BROOKFIELD, Wis.–Concerns over rising interest rates and a shortage of affordable housing could cool an otherwise hot home sales market, leading mortgage lenders to approach the coming year with caution, according to one new analysis of threads in the coming year in mortgage lending.
The analysis, “2019 Trends: What’s Next in the Mortgage Market,” authored by Fiserv’s David McIninch, SVP of Strategy and Marketing, Bank Solutions, and Lionel Urban, VP of Product Management, Bank Solutions, offers three trends the authors say credit unions should be watching.
The three trends to watch, according to Fiserv:
Acceleration of Automation and Digitization
“The faster we can get paper out of banks and credit unions, the better it will be for everyone,” the authors state. “Digital transactions and processes reduce costs, increase transparency and make finding needed information easy for lenders. Look for 2019 to bring our industry closer to a completely electronic mortgage experience, from origination to close.”
The authors note loan files often contain as many as 700 pages, which must exactly match existing loan data and terms, and that validating the accuracy of those documents via an automated process can decrease origination costs and speed time to close, while helping remove the chance for human error. “Process automation is not just about tools and technology,” the authors state. “It's about financial institutions getting a clearer understanding of how to efficiently and cost-effectively process and evaluate their mortgage portfolios.”
Getting It Right
More than half of all loan applications in the past two years included some online or mobile component, according to the Fiserv paper. Of those who have an existing home loan, 67% would feel comfortable completing a home loan application on a laptop or desktop computer, and 29% would be comfortable using a mobile device, according to Expectations & Experiences: Borrowing and Wealth Management, the latest quarterly consumer research from Fiserv.
“Mortgage lenders are consequently challenged to deliver a more efficient lending process and a compelling, differentiated borrower experience,” the authors said. “To grow their mortgage business, financial institutions will likely make greater investments in the customer experience in 2019.”
However, the demands are significant for lenders that want to address the complexities of lending and enhance the customer experience, especially as consumers move through the process and switch from one channel to the next, the paper observes.
“Borrowers won't get up in the middle of a sentence and walk out of a branch, but they will abandon a digital transaction or interaction that isn't intuitive or valuable. As those types of engagement replace face-to-face conversations, every channel must deliver a rich, digital experience,” according to the authors.
Data Takes Center Stage
Lenders have always used data points to help them make decisions, but technology enables an enterprise-wide, 360-degree view of borrowers and the lending operation, the Fiserv paper notes.’
“The more lenders get the transparency, visibility and quantity of data right – and make it easily accessible – the more it enables quicker, better decisions and reveals additional opportunities. Automation and faster decisioning affects closing speed, the user experience and loan quality, which in turn impacts market share.”
Starting with a borrower's first entry into the process – the application – information can now be secured from a data source rather than documents, the authors point out.
The authors also suggest a large, robust and accurate data set is the precursor to artificial intelligence (AI) and machine learning.
‘A Clear Strategy’
“Creating a clear data strategy, assigning dedicated resources to manage data initiatives and partnering with data-focused technology providers lays the foundation for coming innovations. Those could include digital assistants and voice banking skills that enable digital banking and payments. AI can improve the quality of decisions. When financial institutions are able to fully trust decisioning engines, they could potentially enter or exit the mortgage businesses with the flip of a switch.”
The full paper can be found here.