The term “digital mortgage” was once defined as a self-service method to apply, originate, and service a loan online. Today, true digital mortgages are much more comprehensive. You may have heard many terms related to the digital mortgage experience. For example, “eClosing” and “digital application” refer to digitizing aspects of the mortgage process. However, a true digital mortgage requires more than just implementing technology at specific stages of the mortgage lifecycle.
A true digital mortgage encompasses the entire process—from lead generation to the loan origination journey and beyond post-closing. This entire digital experience is connected from start to finish through an infrastructure that enables lenders to automate the steps of their processes. It also includes automating touch points with outside partners involved in the transaction, especially where critical processes involve collaborative workflows such as with settlement companies and even borrowers.
What is the digital mortgage experience like now?
Over the years, lending technology has had three major turning points. With the introduction of TRID came technology to help lenders comply with federal requirements and coordinate with settlement partners on closing disclosures. Then, Quicken Loans (now Rocket Mortgage) launched the first-ever digital mortgage application experience. Finally, the pandemic spawned the acceleration and implementation of eClosings. Every stage of mortgage technology development contributed to the industry’s shift to a more digital workflow. Still, lenders lacked the supporting infrastructure to link and manage all the new technologies at their disposal.
The experience of getting a mortgage online was, therefore, a patchwork of many technologies. Mortgage teams effectively used several tools and processes to complete a mortgage from beginning to end, but mortgage operations eventually suffered. For instance, data from the MBA reveals that the cost per loan climbed significantly over the previous decade, even as technological innovation advanced. The lack of infrastructure to connect various technology point solutions led to a fragmented process that resulted in cost inefficiencies for lenders and less-than-optimal experiences for borrowers.
What are the technology advancements moving lenders toward a true digital mortgage?
Robotic process automation (RPA) is becoming increasingly popular among mortgage lenders to digitize components of the mortgage process further. Loan underwriting and the pre-closing, closing, and post-close procedures exemplify several business operations that, in the past, required the involvement of a human at numerous touch points and are currently being advanced through automation. But automating aspects of a mortgage is not isolated to just the lender. Application programming interfaces (APIs) are protocols that allow two otherwise disconnected pieces of software to speak to one another. For example, APIs can connect lender systems with title and escrow company software so that both sides can work efficiently in an integrated system.
The key to success with digital mortgages is to build a connected infrastructure that unites operations to enable a consistent and standardized loan production process. Through a connected system, lenders can seamlessly unite digital processes to deliver a true digital mortgage experience from application through post-close.
Who does a digital mortgage benefit?
A connected digital mortgage experience will shorten loan cycles and appease borrower demands. According to research from Fannie Mae, 69% of consumers prefer to submit financial documents using digital tools. Compared to conventional pen-to-paper methods, electronic signatures can speed up the turnaround time by 80%.
Research from advisory firm KPMG states that automating and digitizing aspects of the mortgage process can:
- Decrease the cost of loan origination from 25% to 50%
- Shorten the sales cycle and increase sales productivity by 75%
- Increase pull-through rate by 20-25%
- Reduce the cost to service a loan by 25-40%
In a piece written for National Mortgage Professional, Patrick Stone, executive chairman and founder of Williston Financial Group, noted that the digital mortgage experience enhances collaboration to improve the mortgage process and better the borrower experience. “[With enhanced collaboration], not only do we eliminate the need to take the time to enter a property address 80 times over, but we also reduce the number of mistakes.” Digital mortgages automate this redundancy so lenders focus on revenue-producing activities.
Why should lenders invest in technology that enables a fully digital mortgage experience now?
The U.S. has faced a challenging macroeconomic environment. Rising interest rates, a volatile stock market, supply chain issues, quantitative tightening, and limited credit availability impact consumers and businesses alike. Many companies are tightening their belts to prevent significant financial losses. This includes reducing spending on research and development, slashing employee headcount, and pulling back on technology investment.
However, research suggests that organizations that invest in technology to boost operational efficiency during significant economic downturns have positive post-recession outcomes. According to research published in the Harvard Business Review, companies that successfully reduce costs by investing in technology rather than laying off employees are more likely to emerge from a recession stronger.
Lenders may experience more effective operations and more significant results for their businesses by investing in technology that allows an authentic, connected digital mortgage process.