As with Starbucks or Chick-fil-A, the mortgage application process continue to progress towards similar applications. A rise in home purchases due to low-interest rates is projected to result in originations of more than $2.5 trillion between 2020 and 2022, which is 35-40% higher than average annual originations from 2010 to 2019.
An online mortgage application process with an emphasis on speed is preferred by about 60% of borrowers according to post-COVID-19 pandemic surveys. A delay of more than 10 days in making a decision drops satisfaction levels by 15%. Starting with Dodd-Frank CFPB requirements driven post-financial crisis compliance spending, technology investments have turned towards the borrower experience improvement. In addition to providing customers with a streamlined process, technology also allows lenders to comply with regulations such as fair lending standards. The time to process loan approvals is also kept to a minimum.
The newest technologies include machine learning and artificial intelligence in combination with user-focused tools like:
- Application forms that automatically fill in key data like name, address, and Social Security number
- A 24-hour call center, online instructions, and frequently asked questions
- Uploading feature for documents such as tax returns and bank statements
- Instantly verify income and employment records with credit agencies
As a result of the improved digital application process, fewer mistakes are made during the application process. Based on a Freddie Mac study, digital mortgage technology can reduce average processing time by 63% for mortgage lenders.
Due to lenders’ and investors’ lack of servicing capacity, they often outsource servicing while still retaining mortgage servicing rights, which facilitates the use of digital technology for servicing. Servicers can also avoid investing in technology by outsourcing services to subservicers, given the capital requirements for servicing. Since two to three years ago, subservicers have improved borrower experience and strengthened compliance using digital technology and artificial intelligence. It appears that the focus has primarily been on originations and closings, with little attention being paid to backend operations, such as servicing and default management. There is a ripe opportunity for disruption in default servicing with the improved use of digital technology. Apps such as those on Amazon and Overstock offer solutions similar to these.