The True Digital Mortgage
An All-in-One Solution for a Changing Industry
The True Digital Mortgage
We hear a lot these days about the benefits of the "digital mortgage." The term is widely overused, yet its promoters have largely under-delivered on its true promise. Often, they are simply referring to the online applications that have been available for well over a decade. Others define digital mortgage as an eClosing, again merely citing one moment in the lending process.
Here’s the real question: If the solutions currently being promoted as a digital mortgage really streamline the process, why does it still take up to 60 days to close a loan?
A true digital mortgage must encompass the entire loan lifecycle, from targeted marketing automation to lead generation to application and all the way through to automated investor delivery. Only then will the promise of the digital mortgage pay off for both borrowers and lenders.
A Digital Mortgage for Homebuyers
To better understand the preferences of U.S. homebuyers, Ellie Mae surveyed more than 3,000 Millennials, Gen Xers and Baby Boomers. Ellie Mae’s Borrower Insights Survey found that across generations and genders, homebuyers want a mortgage experience that combines speed, convenience, and security with personal interaction.
When Millennials were asked what could most improve the experience, nearly 25% said they would like a faster mortgage process. Not just the application process, but the entire process. While that response was expected, more surprising was that the same number of Millennials also desire more personal interaction.
Today’s borrowers expect transparency, service, speed, and a human touch. To meet these requirements, lenders must offer an engaging, intuitive user experience that continues even after the application has been submitted. Lenders should have access to current and historical data on every individual borrower, and provide an intuitive borrower portal that offers a simple, transparent interaction, the ability to easily upload documents, and real-time status updates, with the ability to talk to someone at any point in the entire process.
A Digital Mortgage for Lenders
As lenders learn what it takes to engage all borrowers, they must also adjust to a purchase-centric market with lower volumes, higher expectations of on-time origination, and tougher scrutiny of the bottom line. In this environment, the savvy lender is focused on reducing costs and recognizes the need for automation, exception-based processing, and the ability to better leverage data in all aspects of the origination process.
This is where the true digital mortgage earns its name. Through the use of intelligent automation, the true digital mortgage not only helps lenders engage with consumers to generate more leads, but also helps them manage loan processing while reducing overall origination costs. It also enables the lender to gather various data and make smarter decisions through predictive analytics and machine learning.
Conventional wisdom says that to fund more loans, you need more applications. In reality, local and regional lenders today are having to compete at the point of sale with the multi-million-dollar national marketing campaigns of the few largest retail originators. Given the crowded competitive landscape, generalized marketing campaigns struggle to meet response and pull-through rates necessary to capture market share.
Rather than more applications, the smart lender goes after the right applications. By employing new tools that allow them to engage the consumer earlier in the process – at the “point of thought” – the lender can offer solutions and support the moment the homebuyer begins embracing the idea of a transaction. This strategy starts with the lender’s most competitive advantage, their own data.
By augmenting this data with public records, current market information, servicing data, and psychographic/social media data in a single private data repository, the lender can apply predictive analytics to determine exactly which consumer may be ready to purchase their first home, downsize, upsize, or refinance, even if the lender has not worked with a consumer previously, there is enough data to create an offer and experience that will meet their needs and expectations.
Once the lender engages the borrower, the online application becomes a pivotal point of differentiation in the borrower experience. If the borrower has a history with the lender, they simply validate the existing data. When the lender has employed predictive analytics and marketing automation to drive the consumer to their online engagement solution, the data used for the identification, scoring, and marketing of that consumer seamlessly populates the online application.
Of course, not every consumer wants to interact via technology. Many prefer to talk with someone, and even those who begin the process online will likely want some human touch at some point in the application process. Predictive analytics leveraging behavioral data can help identify these consumers so that the lender can offer their preferred experience.
Survey data shows that today’s borrowers want a mortgage experience that combines speed, convenience, and security with personal interactions that are both reassuring and convenient. This means the digital mortgage has to be more than just an online application.
Machine learning consumes internal and external data, builds a borrower profile, and predicts the preferred experience for each borrower. The more data it consumes, the more the machine learns, and the more it learns, the smarter and more precise the results.
As the home mortgage industry moves to process automation and digital engagement with consumers, it will be critical that compliance doesn’t take a back-seat. In fact, compliance should be a primary driver of innovation. For example, marketing automation should ensure not only that the right message goes to the right consumer at the right time, but also that all communication complies with current regulations and standards.
Online applications that enable easy access for consumers can put lenders at risk of non-compliance if disconnected from the lender’s system of record, where business rules reside to ensure compliance. By using a mortgage management solution that serves as system of record for the loan lifecycle, lenders can take a systematic approach to consumer application data and minimize audit risk.
While automation throughout the origination process is critical to driving efficiencies, it must also account for each point in the process where a re-disclosure or other borrower notification is required by law. Technology must be deeply rooted in an up-to-date understanding of the mortgage industry, including compliance. With the right technology partners, compliance will inform, not impede, the path to the true digital mortgage.
The Future of the Digital Mortgage
The true digital mortgage allows for a fundamental shift from "checkers checking checkers" and "stare and compare" reviews to exception-based processing. Now, personal document review is required only when a loan does not meet established rules and an exception is identified, according to rules that a lender establishes in their system of record. Automation not only reduces time to originate and lowers the cost of origination, it also supplies loan agents with everything they need to know about where the loan is in the process so they can provide the personalized human touch consumers expect. Faster processing and improved customer satisfaction lead to higher pull-through rates and better business results.
The technology and capabilities discussed here are available in our industry today, but they are vastly underutilized, as many lenders’ digital mortgage strategy has been limited to presenting a website with an online application. To realize the potential of the digital mortgage and the value it can deliver to lenders and borrowers alike, we need to expand our vision of the digital mortgage to encompass all phases of the mortgage loan lifecycle, with each milestone informing the next. The market will require lenders to adapt, as the pressure to meet closing dates, increased competition, and the emerging high-tech and human-touch expectations of borrowers continue to drive the use of the next generation of technology.