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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2018

How eLending Transforms the Industry

The true value of a fully digital mortgage can be found in the data

Digital mortgages have generated a lot of industry buzz in recent years, despite an ambiguous definition of what they actually are. Some refer to digital mortgages as a borrower’s ability to apply online in only a few minutes. Others focus on the borrower’s ability to bypass reams of paperwork and eClose a loan using a digital device. Other definitions emphasize the various steps between origination and closing.

The potential for an end-to-end digital mortgage is tremendous. It can remove extraneous effort and costs, and decrease the amount of time originators spend on paperwork, giving them more time for selling. It can help lenders make higher-quality loans to qualified borrowers. Most importantly, it can give homebuyers a faster, more convenient and more secure experience.

It is no secret that the process for creating a mortgage loan historically has been cumbersome and inefficient. Automation technologies have greatly sped it up, but there is still plenty of room to innovate and improve. One way to remove time and cost from the process is to ensure the right loans are being offered to the right applicants.

Competing for borrowers

Conventional wisdom says that to fund more loans, you need more applications. But given the stacked competitive landscape, generalized marketing campaigns often struggle to yield the response and pull-through rates necessary for originators to capture market share.

Rather than pursue application volume, smart originators focus on pursuing the right applications. By employing new tools that allow them to engage consumers earlier in the process — at the “point of thought” — mortgage companies and originators can offer tailored solutions and support from the moment the homebuyer embraces the idea of a transaction. This strategy starts with originators’ most competitive advantage: their own data.

Once a potential client is identified, an originator’s next decisions are what marketing content to send to that consumer and the optimal time to send it. This is where machine learning can help. By analyzing all of their historical customer data, originators can match their marketing materials — everything down to message, visuals and specific offers — to those borrowers with whom the marketing will most likely resonate.

A millennial homebuyer who is single and looking to buy in a city, for example, will not respond as well to a piece of marketing that features a suburban family standing in front of a minivan. And mortgage companies certainly don’t want to spend marketing time or resources soliciting consumers who would never qualify for a loan.

Starting the process

Once the communication is sent out, it is time to really engage the potential borrower. There is a lot of talk in the industry about online applications, but we know that not every homebuyer wants to interact the same way. So, originators need to offer options.

An increasing number of homebuyers say they want to start their loan application online. For those people, the application and interface should offer a truly intuitive, interactive and engaging experience. Rather than offering rows and rows of questions, instead it should feel like a conversation that turns their interests and needs into an application.

The borrower needs more regular high-touch communication, which will result in a more effective experience. This is intelligent automation. 

Other homebuyers will prefer a hybrid approach. At some point, they want to complete the application process online, but they also want to talk with their originator by phone or in person. When the borrower wants that personal interaction, mortgage companies need to be ready with the right person who can answer that borrower’s specific questions.

Every step of this experience needs to be highly personalized to the individual consumer. And, of course, everything just described happens before the consumer even gets to an application.  The mortgage process is more than an application. In fact, the application is just the first 20 minutes of a sometimes two-month-long journey for a homebuyer.

Combining tech and touch

The real value of the digital mortgage is realized in the origination process. With origination, there are two major elements to consider. One is automation, or high-tech. The other is a continuation of the personal consumer experience, or human touch. Both are equally important.

A recent survey of 3,000 homeowners and renters looked at millennials who had just completed the homebuying process and asked them what could be done to improve the process. The majority wanted the loan process to go faster. This is not a big surprise. The second-highest rated request, however, was for more personal interaction with the lender or originator throughout the process.

So as lenders, mortgage companies and originators think about digital mortgages, it goes beyond using automation to make the process go as fast as possible. It’s also about using machine learning, data and automation to make the journey as personalized to the borrower’s needs as possible. The real opportunity of a digital mortgage is that it can free up originators from having to spend time on process and paperwork so they can focus more attention on building and nurturing relationships with their borrowers.

Maybe a millennial-aged first-time borrower is nervous about making such a large purchase, for example. First-time borrowers typically require more hand-holding because they don’t know what to expect. While an originator may not have data on that particular millennial borrower, it is possible to predict, based on data from prior first-time millennial borrowers, what the cadence of communication should be.

In this case, originators should know they need to communicate every three days instead of four, via phone instead of e-mail — with a text message first to ask what time the borrower is available to chat. The borrower needs more regular high-touch communication, which will result in a more effective experience. This is intelligent automation.

Leveraging data

Of course, at the end of the process, the goal is to fund a loan. But even though the digital mortgage may conclude for one loan, the data in that loan can be the catalyst to begin the digital journey for the next.

Having data provides no value unless it can be both accessed and leveraged. Some lenders and mortgage companies want application interfaces that provide access to this data. Other companies have data scientists and business analysts to evaluate the data for them.

A good data analyst can cut this data in meaningful ways to understand how to shift marketing dollars, what products are performing, where originators can compete better from a rate-lock perspective, or where applications fall out. All of this information can help originators sell more loans.

But the real value is taking this data and applying machine learning to it. A system that can automatically and continually learn from every borrower that comes through the company and every service that gets ordered can inform ways to lower costs, increase pull-through rates, improve funding time and help originators find their next borrowers.

•  •  •

Although many in the industry define a digital mortgage as one component of the entire process, there is a much larger opportunity to improve the entire experience for lenders, originators, homebuyers and the entire mortgage industry. These digital mortgage technologies and capabilities are available in the mortgage industry today. Originators who use them to their fullest potential will be able to focus on high-value activities, such as growing their business and delivering personalized service to borrowers.


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