By Harold Copher, Jr. • Mortgage Lending Professional
One of the most significant changes in mortgage lending over the last couple years has been technology advancements in the origination of residential mortgage loans—particularly with the initial application, required disclosures and supporting documentation submission. The cutting-edge lenders view development of better technology as a way to give them a competitive advantage by improving the customer experience and lowering costs. Other lenders were content letting others lead the way and are now playing catch up. Truth be told, the need for the mortgage origination process to become easier and more transparent for the consumer has been out there for years.
As recently as the late 1990’s, loan originators were required to submit handwritten loan applications and obtain documents with original signatures. Today, our buyers can complete the loan application on their phone, upload any required supporting documentation directly into our system and electronically sign the application and disclosures. If they fit the profile, a click in the right place and their income and employment verification, asset validation and tax transcript documentation is uploaded on their behalf. In some cases, the lender will receive an automated loan approval that doesn’t even require an appraisal report.
Technological advances are occurring on both the consumer front and in the back room of mortgage origination. Streamlining the process for the consumer is probably the most visible improvement, but cloud-based loan origination systems and advances in automation designed to replace tasks previously done manually are improving the overall cost structure and timeliness required to complete the transaction.
Most think the millennials deserve at least partial credit for driving this change and they are probably right. Being able to interface with your mortgage team from your phone as easily as you track an order on Amazon is not only convenient, but can reduce errors, as well as processing and underwriting timeliness. According to a 2016 Federal Housing Finance Authority report, 18 percent of home loan applicants were forced to redo their paperwork, with slightly over 23 percent experiencing a delay in their scheduled closing- Although the same report indicates overall borrower satisfaction levels remained acceptable, the numbers reflect satisfaction levels among younger applicants trending downward.
Is it important to address satisfaction levels among younger buyers? According to FNMA, the millennial generation is the largest sector of home buyers in 2018 and will continue to drive the housing market moving forward. And because millennials are also the most technically advanced sector, mortgage lenders (and REALTORS) who provide instantaneous, digital access to data will be the long-term winners.
So, the advances in technology are mostly market driven and not a response to regulatory change? I think so. I believe the industry is advancing and striving to meet the expectations of our customers. Being better equipped to document compliance is definitely a benefit, as is lower overall costs per loan. As costs per loan have increased and margins per transaction have decreased, the ability to more efficiently process and analyze data are allowing us to provide a better experience for the consumer, while helping keep costs in check.
Loan eligibility determined by automated underwriting continues to improve with better technology. We’ve seen agencies modify their automated underwriting guidelines to accommodate new data, which frees up experienced underwriters to apply their expertise in evaluating those applications that are “just outside the lines.” Niche loan products are the fastest growing area of the mortgage marketplace. The challenge of property valuation and the role of the appraiser are changing. Like most industries, our business model is evolving due to advances in technology.
What does all that mean to you and me?
The need for a seasoned professional loan originator will continue to be critical to the process. With the trend towards direct borrower – lender interaction, the benefit of education and counseling remains. The value of the technology manifests itself in the execution of the plan and the process, not the development of the plan. Good loan originators are becoming better at leveraging the new technology. We are now able to invest more time coaching people through the complex transaction that is a mortgage; leaving the tedious, repetitive tasks to technology. Technology will enhance our service, not replace it. RL