Even a couple of years ago, most companies operating in the mortgage industry would have hardly recognized terms such as machine learning, blockchain, big data, and artificial intelligence. But today, these are more than buzzwords, as technology in all its various forms is taking over the mortgage landscape and leaving behind foreclosed businesses which could not innovate in its wake. In fact, the rate at which technology is evolving today is making it increasingly difficult for lenders to keep up and compete with disruptive new start-ups and fintech companies.
There are three important factors that are behind this disruption in the mortgage industry, which include -
These mortgage trends together are single-handedly responsible for changing the entire outlook of the mortgage industry. A decade ago, the real estate agent was at the center of all home transactions being performed in the US, but today, it's the customers who are most important by a far margin.
Put simply, the Amazon effect is the ongoing digital disruption of markets ranging from retail, real-estate, and even the mortgage industry at the hands of tech-savvy service providers who value customer satisfaction first and foremost. The term is a nod to how Amazon disrupted the retail industry years ago and now dominates the online retail space which has taken many customers away from traditional brick-and-mortar offline stores.
The manifestation of this effect can be seen in how customers today are becoming more tech savvy and choosing their options carefully whether it is before buying a car or taking a home mortgage. The internet has made it extremely simple to find things without looking too hard, and a mortgage lender who does not have a website or favorable online reviews might as well as kiss his business goodbye in today's world. On top of that you have companies such as Redfin and Zillow which are eating up complementary businesses while creating one-stop-shops for their customers and offering better customer service. Today, a modern mortgage company controls the top of the sales funnel, ensuring transactions flow as per how they want them to flow since they are the first ones to come in touch with new, potential buyers.
While technology has played a part in disrupting the mortgage industry, at the end of the day, it is just a tool. The main reason why the mortgage industry got disrupted was because the lenders decided to employ new technology which made their lives and work easier, without caring about its impact on the customer. Intense, single-minded attention to your customers' needs is the only way to secure a footing in these tumultuous times and move ahead of the competition!
Saying that, there are 5 other main factors which are causing disruption in mortgage industry, and include the following -
It would be wrong to think that in the past few years, technology has changed only the mortgage process. Today, everything from securing a homeowner's title insurance to creating a new listing has been digitized. This transformation has taken over the entire mortgage ecosystem and has led to the rise of hybrid/electronic mortgage closings which are soon becoming a norm across the industry. If you own a mortgage company, you can either build new digitized processes from scratch or partner with a service provider experienced in doing so for other mortgage lenders. These partners can help build a comprehensive platform that is not only the latest in technology, but also keeps customer experience front and center.
Today, the world has become increasingly hyperconnected and customer seek instant gratification. They want access to your products and your portfolio at all times and want to compare it against other similar portfolios. You do not need to be there in person to service them, as self-service is becoming increasingly commonplace in today's mortgage industry. Better self-service channels not only provide valuable information but also allow access to educational tools which allow consumers to do what they want to do on their own, while also helping you cut down costs. Today, modern mortgage lenders have their own borrower portals for better customer satisfaction, using which customers can generate their own pre-approval applications, check their credit score and credit line, run their files through automated underwriting processes among other things.
Customer validation has always been a major pain point for lenders around the world and is a complicated process which takes a chunk of time without anything of measure taking place. Today is a different day though, as collecting a borrower's information such as assets owned, income, liabilities, credit, liens, judgements, identity, employment etc. need only a few steps. Most of this data is required to complete a 1003 application and is available digitally. Collecting customer data and back-filling the tenuous 1003 form is now a much more fast and seamless experience not only for the lender, but the customer as well.
The Day 1 Certainty program launched by Fannie Mae in 2016 ensures less and sometimes even no documentation for both borrowers and lenders by automatically passing on customer details from financial institutions such as IRS. This in turn leads to faster mortgage processing times and underwriting times as well, while helping you cut down costs.
Many lenders are interested in understanding how new business models are affecting the mortgage industry. A major new model is the rise of a mobile-first attitude. Mortgage lenders today need to design their operations from the ground up for mobility in order to survive in an extremely competitive landscape. As more people start using mobile devices daily in comparison to traditional desktops, it is imperative that all your products and services can be easily accessed by your customers wherever they are. Different mortgage service providers are therefore coming out with apps with varying degrees of functionality; some assist users in tracking the updated mortgage rates, others help to take customers through a step by step online underwriting process. Mobile and web apps help to streamline the various offerings you have and present them in a consolidated manner, ensuring your customers can manage their finances easily with the aid of modern technology.
Drawing actionable conclusions from the mass of data available with mortgage lenders nationwide is imperative and extremely important for lenders who want to diversify and offer high-quality services to their clients. The potential benefits of machine learning algorithms can help lenders identify the latest trends in the market and support customer requirements more efficiently. The growth of digital technology carries enormous opportunity for mortgage companies, but unlike other industries, mortgage lenders have more at risk. Data theft - as seen recently in the Equifax fiasco, is a major cause of concern as handling sensitive customer information without securing them properly can lead to massive blow backs for the company.
At FWS, we understand that technology has a big role to play in the mortgage industry, as it will help devise the means with which your customers can play a more fulfilling role in the transaction. Significant changes such as the ones we see nowadays can only happen when the perspective changes from your needs to paying more attention to the borrower experience. With our help, you can begin modernizing your traditional processes while paying attention to customer satisfaction. We are the ideal technology partner for mortgage lenders since our full stack experience will help you create delightful user experiences without hampering security and experience.