Even though 90% of prospective home buyers search online as they look for a place to call their own, less than 10% of lenders offer a complete digital mortgage experience from application to closing. Instead, borrowers are transported back into the age of copiers, scanners and fax machines to provide applications and financial documentation. It’s an industry Silicon Valley has overlooked, but with the recent surge of fintechs (financial technology) entering the space, it’s finally being brought into the 21st century.
Here are the top five ways technology is reinventing the mortgage process for borrowers and lenders, and enabling quicker, safer lending:
1. Better borrower experience
For applicants, successfully navigating the mortgage process takes time and patience, as they struggle to fill out dozens of paper forms and dig up documents and financial records and then scan or fax them to their lender, only to get requests for documentation they have already provided or new requests that are added in the eleventh hour. Not surprisingly, all of this back and forth adds days, if not weeks, of extra time to close on a loan.
As the process becomes increasingly digitized, however, bank account activity, credit information, tax forms, pay stubs, and other required information can easily be prefilled into the obligatory 1003 form, streamlining the process for home buyers and simplifying the collection and verification processes for loan officers. Because the data is independently verified from the source, lenders can quickly confirm the provided information is accurate and up-to-date, speeding up the review process.
a handful of fintechs are powering a mobile-first experience for borrowers that provides them with unparalleled access – from initially completing the loan application to submitting, reviewing, and e-signing documents with just a few taps.
2. Increased transparency
Borrowers are essentially walled-off during the entire loan process and rely on their loan teams to communicate documentation requirements and status updates. As a result, loan officers often field multiple phone calls and emails from anxious borrowers looking for updates. Thanks to the work of a handful of innovators, prospective home buyers are gaining a portal into the process. This allows both parties to work in tandem, easing the minds of nervous borrowers and taking the pressure off of lenders to proactively share updates.
3. A painless mortgage process
It takes almost 50 days to complete the loan process. In a digital world where we can order something on Amazon and get it the next day, 50 days seems like an eternity. With technology putting the ball in the borrowers’ court, we’re able to move away from the established model of lenders painfully extracting documentation and instead are empowering prospective borrowers to “self-serve,” while providing comfort knowing expert help is only a click away.
4. Digital compliance
New federal regulations implemented in the post-crash mortgage world require lenders to adhere to responsible lending practices and provide borrowers with increased disclosure early in the loan process. As we have seen with the new rules and expect for future ones, technology plays a critical role in empowering lenders to adhere to regulations and remain compliant without negatively impacting the borrower experience.
The ‘Know Before You Owe’ mortgage disclosure rule was designed to make it easier for consumers to understand their loan options. For lenders, it requires extensive tracking of received data and outgoing notifications to ensure consumers are sent a written estimate of their loan terms and fees within the three business day period prescribed by the rule. With recent developments in technology, lenders can automatically trigger the generation and delivery of electronic disclosures upon receiving certain information. Technology has also made great strides in audit logs, providing a chronological record of every action between the loan team and a potential home buyer, which in turn provides a new level of accountability and deterrent for fraud and manipulation.
5. Big-time savings
Intelligently leveraging modern technology and automating manual tasks reduces costs – saving money for both the borrower and the lender. It helps to reduce errors and move the process along, while reducing reliance on human capital. That’s not to say technology can take the place of experts; instead, it allows lenders increase their efficiency and benefit from lower costs and can pass the savings on to consumers.
Source: “Here are the top 5 ways technology reinvents getting a mortgage,” (August 2016, REwired)