The future of mortgages is digital. Is your company ready?
As digitalization has taken over a larger portion of American's lives, it was only a matter of time before the components of getting a mortgage loan — applying for, processing, underwriting and secondary marketing — went down that same path.
The industry has been abuzz with chatter about digital mortgages since long before the Great Recession, and over the past three years, a handful of lenders have emerged as pioneers, many partnering with fintech providers to reimagine their product strategy. These early endeavors have offered valuable lessons learned, but more importantly, have shown vast promise and helped the industry come to the consensus that the future of mortgages is digital.
There's a strong appetite by consumers for digital mortgage products. According to a study by J.D. Power, 43% of mortgage borrowers applied digitally in 2017, versus just 28% in 2016. As a result, digital mortgage lenders have quadrupled their market share in eight years — going from only 2% in 2010 to 8% in 2018, a report by the Federal Reserve Bank of New York showed.
Every phase of the mortgage process has grown in online loan activity — from research and discovery to application, qualification and approval, as well as risk and compliance. Because customers now have unprecedented choice and bargaining power, mortgage companies will need to work harder to improve their competitiveness by providing better options and, of course, increasing their digital presence.
Although further progress still needs to be made before there is a fully digital mortgage, the industry is already seeing benefits. Lenders are starting to meet borrowers' expectations by providing many self-service opportunities. Quality control and compliance are improving due to more accurate data and fewer opportunities for human error. And, processes are becoming more streamlined, as evidenced by decreased time to close.
Now, the next phase of the digital mortgage revolution is starting as firms think more about offering enhancements through machine learning and artificial intelligence for enhanced analytics and decision making.
Amidst this revolution, companies with a robust digital strategy have gained a competitive advantage through long term operational cost savings and the use of advanced data analytics to improve the end-to-end process.
So, for those that have not yet developed a digital strategy and road map, the time to do so is now. While the task can seem daunting, the right strategic partnerships and aligning with the broader corporate strategy make it possible. One key lesson learned from early entrants that fast followers can benefit from involves choice of technology. Lenders must consider a long-term strategy which envisions a flexible, digitized lending platform that utilizes the latest innovations.
Developing a robust digital strategy can seem overwhelming. At Capco, we believe the key to a digital strategy is to make sure it is holistic. There are no digital "magic bullets," or all-in-one products or vendors who will solve every pain point. Companies who win have a robust digital strategy that spans across lines of business, products and processes.
We developed an easy-to-use framework of questions and topics for lenders and their executives to ask themselves to create a holistic approach, including:
· Customer-centricity: Do we know what our customers want?
· Competitive landscape: Who are our current competitors, and who do we want to compete against?
· Data strategy: How can we get a unified view of our customers leveraging existing data?
· Digital thumbprint: What does "digital" mean for us and what else does it include besides technology solutions?
· Talent strategy: Is my organization ready?
· Technology maturity: How quickly can we become digital?
Providing a digital mortgage experience to your customers will be necessary to survive and thrive. And selecting the right partner — one capable of navigating complex questions and developing a comprehensive, flexible approach — will empower you to compete and win. What's your plan?