Borrower Enablement: A Win-Win for Lenders and Borrowers
Contributed by Sanjit Bose, Ashish Shreni
Empowering mortgage customers with more and better information helps them make better decisions, and saves money for lenders.
Beginning around 2003, lenders began offering basic online lending features, starting with basic loan search, rate calculators, product comparison engines and branch locators. They then expanded into guidance on property search and research, and other “enablement” features. These capabilities help lenders achieve transparency, extend their market reach, improve lead management and realize operational efficiencies.
The Power of Enablement
The ongoing credit crunch, and the attention it has focused on lenders, makes the benefits of well–educated borrowers more important than ever. By delivering more timely and precise information and services, lenders can keep borrowers more engaged throughout the mortgage lifecycle. Standard features that spur engagement today include rate and payment calculators, product comparison, borrower registration, e–application and payment setup, etc. After entering information such as the loan amount, property value, credit score income, etc., borrowers see an intuitive, visual assessment of products across key parameters such as payment, interest rate, duration and total interest.
Not only does this help assure the customers understand loan terms, but it reduces the time the front–office team must spend explaining products. The information customers enter also helps loan officers know when and how to contact them based on where the borrower is in the application process. It also reduces data entry on repeat visits and enables easier conversion to electronic applications over the Internet. Features such as payments setup enable borrowers to make mortgage payments through credit card or bank accounts, while online utility bill payments ensure that all property–related charges are paid through a single process. This saves time and effort for both the borrower and the lender.
Figure 1 : Tap or click on the circles 1a through 5b to learn more about emerging and standard features for online self-service apps.
Emerging features include online chat, incentives for online applications and the ability to
upload documents and view them online. Such features save costs and reduce workload across the front–, middle– and back–office, improve lead management and pull–through and brand/perception building (see Figure 1).
Document upload and online viewing, for example, not only reduces back–office processing costs but helps lenders meet regulatory requirements that borrowers have a single view of all their communication about their loan.
While there are clear benefits for borrowers and lenders, some are easier to quantify than others. One example is an incentive for a borrower to apply online. A $25/hour cost for a front–office staff person, with an average time spent with a borrower of 45 minutes, results in a cost per application of $20. Add $40 for document shipping, printing, scanning and indexing, as well as data validation, and the price per application rises to about $60. A $50 incentive to apply online thus produces a saving of $10 per application. In other cases, though, lenders will find it harder to determine benefits due to a lack of data and metrics, as well as the high cost of data gathering.
It is easy for lenders to get lost in the myriad of features they can offer. A structured and comprehensive approach is required to lay out a defined and definitive roadmap. This plan should take into account the bank's resource and budgetary constraints, technology landscape, competitive landscape, current features, feature complexity, business impact and business drivers.
A lender that originates mortgages primarily through retail channels vs. wholesale would require very different features. A bank with little more than “brochure–ware” describing products and interest rates online might choose to implement just a basic rate and payment calculator and some alert features rather than making the leap to a full set of advanced features which would require considerable budget, manpower, training and change management.
For more information, read the full white paper, Borrower Enablement in Mortgages (PDF) and access Cognizant's solutions for the consumer lending industry.