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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2017

Flip the Switch on Mortgage Technology

Online application and loan-processing innovations attract on-the-go borrowers

Flip the Switch on Mortgage Technology

The mortgage industry may be a late arrival to the computer age, but the advent of digital mortgages and financial-technology innovation has disrupted mortgage originations in a transformation that likely will continue to accelerate and evolve.

Now that anyone can carry a room-sized computer in the palm of their hand, employing origination technology to offer convenience and speed to borrowers, while reducing costs and adding efficiencies for loan originators, is no longer a luxury, but rather a necessity to compete in today’s mortgage marketplace.

Mortgage originators must lean into the future with innovation or risk being surpassed by their tech-enabled competitors. Effective use of technology can translate into less upfront work for originators, more loans in the pipeline, faster closings and happier borrowers.

The good news is that originators can tap into a wide variety of third-party technology that has come to market. Many of these solutions can be added onto existing loan origination systems (LOSs) for those who opt not to develop technology in-house. These can range from simple text messaging apps that link into an LOS to quality-control features that reduce risk, create audit trails, and add transparency and efficiencies to the entire loan-production process.

For those who sell to Fannie Mae, its suite of technology solutions — Desktop Underwriter, Collateral Underwriter and EarlyCheck — allow mortgage lenders to underwrite loans with greater certainty and less risk.  The government-sponsored enterprise also made automated asset and income validation tools available earlier this year via third-party vendors. Freddie Mac, meanwhile, has introduced automated collateral evaluation, automated assessments for borrowers without credit histories, and soon will offer its customers automated asset and income verification.

Popularity with consumers

Technology has certainly created efficiencies for the mortgage industry, but a big emphasis for technology today is the enhanced borrower experience through the usage of mobile apps.

The astronomical ascent of Quicken Loans’ Rocket Mortgage product may be speeding the pace of change. Quicken Loans funded $7 billion in closed loans through its fully digital Rocket Mortgage platform in 2016, the product’s first full year of existence. That $7 billion volume of closed loans would put Rocket Mortgage in the top 30 of all mortgage lenders in the United States.

Although many have made the assumption that millennials are driving the push toward a tech-savvy origination process, statistics show the interest in digital is widespread. Of the first-time buyers that used Rocket Mortgage last year, for example, 57 percent were over the age of 35.

Data from J.D. Powers’ mortgage origination satisfaction survey released in November 2016 shows technology is becoming increasingly important for homebuyers. Some 28 percent of borrowers in the survey indicated they completed their mortgage application online, up from 22 percent in 2015 and 18 percent in 2014.

Statistics show the interest in digital is widespread.

Mobile devices also can be a popular way for borrowers to initiate a connection with a mortgage broker. Almost 50 percent of all webpage views worldwide are now delivered to mobile devices. In North America, mobile’s share of internet traffic is closer to 37 percent, which is not insignificant.

Reaching potential borrowers

Smartphones have changed the way people interact with one another.  As smartphone usage becomes ubiquitous, apps that allow mortgage borrowers to apply and check the status of their loan applications on their mobile devices can speed the lending process and improve efficiency. Borrowers often like this “self-service” option, which doesn’t require them to call or e-mail their banker or mortgage originator and wait for a status update.

This penchant for self-service is evidenced by the sharp rise of online banking in recent years that allows consumers to deposit checks, transfer funds, withdraw funds, pay bills and check their account balances with ease from a mobile app. The Federal Reserve notes a rising use of mobile devices for mobile banking, especially among the young. Some 67 percent of consumers ages 18 to 29 who had both a mobile phone and a bank account used mobile banking, according to the Consumers and Mobile Financial Services report published in 2016 by the board of governors of the Federal Reserve System.

Mortgage originators stand to benefit from this move toward mobile technology. A self-service borrower means originators can spend less time returning calls and e-mails to report on the status of loans and more time, ostensibly, to move additional loans through a streamlined production process.

The increased use of mobile device also opens up new ways to reach and interact with potential and existing borrowers. Technology providers can help originators plug into new channels of communication that feed directly into a company’s existing processes, for example.

Mobile-friendly mortgage websites give borrowers the option of pinning the website to their mobile device’s home screen and accepting push notifications. Borrowers can click an icon on their phone’s or tablet’s home screen that will go right to an originator’s chosen section of their website. This icon will feel and look just like a native app but without all the work or maintenance of a full app.

An originator’s information technology team or a third-party vendor also can provide the technology needed to connect borrowers via the app’s push-messaging features to the loan origination system, asset management, and the marketing system to send updates, offers and tasks to borrowers, or to potential customers.

Originators who can make the borrowing process faster and more intuitive for consumers are those who will gain market share.

When a borrower applies for a mortgage, for example, the originator can use a service such as Twilio to immediately send a text message that thanks the customer for the application and informs them that they can receive updates via push messaging as the application moves through the process by simply clicking a short link. Services such as Twilio, combined with an LOS, make it easy to send notifications based on conditions and then parse responses and store them inside the relevant file fields.

To attract prospective borrowers, mortgage companies also can consider publishing an SMS-receiving phone number on their website that allows prospective borrowers to text a property address to the phone number to start an application. Computer programs that leverage artificial intelligence to form conversations with real people can even present application questions to borrowers and parse their responses into an LOS-housed file.

Improving outcomes

About 21 percent of homebuyers regret their choice of lender, according to J.D. Power. That number rises to 27 percent for first-time homebuyers. Improvement in customer satisfaction, the survey suggests, is certainly needed, and technology, used smartly, has the power to improve customer relations and increase an originator’s competitiveness.

Originators who can make the borrowing process faster and more intuitive for consumers are those who will gain market share. Technology also is important in effectively and efficiently dealing with the reams of post-housing-crisis regulations that require robust methods for compliance and increase the cost of originating loans, which reached $8,887 per loan in the first quarter of 2017, according to the Mortgage Bankers Association.

Because it is expensive to produce a loan, technology to reduce risk is a priority for many originators. Technology, such as automated data and income verification and proprietary appraisal-review systems that affirm appraisal quality, also allow originators to produce higher-quality loan files in less time, which is a win for everyone.

• • •

Fintech, or financial technology, certainly will continue to advance the mortgage industry. The major advantages of technology-enabled mortgages include speed, convenience, efficiency, customer experience and engagement, reduced risk and improved compliance.

To stay atop their game, loan originators will need to look for ways to leverage technology to enhance the borrower experience while making the back-end loan-production process more efficient and effective. This means thinking about how technology can be utilized to build brand awareness and expand reach. Originators will need to continually add to and tweak their technology solutions and usage to push for improvements in workflow, speed and, ultimately, customer satisfaction as the fintech industry advances.

The digital mortgage is here. Technology, including mobile apps and online capabilities, is a must for originators to survive and thrive in today’s housing economy.


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