Digitization breathes new life into the mortgage process




Today’s borrowers have come to expect an effortless and satisfying buying experience, whether they’re in the market for a pair of shoes or securing a mortgage, according to Mark Palim, deputy chief economist and vice president with Fannie Mae.

“Consumers today really measure their customer experience relative to what they’re getting in other industries,” said Palim. He pointed to Amazon.com as a benchmark for the kind of seamless customer experience many consumers have come to expect.

So how can mortgage lenders give their customers that same kind of experience? Experts like Palim said banks and other lenders must embrace more digitization, which cuts down on paper, and streamlines processes with efficiencies that can decrease operating expenses and ease regulatory challenges.

“Now what I’m hearing from lenders, it’s less about implementing technology to help them with compliance [regulations] and it’s more on implementing technology to help with the customer experience and increase efficiency,” he said.

“Looking at the evolution of the post-housing crisis, with more digitization tools in place, one of the positive outcomes is that now bankers have more processes to ease the burden of dealing with the heavy regulations.”

Mark Palim, deputy chief economist and vice president with Fannie Mae

Forecasters at Fannie Mae predict a 40% decline in refinancing volume this year because of rising interest rates and other factors. Palim said that means lenders likely will focus more of their efforts on the home purchase market.

“The mortgage industry is having to implement technology to continue to improve the customer experience and deal with declining volume, which means controlling your costs more carefully,” he added.

Achieving customer satisfaction

When it comes to achieving repeat customer satisfaction in the mortgage lending space, Detroit-based non-bank mortgage giant Quicken Loans is leading the way. As the second largest retail mortgage lender in the U.S., Quicken ranked No. 1 in customer satisfaction for primary mortgage origination from 2010 through 2016 by J.D. Power. The company also made the 2017 list of Top 10 Places to work, according to Fortune Magazine.

Most people know the retail side of Quicken Loans from its flagship product, Rocket Mortgage, an online mortgage application that lets borrowers use digital tools to process their mortgage.

“The J.D. Power study reported faster closing times and higher satisfaction and loyalty levels among clients who used Quicken Loans’ Rocket Mortgage,” said Greg Bartosch, spokesman with Quicken Loans. “This study corroborated our data that younger clients are more likely to embrace Rocket Mortgage, with a heavy emphasis on home purchase loans.”

What many people may not realize is that Quicken also partners directly with smaller lenders who need digitization tools to provide local customers with a digital mortgage experience.

When lenders use digitization tools to process mortgages, it speeds up the loan origination process and creates more secure transactions, according to Tracie Gallahan, vice president and mortgage division manager at First National Bank in Lynchburg, Va.

However, when financial institutions develop their own proprietary digital mortgage applications to better serve their borrowers, it can be a costly investment, particularly for smaller banks and credit unions.

As a community bank with just eight branches and $150 million in assets, Gallahan said her executive leadership team wanted to keep their costs down but still gain the competitive advantage the technology provides. That’s why they work with Quicken Loans Mortgage Services through a “lender partner correspondent platform,” a contractual agreement that gives banks access to the Quicken platform, Gallahan said.

The portal allows Gallahan to retrieve personal information such as borrower income. It also notifies her about specific outstanding conditions that require resolution, something that could delay a closing if left ignored.

“It’s in real time, there’s no lag time where we have to wait for them to look at it [information we submit]. We see everything we’re submitting to them, we see when they’ve accessed it, and when they’ve cleared it,” Gallahan said. She also likes the convenience of ordering appraisals directly through the portal.

Speeding the process

Meanwhile, Fannie Mae recently launched Day 1 Certainty, a technology initiative designed to ease the burden of obtaining key information from borrowers with the end goal of closing loans more expeditiously, according to Fannie Mae spokesman Aleksandrs Rozens.

“It changes how we collect all the paperwork, pay stubs, employment verification…different parts of the underwriting process are sped up,” he said.

Using another aspect of the initiative, it may be possible under certain circumstances to obtain property inspection waivers, which is an offer that could waive the appraisal, according to a Fannie Mae news release.

“With a qualifying risk score from Collateral Underwriter, Fannie Mae’s appraisal risk assessment application, and a recommendation of Approve/Eligible from Desktop Underwriter, appraised value can be accepted up front to give lenders freedom from representations and warranties,” the release stated.

Time is often of the essence in processing mortgage loans. When a 30-year-fixed rate mortgage takes too long to process, lenders run the risk of losing customers to competitors who can process loans more quickly, according to Rozens.

The Fannie Mae Day 1 initiative uses technology to get borrowers to closing more quickly, compared with traditional methods that rely on manual processes, Palim said.

“The volume of loans is so immense you have use technology to enable quality and speed,” he said. “Day 1 allows for more substantiation of key data to underwrite the loan.”

As the marketplace constantly changes, Gallahan said lenders striving for the competitive advantage must embrace new and emerging digital tools to help them better manage daily operations and stay abreast of new regulations.

“To stay relevant and stay productive it’s important because with all of the regulatory changes that have come since the 2008 financial crisis, it has become a lot more work to get the same loan processed than it did pre-financial crisis,” he said. “You need to use technologies that you can to maintain the best efficiency possible.”

Freelance writer Elise Oberliesen contributed to the writing and research of this article.


About the author

John Roszkowski

Finance Editor John Roszkowski develops and edits content for OnCourse Learning’s financial services blog, which covers industry news and trends in mortgage, banking, compliance, credit unions, gaming and nonbank financial services. He has more than 25 years of writing and editing experience, having previously worked for weekly and daily newspapers.

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