WHERE WE'RE HEADED
Of course, there are companies already offering applications online. You can apply for a mortgage on your desktop computer or phone, and that’s the first step in the right direction in terms of convenience. But for the most part, the back-end operations are the same as if you walked into a physical office. Your application information may have been entered online and captured digitally but the rest of the process is analog and largely sequential.
One key next step beyond making applications available online is to take advantage of the vast amount of digital data available, including property information, borrower assets, income and credit information and other publicly available data leveraging technology to automatically process and analyze that mortgage application, and carry it through the entire mortgage lifecycle and eco-system.
This will drastically reduce the amount of information an applicant needs to submit, as well as the need to enter the same information during the different stages of a mortgage application. From the lender side, data analytics can distill insights necessary to make good underwriting decisions.
Right now there are plenty of fintech firms working on developing sophisticated algorithms that will automate more and more mortgage processes. Business rule engines can flag applicant entries that don’t make sense, such as an impossible birth date or an erroneous area code. Pricing engines are being developed that use artificial intelligence, machine learning and fuzzy logic to weight all the data, make the most accurate underwriting decision and calculate the best price. AI-based technology can automate home valuations more cost effectively and provide real-time instant feedback. And the more data the technology has to work with, the better it gets at spotting and reducing the possibility of fraud.
That raises an important caveat about rapid automation. With more data captured, crunched and stored in one place, the opportunities for data theft and fraud increase. Automation triggers a host of security, privacy and liability issues. For example, if there is an automated appraisal on a property and there is a dispute over the value, who is liable for the discrepancy? Part of the technology revolution will have to involve resolving these issues, establishing governance, creating new mechanisms to resolve disputes and standing guard against criminal activity.
A BRIGHT FUTURE
Beyond mortgage origination, the industry is quickly developing technologies that connect the entire mortgage ecosystem and value chain. Innovations like eClosing, automated valuation, AI-based appraisal and “straight through settlement” are all just around the corner. Disruptive technologies like blockchain have the potential to transform and replace decentralized and expensive process such as title search and title transfer. It is not unthinkable that one day in the near future the entire mortgage process will be seamlessly enabled by technology without a single human touch point.
But anyone who has ever tried to talk to a customer service representative when they’ve had a problem with Google, Facebook or their bank knows that humanity is in short supply on the digital frontier. Yes, customers want speed, price and convenience, but they also want a person to talk to when things go wrong, or if they want personal advice.
An automated mortgage process that takes minutes, plus a friendly voice to help answer any questions may just be the best balance of old and new to make the digital future of mortgages an inviting place to do business.