Residential Magazine

The Dawn of a Digital Revolution

Lenders and their business partners must address a reluctance to embrace technology

By Alan Chang

The stifling air of uncertainty brought on by this year’s global health crisis has affected nearly every business, from global corporations to mom-and-pop companies. It wasn’t only businesses that needed new ways to adapt as a means of survival; it was individuals and families from all walks of life who needed relief from their daily expenses.

Interest rates for purchase mortgages and refinances fell to staggeringly low levels. For many Americans, lower rates offered short- and long-term savings, as well as the ability to borrow cash and guard against near-term economic uncertainty. As of May 2020, refinances were up 200% compared to the same week a year ago, while purchase mortgage applications steadily increased early in the spring buying season. 

Many industries would not be prepared for such a surge in activity, let alone near the outset of a major economic downturn. Lenders and title companies were focused on keeping their staff members safe, which meant fully remote operations. This was a first for many, and presented a need for digital workarounds to replace in-person office tasks and meetings. The industry also was feeling the effects of its historic reluctance to adopt new technology. 

Sudden disruption

Lenders responded to the deluge of orders in many ways. In some cases, companies opted to implement piecemeal software designed to replace very specific steps in the lending process — such as electronic signatures, remote online notarizations and funds transfers. These fragmented tools were put in place just to make transacting possible but did little to streamline processes. 

This resulted in a disjointed experience for lenders and borrowers, and it often created more work in the process. It prompted lenders to reevaluate their title partners, preferring those with a demonstrated ability to pivot quickly and continue transacting in a remote environment. Cybersecurity and protecting borrowers’ sensitive financial data presented another challenge in the new digital working environment.

In some extreme cases, lenders nudged up interest rates, seemingly in an attempt to slow the rate of applications. It’s hard to imagine that any service-based industry in 2020 would not be armed with the necessary tools to operate digitally and remotely. Even through the most dynamic market conditions, however, economic turbulence has never commanded a fundamental restructuring of traditional workflows. 

Interest rates and digital tools aside, some lenders were for months unable to access mail and physical documents stored in offices. This stalled countless applications with no idea of when lenders could retrieve these items. 

Consumer behavior

In the meantime, consumer behavior shifted drastically. Even prior to the pandemic, an increasing share of the population had come to expect all goods and services to be seamlessly accessible online. This trend is reflected in the overwhelming popularity of on-demand services such as Airbnb, Amazon Prime, Uber, food delivery and instant financing. In real estate specifically, the rising popularity of virtual tours also showcases this shift. 

On top of that, consumers have an endless supply of information and tools at their immediate disposal that allow them to compare competitors in an “apples to apples” way via online reviews. The COVID-19 pandemic has increased pressure on service providers to devise remote offerings and remain competitive. 

For real estate professionals — specifically title companies and lenders — it’s dangerous to assume that the immediate impact of the pandemic on consumer behavior is only temporary. The mortgage industry has no choice but to join the sea of service providers that are scrambling to adapt to this new digital-first world while maintaining (and ideally improving) efficiency along the way.

There are a host of other factors that could impact future demand for new mortgage applications and refinances. One notable example is the migration of urban dwellers to suburban areas, often a more affordable alternative to city living. 

Suburban living also offers additional square footage to make remote working more comfortable, with less exposure to shared spaces and surfaces. Without full access to neighborhood amenities in cities, which often justifies the higher cost of living, some renters are likely to opt for more personal space in less-populated neighborhoods that still offer convenient access to urban markets as needed.

Critical juncture

Nearly six months later, the U.S. real estate and mortgage industries are still adjusting to the changes brought on by the pandemic. Title companies and lenders will look back on COVID-19 as a critical turning point in how they conduct business and how consumer behavior set the course for the industry’s future.

Although the pandemic incited a shift toward more digital workflows, a coronavirus vaccine or cure will not reverse consumer thinking. Operating under the assumption that demand will eventually drop, or that there is no long-term urgency to evolve digitally, is myopic. Lenders and title companies must now seriously consider purpose-built software solutions for the industry to align with consumers’ purchase behaviors and preferences. 

Forward-thinking mortgage and title companies with systems in place to allow them to pivot quickly are best-positioned to immediately implement a fully digital workflow. Following in the footsteps of other popular on-demand service industries — such as short-term rentals, ride-sharing and e-commerce — it’s likely that consumers will gravitate toward these innovative lenders and title companies that offer a process to fit their lifestyles. Once this demand is realized, companies that simply opted to build plexiglass dividers and hand out rubber gloves, then later fell back on familiar, manual processes, will face another uphill battle to catch up with early adopters. ●


  • Alan Chang

    Alan Chang is vice president of title operation at JetClosing, a digital-first title and escrow company that serves lenders, agents, buyers and sellers across Arizona, Colorado, Nevada, Texas and Washington. Chang has worked in the title insurance industry for nearly two decades, establishing a reputation for maximizing operational efficiency through workflow and technology enhancements — while maximizing the strength and value of the human touch.

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