Although studies show that technology has become a priority for the mortgage industry, usage is not rising as quickly as one would expect. While certain technology and tools tailored to the needs of the mortgage industry already exist, the mindset and comfort level of lenders and investors must catch up to the reality of where the industry is heading if they want to remain competitive.
If for no other reason than to rein in ballooning expenses, adopting technology where relevant can have a double-positive effect.
According to a study by the Stratmor Group published in March 2016, the TILA-RESPA Integrated Disclosures alone has increased mortgage lender origination cost by nearly $210 per loan. This increase is due in large part to the additional compliance staff lenders have added.
Another study, conducted by Accenture and released in August 2015, explains that between 1980 and 2000 there were approximately 86 million millennials born in the U.S. alone. Unlike previous generations, millennials rely more on technology for everything from grocery shopping to interactions with financial institutions. National Mortgage News’ report "Mortgages 2016: Customer Service, Tech Top Industry’s Agenda" states that 34% of the lenders and servicers would change their strategy to pursue millennial customers. This number increased from 27% in 2015.Taking these data together, the next step seems clear. While some lenders are already rethinking the customer experience to include mobile options, increase the use of automation and embrace e-docs, broad acceptance is still elusive.
Ongoing and escalating regulatory changes have been the catalyst for originators re-evaluating and streamlining their processes to be more cost-effective. Automation can have a positive effect on customer satisfaction, from bringing about more effective communication, to eliminating potential fees as a result of noncompliance and drastically decreasing the possibility of a default or the need for a loan buyback. Providing automated information in a timely manner could also decrease the chances of a customer defaulting on their payment.
Along with regulatory changes driving the use of technology to aid in compliance, lenders have to employ technology just to engage with millennials. There is no way around the fact that more millennials are entering the housing market and they prefer to use various forms of technology more than previous generations. While reports have varied on just how much this generation prefers to use technology versus interacting with a live person, expanding mobile options will result in higher customer satisfaction.
One area in which the industry continues to lag is e-signatures. Despite last year being the 15th anniversary of the federal Electronic Signatures in Global and National Commerce legislation, the investment community is still not comfortable with electronically signed documents. In fact, 30% of lenders still cite legal acceptance as one of the biggest challenges to implement e-signature.
Even when it comes to selling mortgage servicing rights to servicers, technology plays a crucial role in ensuring that the practice is compliant as well as providing an accurate assessment of the value of the loans. The lack of accurate values could spell lost revenue for servicers. Using technology, loans can be reviewed through a system and an assessment can be made on the loans almost instantaneously. When effective technology is used, it is an easy process for lenders to bundle these loans and sell to servicers. In the same National Mortgage News report last September, 41% of servicers said they would be investing in technology to better handle servicing transfers, making tech the area with the greatest amount of investment by servicers.
The landscape of the mortgage business has changed somewhat with technology, but maximizing its full potential is still in the distance. The business case for a technology overhaul exists in nearly every industry corridor, but executive mindsets have to catch up with the need driven by regulatory oversight and tech-savvy consumers requiring more efficient interactions with mortgage companies. This is the only way lenders and servicers will remain competitive and profitable in the mortgage business of tomorrow.
Pramod Karachur manages compliance efforts at IndiSoft.