What do you think of when it comes to the future of mortgage technology? Large data and more advanced automation right? While those two components are still hot topics there is still more to be discussed.
In the beginning, when the mortgage industry first started entering the digital era, it made a lot of sense to concentrate efforts on using big data and smarter automation on the front end of the loan origination process. The thought process behind this was that if we can get more people applying for loans into the process quicker, lenders will have a smaller risk of losing them to other lenders they’ve applied with.
While in theory, this results in greater efficiency of the grunt work, the industry still ran into some problems. One of them being a lack of trust. Whether that was between borrowers not wanting to give credentials to the loan officers or loan officers sending the digital version of the application but also including stacks of paper “just in case”. As time goes on, the adoption of new technology along with its full potential will continue to follow.
Due to the current pandemic, caused by COVID 19, the world was thrust into technology more than ever before. Mortgage lenders had to redesign their system to work from home. Since the US Federal Reserve System kept interest rates low and stimulated businesses, the American residential real estate industry grew at a pretty significant rate. In addition, borrowers looking to buy homes didn’t have many other options than to apply for the loans online.
One of the major trends that has started to take off is collateral valuation. Because traditional home appraisal hasn’t been an option during this pandemic, investors have had to find other options. Now instead of in-person home appraisals, they have started to utilize databases to collect all the needed information on creating a value. This means the process reduced the time of appraisal from half a day or more to less than a minute.
The other major trend has been loan underwriting. This process used to mean collecting information, creating the documents, printing them out, getting them to the correct department, scanning them, or even typing the information back into a system. According to a study by the Mortgage Bankers Association, a mortgage underwriter with a process productivity of two and a half loans a day could process about four times that amount with the correct technology. Because mortgage underwriters are highly paid, the effect on the originating expense of the lender would show a huge return on investment. The technology that makes this possible exists but hasn’t been applied in the correct places.
Throughout this global pandemic, the mortgage industry has realized that only applying technology to the front end of loans will not be sufficient. For this reason, going forward will have to be less emphasis on the borrower’s application experience and more emphasis on actual efficiency throughout the entire process. In doing this, the lender will have a higher return on investment and increase the speed and efficiency of closing a mortgage loan.