The mortgage industry has not traditionally been the vanguard of digital adoption, particularly in data intelligence and applied machine learning. Investments in proper infrastructure, an innate fear of losing process control, and converting the workforce to a digitally savvy “knowledge force” have contributed to “digital apprehension” in the past.
The COVID-19 pandemic served as a force majeure compulsion that has transformed delivery frameworks, perhaps inalterably, toward acceptance and recognition of a global, distributed working model. It has brought in interactive technology and cognitive business process tools as resiliency responses to the crisis.
The mortgage industry has been forced to respond to the massive and sudden work-from-home mandates. It has embraced virtual workforce models that were once considered “risky” or only applicable to trendy Millennial-dominated fintech cultures. It now seems the rank and file mainstream industry stalwarts have learned that there is immense untapped productivity scope to be unveiled from the process “digitization” and operations virtualization.
The sprint to accommodating business process delivery in response to COVID-19 has awakened a new interest in direct-to-consumer and direct business-to-business technology collaboration opportunities. It is no longer a means to experiment with a differentiating model. It is a new standard taking a more significant advantage of productivity tools and means awaiting mass scale adoption.
With no end in sight to record low rates and the increased loan volume, lenders must streamline workflows and accelerate time to close. Evolving from traditional closings to hybrid closings to full eClosings can help lenders process more loans at a faster pace without overwhelming their resources.
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Below are seven realities that were exposed and highlighted from the mortgage industry’s response to COVID-19. These realities may have been known previously but the enduring changes were brought about by the pandemic.
1. Consumers can succeed as self-directed digital learners
In the past, the mortgage industry operated based on the assumption that customers needed to speak to somebody in person to help them understand the complex issues related to lending. When COVID-19 struck, several customers suddenly faced an uncertain situation and wanted to learn about things like unemployment benefits, impact on mortgage payments, and the optimum way forward.
Given that most mortgage companies did not have time to prepare for the onslaught of queries through one-on-one engagement, they set up communication portals equipped to handle these queries. With their high-quality multimedia content and chatbots, these portals were successfully able to engage with users.
The biggest revelation for mortgage companies was that customers were capable and willing to perform business process activities independently without much hand-holding. With newsfeed and push notification of bite-sized content similar to tweets, customers were encouraged to help themselves.
2. Paper is increasingly becoming a dirty word.
With COVID-19, paper was literally considered ”dirty” since it could transmit the deadly virus to anyone who handled it. As a result, all paper-heavy processes in the mortgage process, whether contract signing or reviewing, moved online overnight. Along the way, people suddenly realized how much simpler the process became in the bargain. The reliance on a physically present notary, a signing room and other such requirements as part of the mortgage process is migrating toward E-sign and notary standards.
3. E-Everything (e-closing and virtual transactions)
Asking customers to physically sign mortgage documents in the presence of an attorney or signing agent has been a long-standing norm. The pandemic proved that customers are apt to adopt e-sign for smart documents, with a preference for more convenient closing processes, even executing closing documentation in the comfort of their homes. It is reported that shifting to e-execution models reduced costs considerably, and eliminated the need to travel to a third-party office location.
4. Working from home may be a new preference for a majority of the workforce.
While several industries such as IT have been allowing and encouraging employees to work from home, lenders have been more old school in their approach to work. They took comfort in being able to ”see” their employees working to ensure their productivity. They placed greater emphasis on hours spent at the office rather than taking an outcome-based review process.
COVID-19 confirmed that not only do the majority of workers prefer to work from home; they are also more productive when they do so. Considering the time spent by the average worker in meetings, lunch, coffee breaks, water cooler chats, and commuting, working from home is more efficient. Besides, the lower overheads related to office maintenance and real estate costs could mean that most lenders may end up working remotely forever.
This model could also open up several opportunities for the mortgage industry to tap a much larger pool of skilled remote workers without worrying about geographical constraints.
5. Virtual operations are secure and reduces climate impact
Security is one of the top concerns cited by lenders when it comes to remote working. While there are always vulnerabilities, companies invested and moved from a minimalist approach to a maximalist approach to security despite the expense. This has given clearance for broader adoption of information security protocols that leverage automation, AI, analytics to deploy cybersecurity solutions with enhanced precision and faster responsiveness to threat vectors.
A robust security infrastructure not only makes virtual operations extremely secure, but remote working goes a long way in minimizing the climate impact.
6. Scale and capacity strategies cannot avoid the logic of the global workforce and automation solutions at scale.
Traditionally, most capacity models in the mortgage industry are extremely people-centric. Scaling during COVID-19 was immensely challenging and remains challenging because there is a significant workforce talent shortage in mortgage operations across all country regions. There were not enough workers when rates dropped at the very start of the peak production season in lending. Most lenders had to grapple with immense challenges of recruiting, screening, and training new hire workers in work from home “shut down” situation.
The result has been an incredibly long application-to-funding lifecycle turn times. The demand response to the dilemma has been a high adoption of production migration to offshore/nearshore work teams and a push to automate backend processes with microservices, API co-source applications, and an increase in process automation software.
Many lenders now see their workforce as a hybrid conception: some on-premise, some virtual; some onshore, some right shore; some human physical, some robotic or cognitive.
7. Loss mitigation efforts do benefit from AI and digital automation- it’s not just for origination sales
With automation, loss mitigation interventions such as qualifying decisions can be made far more effectively based on the rules-driven application of just in time data. Advanced algorithms have increased their role in the servicing of distressed borrowers.
Servicers have increased their utilization of intelligent insights and automated risk modeling to move away from human biases and decision variation when executing a loss mitigation intervention. They have also accelerated the use of Natural Language Processing, allowing consumers to ask questions and interact with the servicing data intake systems in ways that are less embarrassing, threatening, reducing the humiliation of “asking for help.”
Providing digital solutions for consumers has increased the rate at which borrowers ask for forbearance, loan modifications, or re-payment plans.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this story:
Sarah Wheeler at [email protected]