Digital mortgages are a big deal. Not only are they capable of improving lender compliance, customer experience, asset quality, and operational efficiencies, they ultimately lead to a more streamlined, faster, and less expensive mortgage process. This, in turn, translates to a more competitive, if not winning, lender.
Transformation will not, however, be as push-button as digital mortgages. Here’s what mortgage lenders and financial institutions can do to ensure successful digitization.
The Problem With Traditional Lending
The journey to a digital model cannot have a short-term focus that capitalizes on quick wins. It goes well beyond the use of new tools and techniques for customer engagement. It requires a holistic change in the mindset of the organization and the ultimate delivery of products and services.
Lenders that implement “digital” utilities and applications should question their longer-term objectives in doing so. Mobile applications should deliver improved brand awareness and credibility. If they don’t, then the organization needs to re-evaluate its digital agenda — and the means for getting there.
This starts with an organizational assessment of digital maturity. Today’s technology framework consists of utilities, applications, components, and systems that have been strung together through years of acquisition and integration. Such a model often lacks extensibility into new ways of doing business, lacks capability reuse, and limits the ability to respond to future needs. Importantly, it results in a disjointed customer experience.
Consider the loan underwriting document collection process. Borrowers, lenders, and closing agents interact and transact through fragmented channels — whether by phone, e-mail — or rely on various disconnected “tools.” Rarely does the customer have a seamless experience. Most often, the customer engages with the lender through call centers or e-mail to collaborate and participate in the process.
Simply put, technology has not kept pace with the changing consumer and mortgage industry dynamics. We have observed the following root causes in the industry that are contributing to this disconnect between technology and value:
Too much reliance upon single loan origination systems (LOS) to address all of the needs within the lifecycle.
LOS have been occupied with compliance changes for the past decade and have not focused sufficiently on innovation.
Traditional operating models that operate within a linear process and align their organizations around sales channels and geographies rather than capabilities.
This limits innovation and core capabilities across the organization.
Mortgage lenders have enhanced some components but not all.
For example, digital documents are typically limited to the paperless value proposition rather than a data-centric approach. Point of sales (PoS) portals, processing portals, disclosure portals, and e-singing portals remain largely fragmented.
The Journey to Digital Lending
To overcome these obstacles, we suggest that mortgage lenders begin by taking a long-term view of what can be achieved with a full-on digital strategy.
For example, a digital solution should deliver an omni-channel experience (web, app, call center, etc.). A fully digital model should also enable tight collaboration between all participants of the transaction between borrower, back-office personnel and third-party. When fully interconnected, this gives lenders the ability to deliver an integrated mortgage solutions across the product lifecycle that enhances customer experience, increases efficiencies and drives down costs.
In our experience, collaboration usually includes the following activities: eligibility, pricing, application, credit checks, self-service scheduling, disclosures, income verification, document uploads, appraisal appointments, settlement states, status updates, and electronic signatures. It always includes going deeper than simply developing a “virtual loan file,” which many lenders already have in place.
When designing a plan to digitize the mortgage process, organizations should carefully consider the technology cost spend, potential disruption to organizational culture, digital alignment to vendor systems, heightened data security, and sensitive electronic closings.
The Closing Day
Complete digitization of the mortgage industry is not a fad. Not only does this movement address numerous industry challenges, but it will personalize customer experience, spur product innovation, enhance service offerings, increase compliance, and lower origination costs. To remain relevant, lending institutions and mortgage servicers must adopt a fully digital operation.
Moreover, digitization is not just a box that needs to be checked or a single-point solution such as electronic signatures or paperless processing. It is a complete renovation of the entire mortgage experience. Thus, moving from a traditional mortgage model to a digital one will require dedicated organizational alignment, cultural buy-in, and change management.