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The Mortgage Industry’s Future Is Being Written Today

This piece originally appeared in the April 2023 edition of MortgagePoint magazine, online now.

If it seems like the pace of technology is constantly accelerating, it’s because it is. It’s called accelerated change—the exponential rate at which new innovations are creating profound changes in the way we live and work.

For example, typewriters existed for nearly 100 years before the first word processors emerged in the 1970s. By the 1990s, most people were using Microsoft Word on their personal computers. Today, we’re seeing the launch of new AI technologies that can write for us … if we want them to.

It may not always seem like it, but new technologies like AI, machine learning, and intelligent automation technology are evolving in the mortgage industry at a rapid pace. While many mortgage processes remain rooted in paper and manual effort, the industry is on the verge of a seismic shift in digital innovation that promises something for everybody—lenders, servicers, data providers, component services, and consumers alike.

AI, ML, and Intelligent Automation
Over the past several years alone, our industry has seen a number of new, visionary technologies, especially in the areas of AI and machine learning. While it’s true that many applications of AI and machine learning still need to be evaluated and proven through proofs of concept and real-time mortgage scenarios, that work is already starting to happen.

For example, right now, emerging technologies like machine learning tools are allowing lenders and servicers to optimize their data to create a holistic view of their customers and analyze prepayment behavior to forecast when a customer benefits from certain products and services, whether it’s a home equity loan to pay for a child’s college tuition or a borrower who needs mortgage relief. AI and machine learning are being leveraged to prioritize delinquent borrowers who require higher levels of attention as well as to optimize when and how to connect with borrowers in the most effective way possible.

As the applications continue to be refined, AI, machine learning and chatbot interaction technologies will accelerate adoption of smart process automation far beyond what lenders and servicers are currently capable of. For example, AI can be used to leverage existing data and produce new data to enable systems to perform bulk processing of similar processes. This has already taken place in the servicing arena, when servicers with the right technology platform were able to bulk process borrower requests for forbearance during the pandemic.

Bulk processing automation today can assist with pre-foreclosure analysis and QA among other servicer processes. Two other developments that will fast-track the adoption of AI are the ongoing development of industry standards and advanced application programming interfaces (APIs) that allow faster, simpler connections between systems, which will create more seamless collaborations between different mortgage market participants. The ecosystem is evolving. Ultimately, the future lies in connecting mortgage origination processes with servicing processes so both become seamless with each other. For the lenders, this will be the key to improving borrower retention numbers, as better servicing will inevitably lead customers to buy more products and services from those that made their home financing goals possible.

Improving the Borrower’s Journey
AI and machine learning aside, over the past 15 years, the arrival of automated workflow technology and robotic process automation (RPA) has begun transforming origination and servicing processes, such as providing borrowers with the ability to drive their own mortgage application process and access tools for paying their mortgage or requesting assistance. Indeed, no-touch processing of basic borrower self-service requests has quickly become table stakes for lenders and servicers, whereby borrowers enter a request for information or service and receive an immediate response.

Over the next few years, however, AI and machine learning will cause this transformation to accelerate by taking new forms of data about borrowers, and automatically launching the correct workflows and notifications to drive these processes the next level forward without any human assistance.

Workflow automation with AI is the most powerful opportunity for growth and expansion of capabilities that the industry has. For both lenders and servicers, self-service technology fueled by AI, machine learning, and workflow automation will deliver rapid digital efficiency that will reduce an organization’s cycle times, drive profitability, and improve other success metrics. But ultimately it will benefit consumers more than anyone. In fact, we are soon approaching the day when anyone—someone buying a home, or someone who already owns a home—can go online, make a request, and get what they need without ever needing to talk to anyone. Of course, many consumers will still want to work with human experts. But they’ll also have the option not to if they don’t find it necessary.

Drones Are About to Take Off
What do drones have to do with all of this? It is still about the technology and the data that is extracted and used in many ways.

It may seem hard to believe, but the first known use of unmanned aircraft was in 1849, when Austria launched balloons to drop bombs on Venice. As technology became smaller and cheaper to produce, drones evolved from remote-controlled aircraft flown by hobbyists to being outfitted by professionals with cameras for all kinds of uses, from agriculture to commercial construction to marketing for-sale properties.

