Expanding The Definition Of ‘Digital Mortgage’
Now that the mortgage industry has largely adapted to life after the TILA-RESPA Integrated Disclosures (TRID) rule, many lenders are turning their attention to other business priorities that were sidelined as the industry focused on TRID compliance. One of these priorities, improving the customer experience with digital capabilities, has been the dominant industry topic for much of 2016 and will continue to lead the conversation this year.
The conversation began to shift with Quicken Loans’ introduction of Rocket Mortgage in late 2015, and this conversation was amplified along with Quicken Loans’ seemingly ubiquitous Rocket Mortgage marketing campaign, beginning with the much talked about 2016 Super Bowl ad. Rocket Mortgage became the catalyst that forced companies to develop digital marketing strategies, and the focus shifted from regulation to the innovative technology required to enable a digital mortgage experience.
But what exactly is a “digital mortgage”? Although definitions vary, generally, the term “digital mortgage” is used to describe the capability to provide a borrower experience, from initial online application to closing and funding, without human intervention on the part of the lender. With a digital mortgage, borrowers are able to apply for a mortgage online in a few minutes and track progress of the loan on any Internet-enabled device. The self-service aspect of the digital mortgage relies on technical innovation that automates much of the process.
Today, automating the borrower application experience and/or the closing process is central to the digital mortgage definition. But the definition needs to be expanded to include the automation of steps throughout the entire mortgage manufacturing process – from loan setup, to underwriting, to post-close audit. Automating these production steps will accelerate origination and contribute to the exceptional customer experience borrowers have come to expect from technology-enabled financial transactions. And, lenders will further benefit from gains in efficiency and decreases in production costs that automation delivers.
In a survey conducted in October 2016 at the Mortgage Bankers Association’s Annual Convention and Expo 2016, 86% of the respondents revealed that they plan to increase spending on automation technology to speed production times and reduce personnel-related loan production costs. The results of the survey, which polled more than 100 executives from leading mortgage companies, indicate that lenders are already expanding the definition of the digital mortgage to include key “back-end” steps in the mortgage manufacturing process.
In that same survey, the lenders were asked if automating the consumer experience during the application process or automating key steps in the loan production process is most important to their companies. Forty-five percent of the respondents stated that automating key steps in their companies’ loan production processes is most important, 37% stated that automating both the consumer experience and their loan production processes is equally important, and only 15% stated that automating the consumer experience during the application process is most important. Three percent of those polled said their companies are not planning to implement automation technology.
Underwriting is one of those key steps that can benefit from automation. Today, underwriters rely on checklists to evaluate loans. The process is slow and error-prone, and critical calculations are often done manually, by which errors can be costly. With automation technology, checklists are completed in a repeatable, consistent manner, and only those checklist items that don’t “pass” are flagged for manual review.
Using automated data extraction (ADE) technology, underwriters are able to complete checklists in minutes, cutting the time it takes to evaluate loan files by up to 80%. ADE technology automatically extracts critical data from loan documents, compares values across documents in a fraction of a second, runs the data through a predefined rules engine, performs consistent calculations, and provides alerts on any values that fall outside of established parameters or tolerances.
This exception-based model eliminates the costly and time-consuming “stare and compare” approach to verifying data across several documents and reduces the multiple touches used today to ensure data integrity. This allows the underwriter to focus on loans that require more careful scrutiny, such as loans with non-occupant co-borrowers, loans on investment properties, loans with borrower self-reported income and other loans with unique characteristics.
Leveraging innovative technology to automate the underwriting step in the loan manufacturing process accelerates origination, dramatically reduces costs, ensures data integrity, and improves the satisfaction of both borrowers and underwriters.
The survey also revealed that technology is top of mind for most lenders. When asked what issues their companies are most concerned with, 73% of the respondents stated implementing the right technology, 51% cited rising loan production costs, 36% stated improving customer experience/customer satisfaction, and 16% cited longer loan turn times. Confirming the shift in industry priorities, risk of regulatory penalties, hiring and retaining employees, and complying with TRID were each cited by fewer than 10% of the respondents. (Total percentage is greater than 100 because respondents were asked to cite two issues.)
As the survey results demonstrate, industry leaders realize that to achieve digital mortgage success, they need to expand the definition of “digital mortgage” to include key steps throughout the loan manufacturing process, not only the application and closing steps. And as industry conversation shifts from regulation to innovation, identifying and implementing technology that automates these key steps will be the focus of forward-thinking mortgage companies.
This article was originally published on MortgageOrb on 1/20/2017.