Since its inception, the mortgage industry has been a key part of the U.S. housing market and the economy. As advancements in technology have created new ways for lenders to interact with customers, the way we view mortgages has changed dramatically over time, including determining whether someone is eligible to receive one.
To better understand how technology has shaped the mortgage industry, especially the processing of mortgage loans, let’s take a closer look at some of the biggest changes that have occurred over time.
Three Biggest Impacts of Tech
Technology has evolved the mortgage industry at three levels:
- Communication
- Process
- Automation
Let’s talk about each point.
1. Communication
Quality communication between all parties has become an important challenge to be solved by technology. For a typical mortgage transaction, between 80 and 100 professionals are working together in the transaction process. This includes many parties, from real estate agents to appraisers and third-party service providers such as title companies and inspectors.
Historically, each professional has been required to communicate within their own organization and reconcile that information with other parties in the transaction. This leads to a tremendous amount of duplicated effort and lost opportunities for more efficient communication and collaboration.
Communication plays a critical role in mortgage transactions because it is often the single most important factor in determining whether the loan will fund or not. A single miscommunication or mistake can lead to an entire loan submission being rejected even if it has met all other funding criteria.
The consequences of not communicating the right information in the right way at the right time are completely detrimental, especially when you consider that most loans are funded within only 24 to 48 hours of being submitted.
The volume of communication must support self-service capabilities and provide the resources needed to make informed underwriting decisions. Developments in tech involve integrating data repositories with workflow management systems, using web services, and developing/upgrading core communication infrastructure.
2. Process
Mortgage documentation is one of the most complex types of documents to have ever existed. Mortgage professionals are required to verify hundreds of pages of loan-related information before submitting the loan for approval. This verification process can be complicated, time-consuming, and resource-intensive, especially when you consider that it must be repeated at each stage of the loan process, including underwriting and closing.
Process technology has enabled lenders to develop better business processes while automating time-consuming manual tasks, creating paper trails of requests and approvals, and removing clerical errors. This enables lenders to tighten the mortgage process, making it more efficient for customers while reducing costs through automation of back-office processes.
Also, process technology manages the flow of information available at different processing stages, thus allowing for real-time visibility into the mortgage process.
3. Automation
Underwriting is the process of evaluating the favorable factors from the borrower’s credit, income, assets, and liabilities to determine whether a mortgage should be made and at what interest rate. To achieve maximum profitability, lenders must automate as many manual tasks as possible while still providing personalized service for their customers.
This partly explains why it sometimes takes a while before applicants know the status of their loans. Although some are using automated systems for scheduling interactions or reviewing information, the applicants don’t know if their current application is being reviewed or one of the many other applications sitting in queues.
Mortgage automation is about making better use of technology to achieve more intelligent lending decisions by transforming data into actionable insights with speed, accuracy, and consistency across the enterprise. Mortgage automation represents a shift from “transaction” to “decision support.”
As more lenders are turning toward automation, some are finding the prospect of building an in-house solution daunting. Thus, they can easily outsource their mortgage process and benefit from a SaaS model that includes reduced costs, improved data quality, and better service levels.
With automation, mortgage loan officers have been able to work from anywhere for several years. Advancements in technology also mean an applicant can apply for a mortgage loan using a mobile device and receive real-time results on their status, even while away from the office.
Most of all, automated underwriting has produced a dramatic change to the decision-making for mortgage approvals, which, in turn, has dramatically improved the speed at which customers can close on their mortgages. The industry continues to explore this realm of technology as lenders look for ways to automate still more of the process while preserving quality lending practices.
It’s important to note that automation doesn’t always imply a replacement of humans by machines but rather an augmentation strategy. The role of employees changes from purely manual work to management of processes and decisions. Therefore, there’s no need to worry about them losing their job anytime soon.