According to Drone Industry Insights, the global drone market is expected to grow from $26.3 billion in 2021 to $41.3 billion by 2026, while the Federal Aviation Administration projected there will be over two million drones flying throughout the U.S. by 2024.

Drones are now having a growing impact in the appraisal and property insurance industries as well. According to a recent report from Deloitte, commercial drone use can save the insurance industry billions of dollars per year. As the severity of natural disasters has continued to grow, drones are used to assess property damage, so that mortgage servicers can fund claims faster and ensure borrowers can repair their homes as quickly as possible. The data and images collected can be transmitted, but within the limitations of the cell networks. If all 5G is down in a disaster area, this data transfer will remain a challenge.

At Clarifire, we’re starting our work with mortgage insurers and property perseveration companies and appraisers that are using drone technology to create more robust products and services, which we are incorporating into our technology platform to provide servicers and their customers with greater visibility into the true condition of properties.

Getting There From Here
Our industry has plenty of reasons to be optimistic about its digital future. In addition to the creation of new digital technologies, the pandemic gave everyone a major digital push by forcing companies and consumers to interact remotely to get home financing done. However, there are things that mortgage lenders and servicers and technology vendors must do for our industry to reach its full digital potential. Mortgage servicers, for example, need more seamless integrations that reduce or eliminate the manual tasks and spreadsheets that many still use and begin leveraging and extending automated workflows to their third-party relationships.

From an industry standpoint, we could also use more partnerships between lenders, servicers, and the GSEs, like Freddie Mac’s recent launch of its Resolve platform, which is using API technology to speed up loan workout option processing for servicers and provide faster mortgage assistance for borrowers.

As servicing operations have grown increasingly chaotic during the pandemic and a seemingly never-ending pattern of natural disasters continues to increase, it’s these types of groundbreaking integrations and partnerships that enable servicers to address the widest range of borrower needs calmly and efficiently, even under the most extraordinary circumstances.

Look at Xerox, for example. The company uses AI in its digital mail centers to compare errors against historical data that it has on millions of its devices around the world. It then finds the best way to solve the problem based on what has happened with other boards, equipment, and service teams.

Since Clarifire started working with Xerox, we have been adding data capture, extraction, and automated workflow synergies to improve processes for mortgage servicers, bankers, and other industry organizations. Whether it’s a mortgage in default or dispatching a drone to the site of a natural disaster, the borrower experience improves dramatically due to the accessibility of critical data in rapid time.

As new digital innovations emerge, one of the hurdles lenders and servicers will need to overcome is deciding whether to buy or build technology—or perhaps doing both.

There are hefty downsides to both purchasing a technology platform from a third party or hiring a team to develop it yourself. Most off-the-shelf mortgage servicing software has evolved little over the past decade, while building technology steals resources away from an originator or servicer’s core business.

But why not the best of both worlds—one application with pre-built processes and the ability to build your own?

For most mortgage participants, the optimal choice going forward is likely to be buying flexible technology that can be easily configured and connected to how they do business. With the right solution, lenders and servicers gain real-time access to borrower information and preset or tailor-made automated workflows that accelerate proven business processes. When workflow automation is combined with emerging AI and machine learning capabilities, these solutions can contribute to unheard of levels of transparency and visibility, drive regulatory compliance, and accelerate business growth.

Whichever strategic direction they choose, lenders and servicers have little to gain by putting off their decision. In fact, with new originations slowing amid higher mortgage rates and delinquency rates still near all-time lows, along with the unrest in the banking industry, the best time for organizations to implement their digital future is now. Regardless of which way the market heads from here, the companies that embrace their technology investments today will invariably come out ahead in the future.

About Author: Jane Mason

JANE MASON is the founder of Clarifire, CEO, and the original intellectual architect of an innovative multi-dimensional workflow solution that transcends numerous industries called after the same name, CLARIFIRE. These industries include financial services, healthcare, and enterprise workflow. Mason has grown her company over the past decade into a thriving SOC 2 Type II software-as-a service provider.

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