Anyone who has kids probably has seen them experience a moment of confusion over “old technology.” In fact, there are hilarious videos online of children trying to use rotary phones, typewriters and 1980s-era Sony Walkman music players. When you watch these videos, you can’t help but wonder how long it will be before a child looks at a pencil and piece of paper and wonders: “How do these things work?”
That day may not be upon us just yet, but perhaps it will come sooner than we think. Consider how quickly mortgage production has become highly centralized and automated. It’s still a highly paper-based and fragmented process, but automated underwriting, electronic signatures and online borrower “portals” that let consumers self-drive the approval process are quickly becoming mainstream. Loan approvals can be achieved in minutes thanks to new automated borrower-verification tools.
Yet, even with all this technology, the overall mortgage experience hasn’t gotten better for consumers. Financing a home is still confusing and even a bit scary — and it’s even more nerve-wracking when borrowers do not get the help they need when they need it. To reverse this trend, lenders will need to find ways to give borrowers both the technology and the human expertise they desire, and at the right times in the transaction.
Evolving Tech Impact
It could not be a better time to improve the mortgage experience for consumers. Job growth and incomes are relatively strong, the U.S. is experiencing the highest home-sales rate in more than a decade, and the Mortgage Bankers Association expects purchase-loan volume will increase th is year and again in 2018.
The last time the housing market was this strong, more than 10 years ago, few consumers were getting approved for mortgages online. Back then, mortgage originators were in control of a process that was neither very automated nor efficient, at least from the borrower’s perspective. Since then, our industry has seen an enormous number of innovations. We can now verify a borrower’s income and assets almost instantaneously.
The same is true when it comes to searching for and pricing loans and locking rates. Electronically signed disclosures are now commonplace. Even ordering tax transcripts from the IRS has become electronic. Although these innovations have consumer benefits, many were motivated more by the need of lenders to manage costs — which was driven by the wave of new regulations and agency requirements that swept the industry after the housing crisis.
At the same time that lenders were adopting technology to improve the efficiency of loan approvals and to streamline processes, a major shift was taking place in consumer behavior with respect to online transactions. The volume of annual U.S. e-commerce sales has tripled since 2007, and nearly every adult and teenager has a smartphone — a device that hardly existed 10 years ago. In recent years, the number of consumers searching for homes and mortgages online has exploded. In fact, more than half of all borrowers now look for a mortgage lender on the internet, according to a recent Fannie Mae survey.
Although technology has given consumers greater access to more information about mortgages than they ever had before, these consumers are not necessarily better informed. In fact, in some ways, technology may have distanced borrowers from the human expertise they traditionally depended on to make the largest financial transaction in their lifetimes.
“Marketing and sales automation also can be used to gauge a borrower’s level of motivation and preparedness.”
Many borrowers today do not fill out mortgage applications online, however, even when they have the opportunity — and that includes millennial buyers, whom we assume prefer an online mortgage experience. It turns out that it is not a digital mortgage that consumers want so much. Rather, they want a good loan, which involves getting human expertise at the appropriate times in the process.
Recent data from the McKinsey Group shows that compared to social media, e-mail is 40 times more effective at gaining new customers. Today, mortgage professionals are swarming to Facebook and Twitter, yet many originators fail to respond to an e-mail from a potential borrower the same day it was sent.
Focusing on Borrowers
Making the mortgage process faster and more efficient remains an important goal that also benefits consumers. Yet mortgage professionals who want to take advantage of today’s strong housing-market fundamentals to grow their business would be wise to focus less on how quickly they can move prospects through the funnel and more on actual client relationships. This should always be the goal, whether or not you are trying to create digital mortgages.
Many lenders, for instance, now offer online portals where borrowers can get approved for a loan all by themselves simply by answering a few questions, uploading documents and electronically signing a few disclosures. No loan officer is needed. Yet, many borrowers are not using these services. The major drawback of a consumer-driven mortgage process appears when a borrower has a question, and there’s no one around to provide an answer.
For borrower portals to be truly successful, human expertise must be available at key moments, and it must be provided quickly, before the borrower has a chance to log off and try another lender. The solution is to leverage automation to not only create digital loan files, but to alert mortgage professionals when a borrower reaches a roadblock in the process. The ability to respond immediately when borrowers have questions also is necessary to an effective process.
Automation creates consistency. It can be applied effectively as an aid to the loan originator in delivering excellent customer service and for streamlining loan production. In fact, the trust that a mortgage professional earns by being proactively engaged with borrowers — and quick to respond personally to their needs — may have a larger impact on conversion rates than simply being able to provide fast approvals.
Marketing and sales automation also can be used to gauge a borrower’s level of motivation and preparedness for getting a mortgage. Many borrowers, for example, look at different lenders to compare rates and to see how much they can afford when shopping for a home. Not all of them care about getting approved right away.
Some will click on an online marketing piece or even fill out an online form, only to abandon the effort before locking in a rate. Mortgage professionals who are using sales automation are able to respond faster to these prospects — before they walk away — and can find out if they have any questions about getting a loan, which they almost always do.
These very same tools can be used to stay connected with past clients and to ensure that sales teams conduct consistent follow-ups, which are the real keys to growing sales. They can be used, for example, to send out an automated text or e-mail to remind a borrower who forgot to upload a key document for a loan approval.
It may still be some time before printed paper goes the way of the rotary telephone. Keep in mind that cell phones have been around for decades, but they did not achieve mass appeal until manufacturers figured out how to deliver a better user experience.
By all means, let’s continue pushing for digital mortgages. But in doing so, mortgage professionals should not forget that most borrowers would prefer the right mortgage to a fast one.