Editor’s note: This story originally appeared in the January issue of Mreport.
It is human nature to look back at the end of each year and see what went right, what went wrong, and what could be improved. But 2020 was not an ordinary year, and just the number of lessons lenders could potentially take away from the past nine months would fill several books.
But if we’ve learned anything over the past year, it could be that most lenders thought they were much further along the road to creating a digital mortgage experience than they actually were. In fact, a lender’s general approach to technology proved to be a real differentiator in terms of its performance over the past year. This is also expected to be the case in 2021. The key is to understand how.
Of course, every lender struggled to adapt to interest rates below 3% and the global pandemic. But their fates were very different. Those who had the foresight to invest in more cloud-based digital technologies prior to the pandemic were in a much better position to handle the huge surge in borrowers looking to refinance and set up their own businesses in a remote work environment to relocate. However, many others were caught flatfoot.
Those in the latter group usually found it necessary to strengthen their sales and insurance teams rather than upgrading their legacy technologies, which inevitably affected their profitability. But even with larger teams, many still struggled with the inability to streamline workflows, increase efficiency, and reduce shutdown times – skills that come with more modern mortgage production platforms.
Switching to remote working when the social distancing protocols went into effect only made matters worse. When branches closed and borrowers could no longer meet the loan officers face to face, many lenders had to adjust their business processes and find new ways to gain and maintain communication with borrowers.
While no one could have predicted what would happen, lenders tied to a central location were taken by surprise.
Some lenders didn’t even have home-based procedures and tools to move to a dispersed workforce and had to implement them on the fly – while trying to keep up with the volume.
Hopefully every lender by now has a much better idea of the value of cloud-based technologies that allow their teams to work from home and allow borrowers to handle much of the mortgage process themselves – through online applications, electronic signatures and hybrid or full eClosings. Because the need for
These technologies will not go away when life returns to some sense of normalcy.
A permanent digital change
Whether some lenders will revert to the same pre-pandemic era stationary strategies remains to be seen. What is clear, however, is that consumer behavior has likely changed permanently as a result of COVID-19. To some extent, every US consumer relies on technology and self-sufficiency more than ever in their daily lives. This has affected many industries, not just the mortgage business. For example, prior to the pandemic, few consumers used delivery services like DoorDash and Instacart.
Now it feels like everyone is using them. While the end of the pandemic could push many consumers back to personal eating and shopping, these new digital businesses were growing even before the pandemic, and it’s hard to see that growth is slowing. Most lenders have now realized that they will be significantly more dependent on digital technology in 2021 and beyond. Even without a pandemic, it is becoming increasingly important for mortgage lenders to offer borrowers automated self-service options.
These options will become even more important in 2021 with more millennials and even Gen Z consumers
enter the housing market. Lenders who forwardly prioritized digital technology and borrower self-service as a long-term strategy two or three years ago were better able to deal with extreme credit
Volumes that have stumbled so many competitors. Their fortunes have resonated with the rest of the industry – in fact, we’re seeing more lenders than ever looking to replace their old mortgage software with digital technology, having seen firsthand the downside of not adopting it sooner.
The challenge, however, is understanding which technology strategy is the best. To answer this question, it is helpful to look at emerging industry trends and the specific tools that lenders will need to address in the coming year.
In our own industry, for example, there will likely be more companies that are exclusively online and use completely digital processes. We can also see more traditional banks and lenders scrutinizing the rents they paid during the pandemic when no one was using their facilities and looking at a more distant model that will add to their profitability. It will be crucial for most lenders to leverage mobile technology that provides loan officers with automated tasks, due date notifications, proactive needs lists, and notifications of when to track borrowers. This way, a lender’s sales team can build relationships with their customers no matter where they are
and simplify the application process.
Borrower self-service technology, which enables consumers to purchase and apply for mortgages, electronically sign disclosures, submit loan documents online, and participate in hybrid or full eClosings, is becoming increasingly important
also. Over the past nine months, more and more people have become familiar with online degree procedures as well as online remote notarization that will eventually become the path of the future.
However, if we return to a normal work environment, most lenders will still need to have this on-site distribution network. That’s what we say to our own customers because even though we’re a tech company, we need to see mortgage as a 360-degree experience. Some borrowers want their hands to be held during the process while others want to do the job themselves and they always will. There is no turning back from the digital experience, but the personal touch must not be lost sight of.
Before the pandemic, Artificial Intelligence (AI) and machine learning received a lot of attention, and it is inevitable that both technologies will continue to grow. But lenders need to realize that they are using it effectively
These tools start with the right data. You won’t get effective AI and machine learning outcomes unless you have a large enough data set to allow for valid, predicted outcomes. In many cases, lenders sit on data spanning 20 or 30 years. You are only now beginning to see the value of data and the ability to use analytics and data modeling to predict things like borrower default and the risk of early payment default.
What’s coming in 2021
The final impact of the pandemic remains to be seen, but the big story certainly remains
next year this will have an impact on mortgage volumes and the overall economy. Hopefully it will improve our industry’s ability to prepare for future disasters or disruptions and result in more time being spent on risk analysis and
Risk assessment as part of internal strategy meetings.
The other big story will be what happens to interest rates and how lenders deal with any shift in the interest rate environment. This discussion will be about how to cut leads and how to build better and longer.
lasting relationships with borrowers, brokers, property developers and other partners. I think we will also talk about what additional regulatory changes have been made with the new presidential administration and how the role of the Consumer Financial Protection Bureau will change and what it will look like.
In a year’s time, lenders will also look into the impact the new Single Home Loan Application (URLA) has had on their overall profitability.
Did the new form really help borrowers or increase customer satisfaction? Higher employee satisfaction? I think we’re going to learn that the new form won’t have much of an impact in the end, but how well the lenders implemented the form to get more digital
Processes for sure.
The bottom line is that 2020 will be seen as a turning point for mortgage lenders. Whether the events of the past 12 months will prove effective in inspiring long-term – and long-needed – change remains to be seen. Hopefully it will be and hopefully we will never experience a crisis like COVID19 again. But if lenders have ever wondered
They doubt whether digital technologies really make a difference in their companies, they are still wondering.