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The future of digital mortgage processing

Technology is providing a simpler and more profitable mortgage approval process with lesser errors and a better customer experience. According to various market surveys, the pandemic has shifted the way consumers want to handle their mortgages — a combination of digital services and face-to-face engagement with the lender (bank).

But why is there a need for a transformation in existing technologies? The answer is in the impact the pandemic had on existing homeowners and new buyers. To provide context, here predictions and statistics from the U.S market:

  • There will be a steep rise in new home buyers due to historically low interest rates.
  • The ongoing movement of people from cities to suburbs may continue or even rise.
  • Because of the lost jobs or reduced incomes, the number of homeowners behind on their loan payments (6%) has doubled since March 2020 (3%).
  • According to the Consumer Financial Protection Bureau (CFPB), 2.1 million people are overdue by 3 months or more. This is an increase of over 250% since March 2020.
  • Homeowners are contemplating buying a new and better house. It’s a seller’s market and they are already sitting on a hefty premium on their existing house.

Given the current situation, we anticipate that a flood of homeowners and renters will go for either foreclosure or restructuring of their loans.


Challenges faced by mortgage bankers

Banks have been extending moratoriums since the lockdown happened, but that can only go so far before they hit a brick wall. At the same time, banks want to keep finding workarounds to help save the customers’ credit history. Better credit history for the population indicates a better banking system and more business.

In addition, the pandemic has created a demand for mortgage processing without visiting the bank’s branch. Of the lenders currently offering online applications, 60.4% say that more than half the borrowers choose to process their applications remotely. Over 38% say that more than 80% of their clients chose the digital way. With such a large push towards digital mortgage processing, here are some of the challenges that banks will face in the future:

  • Providing a seamless digital mortgage application and approval process without customers visiting the branch.
  • Finding that sweet spot where the banks can preserve their financial positions and the borrowers’ credit history.
  • Handling a flood of documentation for foreclosures, loan transfers and modifications, new mortgages, and other customer requests.
  • Vetting the documents and liaising with thousands of individuals, creditors, underwriters, employers, and financial institutions.

Banks cannot afford to keep these processes lingering for months. The document collection and vetting process needs more streamlining with better communication among all the parties involved.


How digitalising the mortgage process will benefit your business?

About 99% of mortgage lenders believe that technology can improve the whole experience.* Among these, 74% believe that it can simplify the process, 70% say it will reduce the time for closure, and 67% anticipate minimal data entry.

Existing systems for mortgage processing have gaps and limitations, hence the long delays. Digital mortgage processing systems should be able to provide the following benefits:

  • Design a common platform where every party can communicate and be on the same page, including the borrower, the bank, the underwriter, and any other financial institution. This helps in knowing the borrower’s history based on their past transactions with other financial institutions.
  • Reduce the risk of manual errors in vetting the risk and compliances of lending money.
  • Reduce operational costs without cutting down on valuable staff.
  • Automate document collection processes that enable intelligent data review, triggering additional document requirements based on the information available. This also enables a better understanding of the borrowers, lenders and loan-specific needs, which reduces back-and-forth underwriting.
  • Immediate review and feedback without consuming additional time and efforts of the bank staff.
  • An ability to provide an instant yes/no answer, with a request for additional documents (if any).

This will help the customers know where they stand at every point in the mortgage processing journey.


How can Infosys BPM help?

Infosys BPM brings a pool of experts and AI-/ML-based tools to assist lenders in their digital mortgage processing journey. Our solutions-based approach encompasses people, processes, and technology (partners and in-house) to provide solutions for everything from automated lending to reducing mortgage funding leakage.

Learn how our Digital Mortgage offerings can help establish an efficient digital mortgage process for your company.

*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.