Don’t Fear the Digital Future of the Mortgage Industry
There’s no denying the mortgage industry—like many others—is in the midst of a digital transformation. Depending on your perspective, that’s something that can either be feared or embraced as a new opportunity.
The fear, of course, is that as the industry moves towards greater automation of the mortgage process, the jobs of brokers and underwriters would slowly start to disappear.
It was a key topic of discussion at the 2019 Digital Mortgage Conference in Las Vegas, where industry experts suggested those fears are overstated, and for two key reasons.
First, while the development and integration of technology at major lenders has made giant strides in recent years, those on the front lines have been shockingly slow at adopting the tools made available to them (at least according to American data).
And secondly, even if the adoption rate of the newest technologies and automation was through the roof, speaker after speaker made the point that there will always be a need for good, old-fashioned human mortgage advice for a large segment of the population, particularly as increased government regulation increasingly complicates the mortgage process.
Lack of Adoption in the Mortgage Industry
Much progress has been made over the last few years in implementing the latest technologies and tools to create a more automated and efficient mortgage application process.
“Half of lenders have at least some sort of real-time pricing, product selection, bank data and online approval capabilities,” said Garth Graham, Senior Partner at STRATMOR Group, a leading U.S. mortgage industry advisory firm. He noted that’s up substantially from 20% just two years ago.
But the research also shows a flip side to these positive advancements. For example, just 6% of lenders have a high adoption of solutions that pre-fill data that the institution already has. And while 20% of U.S. lenders reported having an e-closing solution, the adoption rate is only 5%.
“The adoption is the struggle,” Graham said. “If your adoption is low, look in the mirror. Most blame vendors for low loan officer adoption, but banks need to commit to people, process and technology.”
He said lenders need to ask themselves, “Are the people trained? Are they properly motivated and do you hold them accountable? Have you redone your process or are you expecting the technology to do the same process over and over again?”
That’s not to say there’s not a problem on the front lines.
“We know it’s a challenge for lenders to get their loan officers to use technology,” said Jennifer Stevenson, Director of Consumer Engagement at Ellie Mae. Her colleague Matt Dowd, VP of Product Management, recounted an anecdote about one of his co-workers during her own mortgage application, where she had to take the initiative to ask her loan officer whether they had a more efficient way to transfer documents online other than by email.
“The loan officer said, ‘oh yeah, yeah, we have this consumer portal you can go to,’” Dowd recounted. “Here’s a person who had to proactively reach out to the loan officer and ask for the experience she was looking for, even though it was offered the whole time and she was just never made aware of it.”
Even though 93% of lenders have online portals for clients, only about a third of borrowers are using them. Given that 80% of consumers say they would use an online portal, “when it was offered,” the issue is clearly that they’re not being made aware of it during the application process.
The Canadian Experience
Those on this side of the border have a lot to take away from the current challenges being seen in the U.S.
“Mortgage brokerages and lending companies are struggling to get their staff/brokers to embrace and adopt change,” said Dong Lee, Chief Operating Officer of DLC Group of Companies, who attended the U.S. conference. “There’s been so much tech creation over the past few years, and adoption is really hampering the fruits of that investment.”
Asked what he sees as the most important technological improvement, Dong said it will involve offering clients the streamlined customer journey that they demand.
“They are going to compare what the customer experience is like in mortgages to other services/products and expect more,” he said. “For instance, emailing a mortgage document is going to be taboo with the heightened sensitivity to securing customer data. This wave is going to hit us, much like the sudden extinction of fax machines.”
Lee Noble, Vice President of Business Development at Lendesk, agrees, saying the adoption of improved technology is no longer optional.
“Much of the technology that was being toted as new is now being accepted as table stakes, with a focus on the underlying benefits of this technology—chiefly being improved borrower experience and reduced origination costs through greater efficiencies,” he said.
“I think we will continue to see more innovation involving different stakeholders in the mortgage transaction, engaging solicitors and realtors.”
Kevin Dear, VP of Broker Experience at Newton Connectivity Systems, agreed, saying that at the end of the day the goal is “how to take that friction out of the mortgage experience, both for the agents and the clients.” That includes automation in all aspects of the process, including appraisals.
“I think that’s really where we’re going to be heading in Canada as well,” he said. “Improving client journeys and client experiences upfront through technology, but being able to automatically validate things like client and property information, again so the quality of data that’s in that application for the underwriter is more refined, so they’re not having to spend that first hour cleaning up an application.”
A 100% Digital Mortgage Application is Still Far Off
Which brings us back to why the increasing digitization of mortgages shouldn’t be feared. The argument is that the increased implementation of technology is meant to assist and complement mortgage professionals, rather than replace them.
The goal isn’t to turn this into a “self-service world,” says Tom Wind, EVP, Consumer Lending at U.S. Bank.
“What we want to turn this into is a digitally enabled world where we take a lot of the drudgery out of the process and then allow our team to really focus on talking to customers about what are their needs,” he said.
He noted that just a couple of years ago, most of his employees’ time was spent on gathering documents. “Now less time is spent on that so we can spend time on meaningful things, like helping people figure out how can they achieve their goals.”
Rakesh Sheth, EVP, Home Lending Business Insight and Digital Strategy at Wells Fargo, echoed those sentiments.
“I want to emphasize the point that human advice is so critical,” he said. “Not for everyone, of course. There are some that will feel very comfortable [completing the mortgage process completely online], but for many, they would like to do things in a fashion where they get advice from someone.”
Is the digital age of mortgages upon us? Of course. Does that mean the loss of the industry’s existing players?
Of course not, according to Mark Burrage, Head of Mortgage Digital Experience at USAA.
“It can be seen as a job threat, in that a digital application is replacing employees’ jobs,” he said. “But it’s actually an enhancement to their experience. You have to make sure that messaging is very solid, because—quite frankly, and this is coming from someone who runs a digital lending bank—we’re a long way away from a fully digital mortgage.”
Burrage said it’s important to highlight to mortgage industry employees how the technology will “enhance their overall experience and create efficiencies,” what he calls the “what’s-in-it-for-me factor.”
For that reason, industry professionals should be excited about the benefits a more digitized and automated industry can offer.
“It’s an exciting time in the space,” said Dear. “Now it’s about how can we make the end-to-end experience more frictionless for both the client and the agents by creating more systems that just collaborate with each other or are an all-in-one type of product.”
It’s just a question of how well these systems can be adopted.