Digital Transformation in the Mortgage Industry: A Closer Look for Lenders

September 2, 2021
For more than a decade, innovation in the mortgage industry has lagged behind other sectors being transformed by the fintech revolution. Now the time for change has come. Unless you are Rip Van Winkle, you’ve been inundated by messaging about the ongoing digital transformation, and perhaps worried you are missing the boat. However, an organization […]

For more than a decade, innovation in the mortgage industry has lagged behind other sectors being transformed by the fintech revolution. Now the time for change has come. Unless you are Rip Van Winkle, you’ve been inundated by messaging about the ongoing digital transformation, and perhaps worried you are missing the boat. However, an organization seeking to digitize processes should first decide how their journey fits in the landscape of industry transformation. 

Asurity's Luke Wimer, Chief Operating Officer, and Franci Webster, Director of Strategic Relationships, help explore critical questions about digital transformation for lenders.

When Did the Mortgage Industry Harness Tech?

In any industry, technological change has different business drivers. For mortgage, digitization has the potential to be transformative for customer acquisition, customer experience and satisfaction, asset quality and risk, consumer protection and regulatory compliance, operational efficiency, reduced credit cost, and more. 

Lenders are feeling the heat to adopt digitization to stay competitive, and automation is increasingly crucial in a competitive market. Even traditionally slow-to-transform industries are making the switch to digital. But often, it only takes one big driver, like a well-known institution, to take the step into the unknown and set the stage for other players, like Rocket Mortgage in the case of the mortgage industry. 

Rocket Mortgage hit the ground running early on with online advertising and processes. Various POS and LOS platforms have launched updated customer experiences. Many processes in mortgage have been targeted for increased automation from technology vendors: eClosing, remote online notarizations (RON), eRegistry and eVaults, automation of diligence/fraud prevention/application stage processes, and more. The key is figuring out which transformation matters most for your organization.

In the past year, the entire industry has seen an acceleration in digitization. In 2020, employees took advantage of remote working opportunities. The multitude of new homebuyers and borrowers was a boon for lenders, leading to fast changes in the industry, as well. 

"The pandemic was a major motivator and milestone. The goal was to close a loan with as little in-person activity as possible. Steady technical innovation combined with the advent of remote needs has made for a new marketplace," says Wimer.

Most mortgage processes now mix various digital and manual paper practices. Forbes Insights and Freddie Mac recently found that nearly 50% of lenders have achieved some level of digital transformation. 

According to Wimer, "Pockets of digitization have been happening for a decade or more, but the mortgage industry has been slow to react." 

Where did the hesitancy stem from, and what led to the ultimate adoption of digital technology? Or, will the industry continue its evolution or fall back? How do you ensure your business won’t? Leaders need to ensure a vision is defined and Implemented in stages. To do this, it's helpful to understand what some of the barriers to change might be.

Pre-Digitization: A Look Back at the Mortgage Industry

When looking at why the mortgage industry was slower to adopt technology, it's key to examine what it looked like leading up to this change. 

Everyone agrees that obtaining a loan can be frustrating, time-consuming, incredibly paper-intensive, and often error-ridden. Verifications were awkward and intrusive. Signing processes and settlements are inconvenient. So why has the mortgage industry been so slow to adopt digital processes? There are several reasons—all understandable and relatable:

  • The size of transactions makes change inherently riskier and institutions and borrowers more cautious. 
  • Lots of money is needed to transform a business. The mortgage industry has thin margins, and people are hesitant to make new investments. 
  • Mortgages through traditional consumer banks have strict regulations.

Updates to systems and software used to be arcane and painful, and a culture developed where people stuck with what they had because it was easier and less painful to do so. 

"Today's regulatory environment is so strict," says Webster. "All the aspects lenders have to consider are quite overwhelming. 

There are good reasons to be nervous about transformation. Lenders have spent years building knowledge - new processes must be defined in detail and tested before rolling out to customers. Many have spent big money transforming but have not gotten results. How willing are you to re-tool or give up what has been successful to turn to something new? Many lenders are still testing different solutions to find the right mix for their enterprise."

The Benefits of Digitization

By taking advantage of modern financial technology, mortgage institutions can optimize their processes for the benefit of both the lender and the borrower.

Optimized for You

One of the key benefits to the innovative technology available today is that companies from every industry have the opportunity to optimize their digital transformation to best suit their unique process. In the fintech space, the tools are incredibly granular and can improve every element of a financial institution’s business, especially within the mortgage industry.

Need a solution for state-of-the-art mortgage document generation? There’s technology for that. What about something to help the lender stay compliant with fair lending regulations? There’s technology for that, too. With all the digital advances available for the mortgage industry, you can significantly optimize every step of the mortgage process for your financial institution.

Optimized for your Client

As much of the world’s business processes have migrated to digital formats, the mortgage industry has been slow to this transformation. Borrowers approaching your financial institution for a loan, however, will not only want the process to be digital, but they will expect it. When met with outdated procedures that increase time and energy, potential borrowers may not find the hassle worth it and decide to seek their loan elsewhere.

The digital technology accessible in the mortgage industry is often designed with both the lender and the borrower in mind. Drastically improve the loan experience for your borrowers by using modern financial technology to streamline communication between the lender and borrower throughout the application and underwriting process, better service loans by automating servicing steps, and ensure no discrimination or bias with compliance regulatory solutions.

The Future of Digitization

In 2020, banks and lenders were forced to manage their businesses remotely, and borrowers adapted to completely digital purchasing experiences. For instance, Bank of America's digital mortgage transactions nearly doubled in 2020 and 68% of consumer mortgage sales were done digitally.

"As we come out of the pandemic, I think we will see a little backsliding into the old ways," says Wimer. "But there has been excellent progress now with digitization, with a year into it already. In this case, progress means adoption or exploration of new technology, most of which is still being formed by real-world challenges.”

Looking ahead, the period between application and deal closure would shrink from weeks and months to hours in the next few years, according to a Freddie Mac study

"I think the path forward will be measured. Not everything is digitizing, and it's not an overnight process. But it will be greatly accelerated now. People are going to have to test and learn, with trial and error, and trying new things." 

Bottom line? The industry is moving toward digital and remote processes. But lenders need to listen to what their customers want, decide how to establish their own unique efficiencies and competitive advantages, and then figure out how to deliver it. 

Asurity's Digital Mortgage Solutions

At Asurity, we've built solutions that will grow with lenders, borrowers, and adapt and evolve with the ever-changing mortgage landscape.

Our digital mortgage technology has enhanced the way we do business with lenders. We are capable of processing high volumes of data, fast. Asurity is the go-to solution for large data needs, the only company on the market that can load a million or more records in an hour. With more than a thousand pieces of data per loan, only a robust, secure platform should be considered for your needs. 

Simplify your lending process with Asurity.

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