Management” survey found that as much as half of recent home application tasks are being completed online, although using a mobile device to complete those same tasks is still relatively rare. The survey also found borrowers who applied for a loan in the past five years used online or mobile capabilities to electronically sign loan documents,
photograph and upload loan materials and driver’s licenses, and verify identities.
Despite the trend toward online, self-service applications, it does seem consumers want it both ways. They want the benefits that technology gives them. They want to be able to submit information when it’s convenient for them, to see where they are in the origination process, and to help their lender accelerate the process by getting documents back to them, usually through electronic means, but they still may want that human contact that only a mortgage lending specialist can give them. For many people, buying a home is the biggest financial transaction of their lives.
They want an advisor to help them navigate the entire process, much like they do when they work with their real estate agent. For lenders this can include reassuring them, supporting them, and helping them figure out alternative options if they can’t qualify for the type of loan they initially thought they wanted.
It’s All About Technology
Today’s mortgage industry is a buyer’s market. The refi market is gone, and it’s going to be gone for a while. Lenders are all competing for the same borrower in the same space, and the only things that are going to differentiate one competitor from the other are fees and the borrower’s experience. The key for both is technology.
Creating efficiencies, reducing costs, growing market share, offering a better borrowing experience, and providing a better user experience are all tied to technology. So is automation and workflow and compliance logic. With technology, a financial institution can create an integrated process from origination to close with less overall cost.
Decrease Risk With Automation
Financial institutions are well aware of the issues of compliance, regulation, and risk associated with mortgages but may not realize how digital capabilities can significantly simplify the process. Manual processes are cumbersome and prone to error, and there are countless compliance rules to consider. Lenders and investors must be able to verify and validate that the loan they’re about to service or create doesn’t have undue risk attached to it.
Technology automates many of those tasks, which not only streamlines processes but also helps diminish the regulatory burden and associated risk. A digital mortgage may mean a digital transformation for some financial institutions. Systems may need to be upgraded—not just their mortgage origination systems but also their entire operation. Business process improvements may be necessary. People and processes and components have to be put in place. Employees have to be trained to support those new systems.
A digital transformation can be a complex and daunting task. And then, there’s the cost factor—how much money has the financial institution budgeted for its digital transformation and how long will it take to recognize ROI when it’s operating efficiently?
Putting the Squeeze On
Lenders are looking to reduce their costs due to market compression and margin squeeze. For bigger lenders, an easy answer is to reduce staffing. But then, how do they grow market share? Midmarket and smaller lenders face the same challenges, but most don’t have the option of cutting staff. They need to be more efficient, while also growing market share. But how?
The answer is technology. More specifically, connected tools including source data for income and asset verifications, OCR/ICR for document and data validation, and eLending tools for hybrid document execution, delivery, and retention. Regardless of size, lenders that deliver intuitive, immediate, and inspired digitallending experiences improve their ability to gain market share—and position their organizations to win by delivering a better digital borrower experience and decreased time to close.
As lenders expand volume with a faster, less complex, less risky product, they’ll have more income. According to Nerdwallet’s 2018 Home Buyer Report, 82 percent of millennials (ages 18-34) say buying a home is a priority, compared with 75 percent of Generation X (35-54), and 69 percent of baby boomers (55 and older).
Millennials also aspire to buy a greater number of homes, on average, throughout their lifetime and are most likely to say they’d like to buy a home to rent out for extra income. Providing instantaneous, digital access positions lenders to capture this tech-savvy generation of borrowers.
Machine learning and artificial intelligence (AI) will play a more prominent role in everything we do, including the mortgage experience. Machine learning uses data to help identify trends and then feeds that data into business intelligence. The information is then used to validate or display those trends, which can point to ways to improve the business process. As more data becomes available to lenders, more rules and automated workflows are created.
That means repeatable intelligent decisions can be made based on all types of data and the variables, or the variable mix, of that data. When an organization starts to remove the human element from complex decisions, such as ensuring a borrower meets specific credit/financial requirements, it can automate those transactions, including validating when those requirements have been met.
Machine learning also helps create a better borrower experience, adding automation for greater accuracy and speed. New digital interfaces are developed on top of automated workflows, digital data acquisition, and automated artificial intelligence and machine learning. The interaction with the borrower and back-office staff continues to evolve, becoming more automated, factual, and real-time.
In addition, blockchain is making large strides in changing the mortgage industry. With all of the touchpoints on a mortgage transaction, there is a need for a single source of accurate, verified data and blockchain provides that. The data from a blockchain record is in chronological order and supports changes to information on liens, tax information, property assessment valuations, transfer of ownership, and other information, making it easier to verify and validate the owner of a property and its value, including the sale of assets on the secondary market.
Blockchain also helps mitigate fraud and reduces time and cost during the real estate transaction, especially in the title search and insurance process.
The Digital Opportunity
The opportunity exists to provide a more straightforward, more efficient mortgage transaction, using digital technology and automation to reduce the cost of a loan throughout the life of a loan.m An intelligent, holistic process considers the full ecosystem and all the players.
Digital mortgage capabilities can deliver a dramatically improved consumer borrowing experience and allow financial institutions to expand their footprints to places without a brick-and-mortar presence or where loan originators aren’t available. It’s an opportunity to make the borrower experience easy and intuitive, and to deliver a differentiated experience quickly and accurately.