Mortgage processing is continually evolving. The rapid evolution of technology is not only being used to provide a better customer experience to all stakeholders in the mortgage transaction, but also to enhance employee productivity, reduce loan cycle time, reduce errors, and also to increase market share.
Recent developments in the mortgage sector have forced several lenders to re-evaluate their practices. The COVID-19 epidemic necessitated a change to a virtual workforce, increased acceptability of virtual interactions and virtual signatures – reliant on use of technology - and some of these have become standard practice now.
The state of mortgage processing digitalization
Applications for mortgages often generate up to 500 paper-based documents, not including those for loan servicing, making it a very paper-intensive procedure. It can be challenging to implement industry-required standards and procedures like the "Know Before You Owe" laws because of these fragmented, manual processes, which can also lead to human error.
For a mortgage to be considered fully digital, it must give borrowers more than simply an online application or eClosing services on a website. A self-service, paperless, digital mortgage accelerates the application process for borrowers and requires little to no human involvement in almost all phases of origination (and servicing).
Although the trend of mortgage process digitalization increased due to the Covid-19 crisis, it is now becoming a critical factor as costs of originations is high, and also borrower and stakeholder expectations have changed. This has compelled lenders to digitize portions of the mortgage process that would have previously relied on face-to-face or even telephonic human interactions.
The benefits of going digital
There are various advantages to digitizing the mortgage process for financial firms. One of the most obvious advantages of mortgage process digitalization is higher efficiency, which arises from the increased visibility and collaboration across departments that digital processes provide. It provides a more seamless, and engaging way to service borrowers.
The simplicity of digital document exchange and the decreased requirement for human involvement at each level of the process results in cost savings, enhanced asset quality and lower risk, and increased confidence in guaranteeing regulatory compliance.
Methods to make the process easier and more impactful
More and more buyers of homes demand simplified and effective solutions for the mortgage application process as the world gets increasingly digital. In response to this development, the mortgage sector has adopted a range of technologies, such as the following:
Adoption and Communication of APIs
Different programs can exchange information via application programming interfaces (APIs). Lenders may then speed up loan processing by pulling accurate and relevant data from many sources, enhancing processing speeds and data quality. As each ‘provider’ of data that goes into processing, underwriting, funding and servicing a loan is able to provide real-time information via APIs, the lenders systems are able to ingest this information and make the most comprehensive, accurate decisions.
Document Scanning Powered by AI
Lenders and applicants must fill out and go through a mound of paperwork to complete the application and approval processes. AI-powered intelligent document processing in the mortgage sector may make both procedures substantially easier.
Scanners will extract, identify, and sort information from both digital and physical documents. The indexed data helps eliminate entry mistakes and tedious work for loan officers, allowing them to focus on more critical responsibilities, such as ensuring the applicant is qualified for the loan. This is sometimes called Intelligent Document Processing or IDP.
Today, many home buyers expect - and even rely on - having their needs met online. They expect loan applications and processing and approvals to be as easy as using their phone to order tickets or even a car online. This entails straightforward user interfaces, shorter response times, and improved information regarding the progress of loan applications.
More lenders are improving their procedures to live up to these standards. This involves developing online apps that provide a completely digital user experience, including the ability to submit digital documents, to assist applicants in becoming pre-approved and locking in their interest rates. It may even cover the complete underwriting and funding processes, at least partially.
Intelligent Document Processing/Optical Character Recognition.
IDP or Intelligent Document Processing technology can extract data from documents that OCR cannot since it is significantly more accurate and ‘smarter’. IDP technology also has the ability to comprehend the context of a document to extract more data than OCR can.
IDP technology, for instance, can extract text from both the text in the document itself and the pictures in a document that comprises both text and images. In addition, IDP technology is quicker than OCR and can process vast amounts of documents in a fraction of the time. Furthermore, unlike OCR software, which often requires operator involvement to rectify errors, IDP technology may frequently self-correct data extraction faults.
Optical character recognition (OCR) technology is used in IDP and OCR to extract useful text information from photos and documents. Both methods rely on scanning an image or document to produce a digital file that can be processed by computer algorithms. The file is then transformed into an editable electronic format after being scanned.
Although both systems can extract text from pictures and scanned papers, IDP technology is significantly more exact and can extract text from a larger range of materials. Both technologies are also utilized to save time and eliminate human data input mistakes.
Point Automation – Processing
As far as automation is concerned, service providers have come up with ‘point’ solutions for the origination value chain, which help solve very specific problems in the process. LoanAccel, from Coforge BPS, is one such solution – an automation and services combination which helps significantly reduce the time between loan applications and clear to close.
It uses a combination of progressive checklists, agile workflows, re-engineered parallel processes, automatic follow-ups, expert mortgage processors and loan-level tracking to have decision-ready loans submitted straight to the Underwriter.
This can leads to more than 15% improvement in pull-through, up to 65% improved underwriting efficiency, decision-ready loans submitted to underwriter within 48 hours and 25% faster clear to close.
Unlike point solutions, automation platforms cut across multiple sub-processes within the origination and servicing chain, and address common pain points across all of them. Copasys, from Coforge BPS, is a enterprise-wide platform for automating quality control, risk management and regulatory compliance. It directly helps in these areas across the origination and servicing functions.
It covers all three risk management and compliance lines of defense (Operations Quality Assurance, QC/ Risk Management/ Compliance, and Internal Audit) using the data aggregation, a rules engine, workflows and management reporting.
As technological change gathers pace, leading edge technologies (like Artificial Intelligence, Bots, etc) are entering the mortgage origination and servicing processes – sometimes in their raw form, and are customized for the process. Alternatively, providers create point solutions that address one or more parts of the value chain, and some offer platforms that cut across the value chain, and offer a way to solve a particular pain point (e.g. quality control) across the organization.
In any case, technology innovation is driving Mortgages into the Digital Era very quickly, with a significant positive impact.