Digital mortgage operations set to propel the mortgage industry to new heights
The mortgage industry is big. Globally, it is one of the largest financial services sectors. Some analysts have sized the professionally managed real estate investment market at USD 10.5 trillion in 2020. The overall market is even larger - the US mortgage market alone accounts for USD 16.96 trillion in debt in 2021, according to Statista. The two main transactions in this industry are new purchases, which are heavily relationship-driven; and refinancing, which is rate-driven.
From the time of mortgage origination, through closing of the loan, and onwards into sale of the loan in the secondary market, the industry accrues income through hedging, interest, servicing fees, reinsurance premiums, and a host of other fees, besides the gains made through property sales. It is no surprise that such a dynamic, market-driven industry is well on its way to becoming substantially digitized.
Digital mortgages: The future
Digital mortgages are the future. A truly digital mortgage is an electronic asset, the transaction of which is done without using a single piece of paper. From application to document collection to eNotary and beyond, every step of the process is handled digitally. Such mortgages help eliminate not just paper, but manual processes (and the resulting inefficiencies and errors), labor costs, and, most importantly, wasted time.
The time of digital mortgages has come, as home buyers prefer to stick to the safety of their homes and perform transactions digitally during the pandemic. The documentation-intensive nature of the mortgage process and the enormous amount of time taken to close (30-60 days) make the industry ripe for digital transformation. The advantages for lenders are enormous - research firm KPMG estimates that digital mortgage solutions can fetch 20-30% top line growth and a whopping 30-50% in cost savings.
Digital transformation in mortgage industry
Digitization is the way to go. Mortgagors can realize these kinds of savings by embarking on digitization of their operations. The challenge lies in identifying where to begin, what to digitize and when to scale. Many lending institutions across the globe have started the journey, moving from a mostly manual process execution environment with poor visibility into KPIs, to truly digital transformations where processes are standardized by getting onto digital platforms for their core operations and there is end-to-end fulfilment of the operation on the platform. Infosys BPM’s Live Enterprise is one such suite of services and solutions that provides a suite of services and solutions that can take mortgage industry businesses to next level of innovationan agile and hyper-productive future.*
Everyone is thinking front-end. The advantages of going digital are evident in every touchpoint of the mortgage process. Digital tools assist lenders in adopting an omni-channel approach in their customer interactions, across multiple touch points. At the front-end, lenders can start with mortgage applications online. They can improve their lead generation capabilities by providing simple calculators as well as sophisticated scenario-building gamification capabilities that help customers make decisions, thereby capturing their digital footprint. Lenders can interact with customers through their preferred channel - online or mobile. Chatbots and virtual assistants can be handy to help customers through the lending process.
However, digitizing back-end operations is where the savings are highest. The biggest challenge mortgagors face is customer dissatisfaction arising from the long time taken to close due to manual checks and processes, and errors entering the workflow. These can be mitigated, even eliminated, via proper workflow automation and data analytics solutions.
For one, optical character recognition (OCR) software and robotic process automation (RPA) solutions can undertake error-free data entry and extraction. RPA solutions can take care of automated loan underwriting and loan bundling activities too.
Artificial intelligence-based machine learning (AI/ML) models are adept at performing routine mortgage application-related checks, compliance checks, credit checks, and collation of digital score and valuation results at scale. The models perform the resultant routine decisions speedily, moving the customer forward in their loan process.
The customer is notified each time their application progresses, improving overall customer experience (CX) and driving up customer satisfaction numbers.
With automated valuation modeling solutions powered by AI/ML, the time taken to make an offer can be reduced from days to minutes. Forward-looking institutions are leveraging smart contracts to overcome visibility and transparency issues that had been inherent in mortgages. Blockchain and content and document management solutions will bring down settlement times tremendously. This digital transformation frees up the time of the financial institutions’ executives to focus on customer-facing activities. Manual workflows and underwriters can serve as backup to handle truly complex cases and offer customers the best of both worlds.
Technology providers running digital mortgage back-office operations have unleashed a slew of innovations to support lending institutions and disrupt the mortgage industry. Supported by these platforms, the industry is set to grow bigger and more profitable.
* For organizations 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 organizational 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 organizations 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 organizations that are innovating collaboratively for the future.