The last five years have presented many challenges for the mortgage industry, with rate dynamics, supply constraints and regulatory considerations upending the borrower experience. As inflation continues to ease, rate dynamics are especially top of mind for lenders, homebuyers and homeowners hoping to refinance.
Recent interest rate cuts, combined with the potential for additional reductions, have sparked an increase in mortgage applications and a significant uptick in homeowner refinancing. Mortgage refinance demand surged by 20% in just one week late last year, a trend that is expected to continue, according to CNBC.
Many financial institutions are unprepared to meet this surge, and with borrowers expecting the same level of speed and efficiency with their loan applications as they see in other transactions throughout their day-to-day lives, changes are needed. Mortgage companies haven’t been closing as fast as they should. However, with the right systems in place, they can rise to the occasion when the flood of both new and refinance applications inevitably start coming in.
One of the main reasons for this challenge is personnel reductions. When mortgage rates are high and application volume is low, many financial institutions make the difficult decision to eliminate back-office roles, which can create operational challenges long term as rates inevitably come down.
Automated tools
Automation and other technological investments are key to preventing this cycle of layoffs, rehires and then layoffs again as economic circumstances change. These investments also help mortgage companies streamline processes, reduce closing times and improve overall efficiency.
To meet the anticipated surge in both new loan and refinancing demand, mortgage companies need to adopt advanced systems and automation tools. The first step is to automate pre-approvals. Borrowers often lose out on an offer because their pre-approval is no longer valid. With automation, these pre-approvals routinely update, giving borrowers peace of mind during the early part of their homebuying journey.
Loan origination systems and digital mortgage platforms are helping financial institutions process financing requests more swiftly and efficiently. These digital innovations support faster and more effective service, addressing both borrower expectations and operational demands.
In addition to a comprehensive loan origination system, products that embrace open finance — consumer-permissioned data such as allowing access to bank account records — and connect to other fintech partners offering e-closing technology create collaboration opportunities that can further transform mortgage closings and enhance borrower satisfaction. This can save time and effort, eliminate laborious manual tasks, slash the cost per loan and ultimately streamline the closing process.
This type of integration combines e-closing technology with data-driven origination workflow automation that generates compliant loan documents, facilitates borrower e-signatures and enables remote online notarizations. By combining these technologies, mortgage companies will be well-positioned to take on increased volume and deliver an enhanced borrower experience.
Enter AI
Artificial Intelligence is now a major factor in lending automation as well. When developing strategies for 2025 and beyond, it is imperative that financial institutions view AI not just as something to consider in the future, but as something to embrace now. Origination costs lenders thousands of dollars per mortgage, emphasizing the need to push more units through fewer team members from origination to close.
When productivity is increased through AI, cost is reduced, efficiencies are created and new avenues for automation emerge. When AI handles more tedious operational tasks, team members can focus more on strategic priorities, complicated loan requests and the human side of lending. This is an area to watch in the coming year as tech companies offer more AI tools that further improve the mortgage process.
To expand on the human side of banking, it is important that mortgage companies never forget the importance of delivering the personal touch of financial services and combining it with a technology stack that meets borrower demand for speed and efficiency. Technology is constantly evolving and improving, but the need for human interaction has not disappeared.
While borrowers desire speed now more than ever, they also look for educational resources and want to trust their lenders. As more mortgage companies are investing in automation and new technology, it is crucial that teams meet the unique needs of the communities they serve. By learning borrower stories, understanding their backgrounds and building rapport with key audiences, mortgage companies can cement their status as the lender of choice when compared to alternative and emerging players in the market.
The recent surge in mortgage applications and refinancing has highlighted the need for mortgage companies to adapt and modernize their processes. Those who invest in automation and digital solutions are better positioned to meet current and future demands effectively.
Especially today, modern borrowers expect swift, digital-first experiences, making automation critical for meeting satisfaction and retention goals. Technology can bridge the efficiency gap, allowing institutions to deliver on both operational and account holder service expectations even under increased demand. By embracing digital innovation, financial institutions not only meet immediate refinancing demands but also strengthen their market positioning in an increasingly competitive landscape.
