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Digital Lending: Easing the Mortgage Process

digital lendingDigital mortgage technology is the way forward as more homebuyers look to completing their mortgage process online and lenders are looking to ease this process for these buyers. According to a recent tech study by the STRATMOR Group [1] on how lenders use technology in the mortgage process, the primary driver of lenders' technology investment has shifted from regulatory concerns to a focus on improving customer service, with providing a digital experience for borrowers increasingly becoming the new reality for them.

Lenders today are also enhancing their customer service through apps with new features such as person-to-person payments, personal financing managing tools, and virtual assistance, according to a global consumer survey on digital banking by Deloitte. This survey also revealed that 23 percent of consumers surveyed in the U.S. used online banking to apply for home equity or mortgage top-up loans and another 23 percent used it for mortgage and mortgage refinance. Experts from Bank of America [2] recently gave their insights into why the digital lending process was becoming so important and the trends that would define the housing market in 2019.

Enhancing the Digital Experience

"With mortgage rates still low and home prices steadying, it remains a great time to buy a home and in terms of easing the process, we're seeing a growing number of clients embracing digital mortgage technology when it comes to getting pre-approved and applying for loans," said John Schleck, SVP, Centralized and Online Sales, Bank of America. Additionally, he said that the bank's Digital Mortgage Experience platform was helping borrowers to also estimate the amount they could borrow while helping them to apply for a new mortgage or refinance an existing one online.

Online platforms are also providing first-time homebuyers with the right resources and information that can help them take that first step towards buying a home. According to A J Barkley, SVP, Consumer Lending at Bank of America, "Without the right resources homeownership can feel like a far-off dream, particularly for first-time and modest-income buyers. Keeping prospective buyers informed about money conscious ways to buy a home like the Affordable Loan Solution mortgage and assistance programs can help make this dream a reality."

Recently, fintech provider Blend [3] introduced a digital platform to ease the lending process for borrowers applying for Home Equity Lines of Credit (HELOC),  a loan that can be used by borrowers looking at large renovation projects or even those who plan to tap into their home equity to fund a second home. "Another option is to tap the equity in a primary residence to buy a second home, either using a home equity line of credit (HELOC) or a cash-out refinance. Buyers can opt to take out a HELOC on their primary home and use those funds for a down payment to purchase a vacation home," said Ann Thompson, SVP, Divisional Sales Executive Bank of America in a recent post [4] on MReport.

This is especially true before the spring buying season when more and more homeowners are looking to update and refresh their homes. "While DIY and smaller projects can often be covered by cash or a credit card, many homeowners are unaware that a HELOC can be a cost-effective way to fund the large-scale renovations homeowners are making today," explained Andrew Leff, SVP, National Business Development, Bank of America.

While TransUnion [5] expects HELOC originations to double over the next five years, this isn't the only housing trend that will define 2019. Millennials will continue to define the housing market this year too.

Homebuying Trends

"In 2018, millennials told us they equate homeownership with their personal and financial success. In 2019, we continue to see millennials, as well as the first Gen-Zers, taking steps toward homeownership as they weigh the important benefits of owning vs. renting," said Hilani Kerr, Retail Sales Executive at Bank of America.

For Kathy Cummings, SVP, Homeownership Solutions and Affordable Housing Programs Bank of America, her goal is to make sure that millennials are comfortable with their basics of homebuying. "As millennials reach their peak buying years, most rank homeownership high on their priority list," she said. "My goal is to make sure that they are comfortable with the homebuying basics and how homeownership fits in their overall financial picture as they embark on this journey."

With the industry anticipating another strong spring homebuying season, Thompson said that purchase mortgage originations were expected to increase by more than 4 percent. "Prospective buyers should have their budget and plan in place so that they are ready to act," she said.