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This is where mortgage technology is headed

One day soon, entire lending process will be online

Many lenders have already started the process of going digital. Why? As Roostify CEO Rajesh Bhat put it in a message to HousingWire, “It’s what customers want.”

On Monday, at the Mortgage Bankers Association annual conference in Boston, several panelists spoke on the topic at a session titled Overcoming the Final Hurdles to Digital Mortgage.

“More and more transactions are moving online, and today's consumers – especially the 35-and-under set – take it as a given that they'll be able to transact online,” Bhat told HousingWire.

But borrowers aren’t the only ones who benefit from going digital. It can also be helpful for lenders. Digital verification helps lenders make decisions quicker and based on more accurate information.

“Digital saves significant time and effort versus manual, paper-based processing,” Bhat said. Lenders get the documents they need faster, can process them faster, and are less at risk for errors that can delay or derail a loan decision.

As of right now, while many are entering the digital realm, the housing market could still be several years off from going 100% digital.

“We do have a very limited version of it due to the number of investors that accept it, the providers who can participate and the number of counties and notaries involved,” Joseph Tyrell, Ellie Mae executive vice president of corporate strategy, said in an interview with HousingWire.

“So as an industry we’re definitely progressing collectively to truly realize an e-mortgage,” Tyrell said. “But it’s more than tech, it’s about collaboration.”

John Harrell, USAA Bank vice president of mortgage pointed out other benefits to going digital in an interview with HousingWire:

  • Better customer experience through design and automation
  • Convenience
  • Efficiency which leads to lower costs, the savings can be passed on to buyers
  • Better from compliance and quality perspective, it takes out the human error

While Harrell points out some reasons why lenders should look to going digital, there are some factors that prevent that change from happening. Some of the hindrances he pointed out include being stuck in legacy, retail business models and not understanding digital or how to get started. Harrell also said that many banks don’t get prioritized funding in their mortgage lending departments.

More simply put: change is hard, according to Bhat.

Not only is it hard, but the mortgage industry may not receive the same pressure to change as other industries.

“Other tech companies outside the mortgage space are forced to drive for innovation because of their customers’ demand, but think about borrowers — they are only doing a transaction once every four or five years, so lenders haven’t felt the pressure from consumers like other parts of the industry,” Tyrell said at the session.

“But it’s something we need to do to be ready — Millennial borrowers have different expectations of what this experience will be like,” he said.

Despite these obstacles, however, there is hope for the future of digital mortgage. In fact, Harrell expects to see mortgages go 100% digital in at least five years. Within two to three years the majority of the process will be digital, he said in the interview.

The key? The GSEs need to adopt electronic documents and be able to securitize them, Harrell said. After that, all counties across the U.S. will be able to handle digital documents.

But is that the key? Or is it rather, as Bhat predicts, a natural reaction as Millennials take over the market? Or will it require a little of both? Either way, experts agree that the market is moving towards being 100% digital.

“At some point – and not THAT far off – there will be homebuyers who have never made a significant purchase offline,” Bhat said.

At this point, lenders simply need to take a step in the right direction, the panelists agreed. While the system may not be perfect, an step towards going digital will benefit the consumers and lenders alike.

“The mindset of starting small and moving outwards is growing among lenders,” Blend CEO Nima Ghamsari said.

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