5 Ways to modernise the mortgage industry with digital transformation

According to a leading management consulting company, the demand for mortgages in the US has skyrocketed during and after Covid. Much of this is because of the lower interest rates. The mortgage industry has a forecast to churn out more than $2.5 trillion each year till 2024. The Indian home loan market has grown by 34% CAGR in the last 5 years.

Leaders in the mortgage industry are investing in technology to streamline the front and back-end processes to make the customer experience smooth and fast.

This article will explain some of the current challenges and the new mortgage industry technology trends.

Current challenges in the mortgage industry

Many mortgage businesses that still have not adopted digital technologies grapple with the high cost of customer vetting and acquisition and long cycle times. The productivity of the underwriter and loan processor is low, dramatically impacting customer satisfaction scores. Here is a glimpse into the numbers –

  1. Origination cost per loan - $7,000 - $9,000
  2. Time required to get initial or refinance mortgage - >45 days
  3. Number of mortgages each full-time employee closes per month – 10 to 14
  4. Underwriter touches per file – 4 to 5
  5. Difference in customer satisfaction scores –
    1. Between the mortgage and other best-in-class industries – 30% to 40%
    2. Between mortgage and banks and other fintech companies – 20% to 30%

While most technology innovation in the mortgage industry has happened on the front end of the value chain, many businesses are realising the need for doing it in the back-end processes. These back-end processes include straight-through processing and automated decision-making.

5 Ways of digitally transforming the mortgage industry

To ensure that your mortgage business is at the forefront, investing in technologies that make the process faster and costs lower is imperative.

  1. Virtual home assessment and appraisal –

    Home surveyors spend significant time visiting and appraising the property for sale. With the rising number of homes in the market and a shortage of appraisers, virtual home appraisals are helping lending businesses. Thus, the property assessment and mortgage application experience for the potential buyer becomes better. The lending businesses lower their requirement for manpower and thus the expenses.

  2. Process automation –

    The mortgage industry can be highly process oriented. Traditionally, most of these processes were on paper, from filling out applications to loan disbursement. This includes many repetitive tasks and a series of documents and forms to fill, and compliances to meet. Mortgage technology, including mobility, analytics, and paperless processing, can help save time, reduce costs and errors, standardise processes, and ensure compliance. You can do effective document management and have better visibility of records for audits.

  3. Open banking –

    Through open banking, third parties can access the customer’s banking, financial, and transaction data using APIs. This helps SMEs, start-ups, and other industry players create attractive products and services. Open banking significantly reduces the number of steps for mortgage businesses cutting down the data points and, thus, the admin costs. It automates matches between lenders and loan applications for loan brokers.

  4. Big data and analytics –

    Big data is the foundation of deep analytics and insights. According to estimates, there will be 463 exabytes of data produced each day by 2025. High-quality data and analytics are crucial for the financial market, including mortgage lenders. Using big data, lenders can accelerate growth, mitigate risk, and reduce costs.

    Lenders can scrutinise loan applications faster and with more accuracy. They can dive deep into the customer profile and even pull data about the applicant from the public domain, including news and social media.

    This helps lenders better understand the financial behaviour of their customers. They can cross-sell and check for any fraud in the past. However, data integrity is important to get valuable analytics.

  5. Risk analysis –

    Artificial intelligence (AI) and machine learning (ML) are transforming the mortgage industry by leaps and bounds. A survey shows that 55% of executives in the sector believe that AI and ML will make their firm more competitive and will help in strategic decision-making.

    ML can help lenders improve accuracy, reduce costs, and increase efficiency through chatbots, forecasting, and credit assessment. By creating a customer profile, lenders can analyse the risk of granting them a loan.

For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.

How can Infosys BPM help?

Infosys BPM helps your business simplify and automate the mortgage lifecycle through AI, ML, and analytics. The primary focus of business process digitisation is to improve operational efficiency, enforce process controls, and provide deep insights.
Read more about how to fast-track digital mortgage operations through digital transformation with Infosys BPM.

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