Until not so long ago, getting a mortgage was typically a tedious task, often taking months for the entire process to complete. Even after filling out lengthy applications and submitting a slew of documents, applicants would be in the dark about whether or not they might get the funds they need until the end. The entire process took considerable time and effort on the part of the borrower and lender alike. However, the widespread use of technology in the mortgage industry has made matters simpler for all.
One of the biggest technological changes that came about before the turn of the last century was the use of loan origination systems (LOS) during the 1980s. They played a vital role in automating the application and approval process, thereby improving speed and efficiency. The evolution of these systems is clear, with newer versions making way for seamless collaboration between mortgage providers, borrowers, and real estate professionals.
The main shift toward embracing what technology had to offer came about during the 1990s, when the use of computers for loan origination and record-keeping aided the typically laborious manual underwriting process. With the internet gaining popularity rapidly, more and more mortgage providers started giving borrowers the ability to apply for loans online. Some even began offering online approvals. The other benefits during the initial tech-driven years included:
While the role of technology in the mortgage industry was largely positive, there were some hiccups too. For instance, implementing modern technologies required investing in infrastructure and resources, which not all mortgage providers found possible. This created a divide between those who adopted technological advances and those who did not. In addition, not all lenders wanted to get on board because of concerns surrounding security. A seemingly high learning curve also served as a drawback during the early years.
During and after the COVID-19 pandemic, several mortgage providers changed their approach when it came to serving their borrowers, and the role of technology in the mortgage industry became even more prominent. According to survey-based data presented by Infosys:
The data Infosys collated also indicates that:
Now, just about every player in the mortgage industry has realized the impact of technology. After all, an increasing number of people turn online to seek information about mortgages, compare their options, and submit applications. Thanks to technology, borrowers can even find lenders who complete the entire process, from pre-approval to closing, online.
There’s been a considerable shift in the dynamic between borrowers and lenders over the last few years, especially after the mushrooming of online mortgage platforms. Now, just about every mortgage provider has an online presence. According to the 2023 Borrower Insights Survey by ICE Mortgage Technology:
Given the shift toward offering technology-based solutions, many people are turning online to look for new loans and refinance existing mortgages, and comparing interest rates and loan terms has never been easier.
Most lenders let you apply for a mortgage online, and getting pre-approval over the internet is fairly straightforward. All you need to do is select a lender and submit an application that requires a few personal and income-related details. Some lenders work only in the online space, letting you complete the entire process of getting a mortgage online. However, scams occur in the online mortgage sphere from time to time, so it’s best to remain cautious.
If you choose a good online mortgage provider, you may look forward to multiple benefits.
While getting an online mortgage might come with several benefits, you need to watch out for a few possible pitfalls too.
Scores of potential homebuyers are taking advantage of the recent rise of FinTech companies in the mortgage industry, and there’s no denying that this is mutually advantageous for banks and FinTech companies alike. Owing to the growth of non-bank tech-driven companies in this field, traditional players have already started upping their ante by embracing technology. This is helping them reach out to larger audiences, provide higher levels of service, and form suitable alliances with FinTech players.
The role of technology in mortgage lending is bound to lead to more advantages even for traditional lenders as long as they are willing to adapt quickly. The benefits they may look forward to include:
While artificial intelligence (AI) and machine learning (ML) made their presence felt in different financial services applications before 2020, the mortgage industry started leveraging the potential these technologies had to offer a little later.
Consider this – the mortgage industry deals with large volumes of data and requires carrying out many repetitive tasks. AI and ML, on their part, are rather effective when it comes to analyzing data and performing cognitive tasks. These can include the classification of information, determining potential risk, and even making lending decisions. It comes as no surprise, then, that some of the top mortgage providers are already using these technologies to improve the overall process, from applying for a loan to its eventual funding.
While the traditional mortgage process is typically time-consuming, AI can help speed things up by streamlining workflows as well as by gathering, analyzing, and verifying different types of information. Given the rise of predictive analysis, it’s possible to reduce the need for human intervention and automate the decision-making process.
Some mortgage providers have turned to robotic process automation with the primary aim of reducing operational costs. This technology can also play a role in improving productivity and accuracy because it can help carry out repetitive rule-based tasks quickly and efficiently. Within the mortgage industry, robotic process automation can help in areas like loan origination, application processing, customer service, and quality control. For example, this technology is perfect for loan origination, which is otherwise a highly manual step that’s prone to errors.
It’s safe to say that the mortgage industry can do with better recordkeeping, traceability, and accountability. Blockchain can help address this problem in an effective way. While this technology can increase transparency, it also holds the potential to reduce costs. It can do this by reducing the risk for incorruptible and infallible transaction records, paving the way for near-real-time settlement, and eliminating friction from the process.
In its current form, the mortgage industry is home to scores of brokers whose profits add to overall costs. The entire process of getting a mortgage lacks adequate transparency because different organizations hold details pertaining to government records, title deeds, and bank accounts. Mortgage providers depend on these intermediaries to collect information in order to make lending decisions.
Blockchain can address these problems by assigning unique trackable digital IDs for all properties, and the use of distributed ledgers and smart contracts can help eliminate the existing roles of various intermediaries. In addition, the chain of information that blockchain creates can help address concerns surrounding the transfer of documents and minimize instances of mortgage fraud.
A majority of mortgage providers in the U.S. believe that technology can improve the entire lending experience. Traditional systems continue to have limitations and gaps that technology can address to good effect, and lenders may look forward to various benefits. For example, a single digital platform can connect a borrower, a bank, an underwriter, and any other financial organization. Other benefits include:
If you look at most of the technology trends in the mortgage industry, you’ll realize that borrowers also stand to gain in different ways.
Given the existing trends in the mortgage industry, providing a good user experience has become increasingly important, and the use the technology can help free up some valuable time. Mortgage providers can turn to AI and ML to automate repetitive tasks like verification of documents and data entry. Digital tools can enhance the customer experience through user-friendly interfaces as well as ease of uploading and digitally signing documents.
Since the role of technology in the mortgage industry continues to evolve, it’s important for mortgage providers to stay on top of the learning curve. By ensuring that they remain abreast of the latest tools, technologies, and trends, they can also do right by their customers.
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