The advancement in digital mortgage has focused on delivering end-to-end digital solutions to improve the consumer experience. But even with this push to make a borrower’s life easier, systemic inequality still exists. HousingWire recently sat down with Joe Hallett, Fannie Mae’s Vice President – Digital Products Management, to discuss how Fannie Mae is leveraging technology to expand access to homeownership.
HousingWire: What have been some of the key drivers behind the digital mortgage transformation?
Joe Hallett: A key area of focus for the housing industry in advancing the digital mortgage has been to leverage technology and new digital innovations to help improve the consumer experience while applying for a mortgage.
This focus has been driven by a desire to help simplify and streamline the mortgage origination process, and has been fueled by consumer expectations that the mortgage lending process should be as easy and accessible for them as other types of financial transactions they can complete digitally.
We not only sought to deliver a better consumer experience, but also to increase operational efficiency in order to drive down costs.
In fact, in a 2021 Fannie Mae Mortgage Lender Sentiment Survey, 41% of lenders stated they prioritized investing in business process streamlining to compete with “online direct-to-consumer lenders” who offer advantages in user experience to attract more customers.
The goal of the digital mortgage transformation has been to deliver an end-to-end digital mortgage process, from prequalification through closing. While there is still work ahead to fully realize this goal, the industry has made great strides in offering new digital capabilities that have taken time, cost and paper out of the process.
HW: Where do you think we are as an industry in the digital mortgage journey?
JH: Collective investments made over the last few years have resulted in a more efficient mortgage lending process that has reduced cycle times and created a more streamlined experience for consumers.
These advances enabled us to scale to meet increased loan origination volumes in 2020, made more challenging as the industry responded and adjusted to the impacts of the COVID-19 pandemic. We pivoted to quickly find ways to provide digital contactless capabilities to consumers throughout the loan origination process and run our businesses remotely.
At Fannie Mae, we increased our focus on how technology could help the industry meet the needs and demands of this moment, and accelerated going digital, by ensuring:
- our key digital solutions, such as Desktop Underwriter (DU), could effectively scale to support our customers and industry partners
- the availability of our other digital solutions such as Appraisal Waivers
- we could support increased industry adoption of digital capabilities such as eClosing solutions and eNotes
During this same time, there was an increase in national attention regarding the persistence of systemic racial and socioeconomic inequity, including the homeownership gap. For most of America, sustainable homeownership has been a main driver of generational wealth accumulation. However, not all people have had equal access to homeownership.
This conversation, and the challenging questions it raised, hit close to home for us here at Fannie Mae. Not only because it speaks directly to our values, but also because responding to these questions speaks directly to our mission.
Despite the digital mortgage transformations made to date, we believe we have a responsibility to help the mortgage industry close the racial housing gap, achieve equality within the housing industry and offer sustainable and affordable housing. We are taking important steps to do that with the introduction of new innovations that help unlock homeownership to underserved borrowers.
HW: What does the future hold for the digital mortgage journey, and what are some of the next steps Fannie Mae is taking?
JH: We continue to focus efforts to leverage data, advance our data analytics and invest in technologies to not only improve the consumer experience and take cost out of the process, but to also find new and innovative ways to responsibly expand access to homeownership.
As an example, the recent update we made in September to DU allows lenders to consider recurring rent payments in assessing borrower eligibility. Positive rent payments history will allow us to potentially help more first-time homebuyers who have a limited credit history but a strong rent payment history to qualify for a mortgage.
It builds on our DU validation service, which was introduced five years ago as part of Day 1 Certainty, by leveraging bank-statement data to not only digitize and streamline the mortgage lending process but also identify and consider recurring rent payments in the DU eligibility assessment.
We think this could provide a positive benefit to thousands of families, and that impact will only continue over time as industry adoption grows and we enhance this digital solution.
This feature is just the beginning. We have opportunities to:
- assist borrowers preparing for the mortgage lending process by helping facilitate digital consumer counseling capabilities
- continue our efforts to leverage new technologies to streamline and simplify the mortgage lending process
- help lenders provide consumers greater certainty while taking time and cost out of the process
- further leverage data to automate more historically manual activities.
As we look toward the next chapter in this journey, we look forward to working with industry partners on ways we can collectively help build the digital capabilities needed to realize the new vision of digital mortgage transformation – a digital, simple, transparent and more inclusive mortgage lending process.