Residential Magazine

The Good and the Bad

The mortgage industry has had a mixed bag of results during the pandemic

By John Heck

The mortgage industry pivoted quickly in response to the coronavirus pandemic. Mortgage professionals have proven their mettle in these difficult times. Still, not everything has gone smoothly and the devil is in the details for what still needs to be done.

Widespread lockdowns, shelter-in-place mandates, a spike in unemployment and a significant disturbance in business operations are some of the events from the past year that not only threatened human life but have taken a toll on the global economy. For mortgage professionals, the COVID-19 pandemic meant adapting quickly to changes in operations, client expectations, standard procedures and much more.

The unprecedented circumstances that have unfolded forced the industry as a whole to reconsider priorities and reevaluate the processes required for a new strategy. There are quite a few areas the mortgage industry is getting right with this shift — even more so than other industries — but there also are areas ripe for improvement. Let’s take a look at what’s working in the mortgage industry.

The onslaught of obstacles resulting from the COVID-19 crisis has significantly shaken the business world. Compared to other industries, however, mortgage professionals have generally taken these challenges in stride.

Flexibility and innovation

Navigating the pandemic over this past year was no small feat for any industry — and the mortgage industry is no different. In the past few months especially, the onslaught of obstacles resulting from the COVID-19 crisis has significantly shaken the business world. Compared to other industries, however, mortgage professionals have generally taken these challenges in stride.

Within the mortgage space, immediate support from the government-sponsored enterprises and their increased flexibility with appraisals, along with the speed with which underwriters have been able to transition to remote work, have been admirable. The transition of mortgage lenders to the new way of business has been fairly smooth, allowing them to continue operating even as regulations, rates and relief programs continue to change.

Naturally, there is a learning curve associated with implementing new tools. But while the mortgage industry is not typically known for quick acceptance of new technologies, lenders and the mortgage originators who work with them are more receptive to these tools than ever.

The use of new technologies, such as big data and machine learning, is a significant benefit for mortgage companies — especially in times like these. Lenders and originators can use these tools to mine data across the entire ecosystem, acquiring insights about borrowers for improved speed, quality and client satisfaction. These tools have already proven to be successful across other industries. It’s a win for the industry that mortgage professionals have welcomed these advances.

Automated workflow

With increased forbearances, defaults and refinancings during the pandemic, mortgage lenders are realizing that rule-based processes such as loan origination and servicing — which traditionally require a lot of manual steps — are far too time-consuming in today’s fast-paced environment. Instead, companies are now looking to automate steps in these processes to better aid the borrower’s lending journey.

Mortgage professionals know better than anyone that loan approvals can be an incredibly long and tedious process — and one that traditionally requires a lot of hands-on activity from a lender. By relying on artificial intelligence (AI) to tackle repetitive tasks, mortgage originators are free to focus on activities with higher returns on investment.

Processes powered by automation will significantly reduce the time it takes to move through the approval process, enabling lenders and borrowers to quickly see results. AI-driven workflow will standardize the entire delivery process, eliminate loan defects, generate more productivity per employee and accelerate scalability.

A digital-first approach to communication with borrowers is key to getting things resolved smoothly, without inundating a team with repetitive customer service calls.

Client satisfaction

There are plenty of things, however, that are not working smoothly for the mortgage industry. By nature, the business is document heavy and often manually powered. Dense loan documents still rely on outdated legacy systems that are rigid and unchanging, which strongly affects efficiency.

As a result, borrowers aren’t satisfied with their current application-to-closing experience. In fact, the sentiment is so negative that the net promoter score (NPS) across all mortgage servicers is a mere 16, according to a J.D. Power study. This number is drastically lower than most industries — the median score is 44. This is due to the fact that fulfillment and servicing take much longer for the mortgage industry.

Today’s consumers expect a seamless process that can be delivered within the minimum regulatory mandates. Some lenders promise closings of 10 days or less. Unfortunately, many borrowers are forced to endure anywhere from a 45- to 60-day turnaround.

Tech implementations

It’s one thing to be open to the idea of new technology but quite another to execute a successful implementation. While lenders are increasingly receptive to new technology, there is still room for improvements during the selection and rollout of these tools.

Any amount of digital transformation is a heavy lift, and mortgage professionals don’t always take into account the time, effort and bandwidth needed to implement technology across an entire organization. For this reason, many lenders have started looking for modular-based solutions that provide a little more flexibility.

Today’s digitally native, cloud-based solutions allow mortgage professionals to bypass the large haul of a full-blown implementation. They can use the tools they need a la carte, without a hefty price tag or the lengthy process of getting an entire solution up and running. The most effective solutions operate parallel to a lender’s existing systems and significantly enhance the entire transaction-management process.

Lastly, the key to any successful implementation is a measurable cost-benefit analysis along with the creation of more business value. In short, any investment in new technology needs to have a rapid burn rate, i.e., it needs to pay for itself quickly rather than long term or, in the worst cases, yield no measurable gain.

Answering questions

When looking for information, 62% of borrowers visit their lender’s website first, but only 28% find it to be the most effective channel for resolving an issue, J.D. Power reported. More often than not, consumers have greater success in resolving their issues when they pick up the phone and talk with a representative. This, however, takes time for both parties and time is money.

Naturally, clients have more questions when the unexpected happens. Expecting representatives to handle every question that is asked during any given situation is time-consuming. In any mortgage operational setting, the more subject-matter expertise that is needed to answer questions, the higher the overall accrual cost.

A digital-first approach to communication with borrowers is key to getting things resolved smoothly, without inundating a team with repetitive customer service calls or negatively impacting customer service. So, rather than picking up the phone, waiting until a representative is available and hashing out an issue, borrowers get online and find the solution to their problems much more quickly. By adopting technology that makes information easily accessible to borrowers, lenders and originators can significantly improve their level of customer service, which means their NPS goes up and customer churn goes down.

Lastly, the combination of AI and machine learning create an intuitively tacit solution that can be used by internal stakeholders, external clients and third-party providers. Tacit or implicit knowledge is normally the result of years of experience. AI and machine learning work in conjunction with a knowledge base (mortgage content). When queried, this knowledge base actually grows and gets “smarter” with repetition and time.

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There is always room for improvement in any business operation, but the mortgage industry as a whole can make significant strides to improve the lending process and the borrower experience. This starts by identifying key areas of opportunity. To address these critical areas for improvement, it is important for mortgage companies to welcome the latest technology while continually exploring new ways to improve the lending experience for borrowers. ●


  • John Heck

    John Heck is senior adviser of lending solutions at Capacity, a software-technology company that uses artificial intelligence to automate support for clients and employees. He has held senior-level positions at IBM, EMC², First American, Fidelity National Financial, PNC Financial and Citigroup. Heck’s passion is to transform the mortgage industry by delivering a digitally native and cloud-delivered mortgage platform, which standardizes asset creation based on investor needs while delivering a true value proposition for lenders and borrowers. 

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