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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. If the digital mortgage really streamlines that 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 and lead generation 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. The Ellie Mae 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 improve the experience, nearly a quarter said they would like a faster mortgage process. Not just the application process, but the entire process. While that response was expected, what was surprising is that the same number also desire more personal interaction.
Today’s borrowers expect transparency, service and speed, and a human touch. To meet these requirements, lenders must offer an 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 simple, transparent interaction, the ability to easily upload documents and real-time status updates.
A DIGITAL MORTGAGE FOR LENDERS
As lenders learn what it takes to engage new-age borrowers, they must also adjust to a purchase-centric market with lower volumes, shorter origination windows and tougher scrutiny of the bottom line. In this environment, the savvy lender is focused on origination cost and recognizes the need for automation, exception-based processing and the ability to better leverage data throughout the origination process.
This is where the true digital mortgage earns its name. Through the use of automation, the true digital mortgage helps lenders not only generate more leads, but also manage loan processing on an exception basis in order to fund and close more loans faster.
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 multimillion-dollar national marketing campaigns of the few largest retail originators. Given the stacked 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.
Lenders have critically important information on the borrowers they have worked with to purchase or refinance a home. By augmenting rich lender data with public records, current market information, servicing data, psychographic and social media data in a single, private data repository, the lender can apply predictive analytics to determine which consumer may be ready to downsize, upsize or refinance.
SMART ORIGINATION
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 their existing data rather than re-entering it.
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 application. Any additional information the consumer enters is automatically assessed, in real-time against the rules resident in the lender’s system of record.
Of course, not every consumer wants to interact with a website, as many still want to talk with someone. Predictive analytics leveraging behavioral data can help identify these consumers and provide them with 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.
Here’s an example. A lender has two borrowers with very different expectations and needs. One, who is a more anxious borrower, calls their lender every four days to make sure the process is going smoothly, even if no additional information is needed or requested. The other, the experienced borrower, is too busy to talk and simply wants to get a text from the lender once the appraised value is verified and a closing appointment is set.
If the lender has previously helped either of these borrowers in the past, data available through call logs, audit trails, or notes in the system of record will trace past borrower behavior and indicate best practices for future interactions.
If the borrower is new to the lender, there is likely enough consumer behavioral data in the system of record to identify a cohort profile that will allow the lender to predict likely preferences. But most lenders do not have the data scientists to build such a profile. This is where machine learning comes in.
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.
This example only scratches the surface of what is possible. Imagine the different secondary market execution options the lender can now employ at the point of origination, creating unique, personalized risk or secondary market-based workflows.
Think of all the services that need to be ordered, received and reviewed in order to originate a mortgage. Credit reports, appraisals, fraud reports, income verification, title reports, flood certification and virtually every other service can all be ordered through automation.
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.
Each opportunity to leverage automation reduces time to originate and lowers the cost of origination. Automation also supplies loan agents with everything they need to know in order to be connected to the loan process in order to provide that personalized human touch that consumers want. 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 origination 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 high-touch expectations of Millennials continue to drive the use of the next generation of technology.
