Over the last decade, retail financial institutions have been quickly adopting advanced automated solutions.
The benefits of doing so are far-reaching, from streamlining processes and saving money on labor costs to deliver a more seamless product to the client.
However, not every sector within retail finance has been able to successfully implement end-to-end automation. Of these, perhaps the most notable has been the mortgage lending industry.
With highly complex processes, including lengthy applications that produce wildly disparate forms of data and critical decisions that can, in a single instance, put millions of dollars at risk.
The complexity and the stakes of mortgage lending have mostly limited automation to specific and narrow processes. But with major advancements in robotic process automation and artificial intelligence, that is beginning to change.
First movers that are able to successfully integrate end-to-end automated mortgage origination software and mortgage management software stand to gain a significant edge against their competitors who are still mired in legacy systems.
Let’s take a look at the top five benefits of implementing full hands-off automation in mortgage lending.
1. Accurate and repeatable decisions
Mortgage risk assessment and underwriting are exactly the kinds of activities that artificial intelligence was made to handle.
Today’s automated mortgage origination software can take hundreds of variables into account during the loan application process.
Using that data, it is possible to categorize clients into risk strata in a way that is vastly more accurate, reproducible and fast than a system that relies on the judgment of individual humans.
When it comes to risk assessment and underwriting, the truth is that automated systems are just better.
Relying on humans to make complex assessments of large data sets where artificial intelligence can do so far more effectively is needlessly hobbling your company’s risk assessment and underwriting processes.
With modern mortgage automation systems, you get a far more accurate decision in seconds.
And this level of accuracy is perfectly repeatable on each application or lead, eliminating human-caused inefficiencies.
2. Improved customer experience
The average credit card application can be pre-approved or denied in a matter of minutes.
But when it comes to mortgages, some studies have shown that the average time the application process takes to complete is more than a month.
Most of today’s technology-native customers will simply find such wait times unacceptable.
And with mortgage-lending automation, application times can theoretically be eventually reduced to days or even hours.
Automation also reduces errors throughout the often-demanding application process.
One study found that 18 percent of all mortgage applicants needed to resubmit a form or redo a part of the application.
With automated systems that are fully integrated with online and mobile-friendly user interfaces, the chances of this type of error can be virtually eliminated through properly designed forms and web resources.
Mortgage lending typically requires more forms than other financial services, including things like W2s and bank statements.
With AI-driven optical character recognition, such documents can frequently be uploaded by the user directly through the online interface during the application process itself.
Those forms can then be reviewed and scrutinized in real-time by the system, with no human intervention.
Such technologies can mark the difference between a customer waiting 40 days to close on their mortgage versus less than a week.
3. Enhanced productivity
As in all industries, one of the chief selling points for automation is the potentially vast increase in productivity that it can offer.
Today’s cutting-edge robotic process automation has enabled mortgage-lending solutions that can deliver near-seamless end-to-end mortgage underwriting with virtually no human interaction at all.
Needless to say, this can significantly reduce the number of man-hours spent on trivial, repetitive tasks, freeing up employees to redouble their efforts on high-level customer-centric tasks like helping clients formulate overall long-term goals. Or helping them navigate the differences between complex mortgage lending products.
4. Improved accuracy
Even as the auto-lending, credit-card and student-lending sectors have seen processes completely automated, in many cases reducing times for prequalification to just minutes, the mortgage-lending industry has fallen woefully behind.
Today, the average time to closing for a mortgage customer from the start of the application process is almost no better than it was in 1970.
The reason for this is simple: When it comes to high-dollar loans, even the smallest error can cost big money.
While modern OCR systems are typically able to achieve more than 99 percent accuracy, a single line that is misread on an income statement can result in disastrous underwriting errors, potentially costing banks hundreds of thousands of dollars for a single mistake.
However, this must be weighed against the possibility of a human worker making precisely the same error, with the same disastrous outcome.
Until recently, the ledger was fairly clear: Human workers made fewer mistakes than fully automated systems.
But with AI-driven OCR and robotic process automation, that has changed at the leading edge.
Today, it is automation that promises to reduce the errors of humans, potentially saving banks millions of dollars in the aggregate.
5. Process mortgage lending applications faster
Currently, the average time to closing for residential real estate transactions is 40 to 45 days, depending on whose numbers you trust.
But many mortgage lenders are already harnessing technology to drop that number to as little as a week or less.
One of the biggest efficiency gains that mortgage-lending software offers is the ability to waive appraisals for an increasingly wide group of customers, including those who are below the top echelons of prime borrowers.
This can dramatically cut the time required to close a mortgage deal.
But the fact is that we likely haven’t even touched the true capability of mortgage-lending software to reduce time to closing.
Many companies are offering credit card and auto loan approvals in a matter of minutes.
While the home-mortgage lending application process may never be whittled down to fractions of an hour. It is likely that early adopters of this new technology will soon be able to offer mortgage closings in less than a week to a wide swath of customers.
Automation technology is rapidly transforming the mortgage-lending business, leading to dramatic reductions in time to closings and vastly improving the user experience.
Those companies that are able to move first, successfully implementing these mortgage lending technologies in ways that create notably superior customer experiences, will be well-positioned to take a big chunk of the more than $10 trillion that is currently held in residential mortgages throughout America.
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William Dawsey is the VP of Finance and Payments at Chetu. The company houses elite programmers with expertise in utilizing the cloud-based, web, and mobile solutions for financial service modules such as payment gateway and POS development software, accounting & tax preparation software, plus banking and finance service modules.