Digital technology has disrupted businesses and industries from publishing to public transportation, so can the mortgage industry be far behind? Actually, anyone who’s applied for a mortgage recently will have recognized that things are already changing fast.
That’s because the combination of digital technology, predictive analytics, machine learning, complex repetitive tasks and oceans of data make the mortgage industry a fertile environment for automation and a complete make-over. But what’s really driving change are customer expectations. As Millennials rise in the workforce and move from their parents’ basements into homes of their own, they are demanding that mortgages be as easy to buy online as concert tickets, anytime anywhere they want, and at the best possible prices.
Meeting that high expectation will require more innovation, disruption and technology than has been deployed to date. But more technology comes with its own challenges. Understanding new customers’ expectations, realizing those opportunities, recognizing the concerns and creating the right solutions are the keys to a bright digital future in the mortgage industry.
THE CURRENT LANDSCAPE
Until recently, the mortgage process has seen little change from the process 20 or 30 years ago – slow, inefficient, complicated, a mountain of paperwork and requiring manual intervention at every step from application and processing, to underwriting and closing.
Plus, it’s been a daunting experience — especially for first-time buyers. The amount of personal information required feels invasive and repetitive. And with so many moving parts and parties involved, not to mention a ticking clock, the mortgage process is not something consumers have looked forward to.
Add to that an industry culture that is still emerging from a historic downturn so lengthy that many professionals have never experienced a normal mortgage market.
After a decade in which most new lenders in the industry performed refinancings almost exclusively, today these crisis-era mortgage professionals are seeing a rising tide of purchase originations for the first time. Moreover, the customers now include an abundance of first-time buyers. This combination of new business and new customers is creating an opportunity to ask questions and rethink the way things have been done for generations.
First, cost. Right now the average cost to originate a mortgage is close to $9,000 per loan, according to the Mortgage Bankers Association. Many disparate systems and manual labor are the key reasons for such high cost. Just by automating many of those manual tasks, the cost would drop significantly.
Second, why does it take so long to process a mortgage? Usually a customer has to plan on weeks, if not months, for the processing of a mortgage — an anxious time for homebuyers. Digital processing should be able to reduce the turnaround time from origination to completion dramatically – from months to days, and eventually hours.
And third, why can’t consumers get the process started any time they want? The desire for a mortgage does not limit itself to business hours. Consumers want what they want when they want it. That means 24/7 access to service, with or without human intervention, and on any medium, with as little data input as possible. This suggests an entirely new customer-engagement model.
Mortgage originators also have reasons to be dissatisfied with the status quo. Technology promises to optimize processes so that operations at every point in the mortgage lifecycle are faster, more accurate, less bureaucratic and less costly for everyone involved.