The total mortgage debt outstanding in the U.S. as published by Statista Research Department amounted to approximately 16.96 trillion U.S. dollars in the first quarter of 2021. The number when clubbed with the findings that, “The rise of information technology (IT) in the financial sector has dramatically changed how information is gathered, processed, and analyzed,” point towards the influence that technology has in the growth of the mortgage industry.
Over the past year, the U.S. residential mortgage industry has experienced a wave of technological innovation as both mortgage start-ups, fintech companies and existing lenders seek ways to automate, simplify and speed up each step of the mortgage origination process. With the pandemic intensifying the demand for a consistent, digital first borrowing experience, mortgage lenders have been leveraging technology to deliver exceptional customer experience.
How Technology-based lenders have increased their market share in U.S. mortgage lending
The market for loan servicing systems is projected to reach $4,812 million by 2028 and it is currently growing at a steady CAGR of 12.19%. The digitalization of most businesses along with the growing customer requirements, calls for a technology led approach to boost the speed and quality of mortgage services. This has now brought about a steady growth in the number of technology-based lenders.
According to ICE Mortgage Technology’s™ Borrower and Lender Insights Survey, “an overwhelming majority (99%) of lenders believe that technology can help improve the mortgage application process, citing benefits that include simplifying the entire process (74%), reducing time to close (70%) and minimizing data entry (67%).”
The pandemic gave rise to not just digital workforces, but also to safe transactional environments where borrowers could interact for their mortgage needs. The rise in employment fallouts and various other aspects
even caused a rise in loan volumes. The technology-based lenders gained popularity as other lenders struggled to adapt to this sudden technology-driven mortgage service environment.
The survey adds that, “Homeowners who used an online application appreciated the simpler application process (55%), reduced time to close (53%) and resulted in fewer in-person interactions (49%).”
The surge in mobile apps definitely meant that lenders who had leveraged technology by providing online applications, faster and more efficient mortgage services than the face-to-face process, were high on demand. The pandemic pushed the need for a consistent, digital first borrowing experience.
The digital landscape also brought along its vulnerabilities like increased risk of data theft, leading lenders to explore and develop, to change approaches and create secure systems too. Technology-based lenders have used the power of big data and automation to create mortgage lending processes that are more efficient and secure.
How Mortgage Lenders Can Leverage Digital Lending
The shift, however, means that many traditional lenders now have to push their way into digitalization. While many have already moved to automated processes and such, with the plethora of technological presence to choose from, many mortgage lenders still face the dilemma of what to adopt and what to keep on hold. Based on the current consumer requirements here’s how mortgage lenders can leverage digital lending.
Online Applications: This by far is the first step of digital lending. Switching from the traditional paper heavy process to submission of application and supporting documents in digital formats not only reduces the workload but also helps in decreasing the time spent on evaluation and filling the missing data.
Automated data capture: With applications coming in online, digital extraction of data becomes easier and faster. Automated data capture is done using optical character recognition for extracting the text from scanned or digital documents like receipts, bills, financial records, etc., and the conversion of the inputs into digital data that can be edited and processed.
Review and validation of application and documents: The most time-consuming processes in the mortgage cycle often call for increased expertise and manpower, an aspect that can be optimized through automated solutions. Mortgage lenders should focus on leveraging systems that can run checks for completeness, correctness, and consistency of the documents submitted and indicate when validation and cross-verification are required.
Streamlined Decision making and Offer Processing: Digital consumers need constant attention and this is where switching to automated systems comes in handy. While 24X7 assist is already in, real-time application tracking, along with on-time alerts and notifications, can help mortgage lenders accommodate to the needs of the digital consumer. Data and analytics have a huge role to play here and so does automated assistance. AI-based systems like chatbots can be utilized to collect the missing data too.
Electronic closing: With the entire system becoming digital, electronic closure is just the next step. It not only cuts down the need to meet an agent in person, but also allows borrows to review the closing documents with ease at their own convenience. This reduces the risk of any errors and hence cuts down the delays.
In order to minimize the risks, mortgage lenders even leverage technology to monitor borrowers’ profiles and analyze their transaction behaviors.
While the advantages of technologies are quite evident, here are the ones that make technology in mortgage lending a necessity.
- Speed: Technology makes processes faster and in the mortgage industry, it essentially handles all the bulk work that used to be time-consuming.
- Accuracy: Right from application uploading to data capture and validation, the manual inputs are minimized hence reducing any such errors.
- Improved Interaction and connection with users: Real-time interactions with customers to get the right information, offer the right service and to improve the customer interactions.
- Convenience: Technology helps in consolidation of data, organize everything in one place, hence making all documents easily accessible and manage.
- Reduced cost and Increased Transparency: Technology makes the processes for a transparent process for borrowers and lenders
How PrivoCorp has leveraged technology
PrivoCorp has constantly adapted itself to the technological changes and provided the flexibility that the growing mortgage requirements demand. PrivoCorp has always been at the forefront of technology-driven mortgage lending. Using technology enabled process AI and Machine Learning and the significant investment in automated Mailbox monitoring System, have already showcased positive results. The effectiveness of technology and its impact on the U.S. mortgage market show steady growth.