Advances in digital technology have been driving change in customer acquisition and experience in virtually every sector of the economy. The mortgage industry has benefited from these changes by improving the loan origination process through a variety of different methods. However, in the current market scenario with decreasing profits, increasing loan origination costs and the impending need for faster closing cycles, is technology deployment the most feasible and smart move to gain market share while cutting costs? Let’s find out.
A major problem for mortgage lenders
In our opinion, one major hindrance in the growth and market share increase of a lender is the time-consuming complexities of the loan origination process itself. According to findings published by the Federal Housing Finance Authority, 18% of home loan applicants were forced to redo their paperwork in 2016, while nearly 24% ultimately had their closing dates postponed. This, of course, meant frustration and delays for the borrower looking to acquire a home, and further dissatisfaction directed towards the lender and other involved entities.
Let’s face it, this is an even bigger issue for Millennials, who have now entered the real estate market and demand speed and ease in their transactions. They are not used to waiting and unnecessary paperwork.
The smart solution to an efficient loan origination process
Lenders do realize that it’s time for the survival of the fittest. They will be judged more and more on the basis of customer engagement and convenience, and the ones that cannot deliver will fall behind. They must take this seriously and re-examine their processes. We are seeing more and more lenders jumping on the technology bandwagon in an attempt to streamline and simplify the loan experience for consumers. The methods used obviously include new tools and online platforms, some using emerging technologies like machine learning, artificial intelligence and robotic process automation. By employing these varying approaches, the loan origination process has seen a reduction in the amount of time it took to process a loan. Ellie Mae’s recent survey found that it took an average of 41 days to close a mortgage in March.
However, in our experience dealing with the top U.S lenders for over a decade, technology alone is not the key for smooth and efficient mortgage experiences. Yes, a digital experience can improve speed and convenience, but it may surprise you to know that next-gen buyers today demand not just technology solutions in their engagement with lenders, but also face to face interaction. Ellie Mae’s second annual Borrower Insights Survey concluded that the ‘digital’ generation still expected that they would have a lender consult with when they decide to take their first step into independent homeownership – someone to talk to them and explain things. For an efficient and responsive loan origination process, lenders must be able to implement technology but optimally merged it with services, backed by a human touch.
Of course, processes need to be analyzed at micro-level to identify redundancies and inefficiencies. Once they have a clear understanding of their existing workflow, lenders can easily chalk-out enhancements and changes, which can be implemented using technology, thus reducing the use of manpower and yielding higher productivity. But technology also means investment. Given that production expenses were at $8,475 per loan by the end of 2017 — the second-highest in nearly a decade of quarterly reporting by the Mortgage Bankers Association (MBA) - deploying technology across the loan lifecycle may not be the only answer that works for all lenders.
More lenders are now understanding that both services and technology really play a pivotal role in the mortgage lending process, especially as next-gen buyers seek mortgages, and are expecting an expedited loan application and approval process, with enhanced communication and less paperwork, backed by an ability to reach out to a human.
At Coforge BPS, we understand the volatility of the market and the changing borrower demands. To keep up with the market trends, we have developed a suite of solutions that are a combination of optimum services and technology. When implemented by our clients, these solutions have delivered faster closings, enhanced communication, and streamlined processes with zero tolerance for non-compliance. To better understand how we support mortgage loan processing functions that can directly enhance business growth, contact us at or visit www.coforge.com/bps
