Cutting-edge technologies are reshaping the mortgage lending process in ways you might not have expected. Today, you either adopt these technologies or accept that you're going to fall behind.
Research from management consultants McKinsey & Company reports that around 60 percent of borrowers are open to completing their mortgage application online. The number includes those looking for a new home and those looking to refinance their mortgage. This statistic highlights the need for tech solutions in the mortgage industry.
Borrowers are increasingly seeking an efficient, convenient, and streamlined mortgage experience. Brokers or lenders can cater to this evolving demand by leveraging various tech solutions.
In this guide, we'll look at APIs, blockchain technology, machine learning, and artificial intelligence and their application in the mortgage industry.
API Adoption
Many mortgage lenders use application programming interfaces (APIs) to increase efficiency. APIs can ensure data accuracy, automate workflows, and facilitate compliance with U.S. mortgage regulations.
They streamline back-office work like loan processing, enabling faster speeds than before. Without an API, your operational speed and efficiency as a broker or lender may significantly decrease. As a result, it can affect the overall saleability of your loan products.
Machine Learning and Artificial Intelligence
Many sectors of the financial services industry adopted machine learning (ML) and artificial intelligence (AI) before the mortgage industry. Still, they have been fairly slow to integrate them. They are behind mortgage professionals who are now fully leveraging the power of ML and AI to deliver smart solutions.
As you're likely aware, the work carried out by brokers and lenders is data-intensive. It involves repetitive tasks like verifying applications and document handling. For this reason, many brokers and lenders rely on ML and AI to effectively analyze large quantities of data.
ML and AI train systems to perform cognitive tasks such as recommending approval or denial decisions and classifying information. Institutions can use them in every step of the lending process, including origination, processing, underwriting, closing, and funding.
Unlike humans, this tech can gain insights from large amounts of data and make accurate decisions within a matter of seconds. They alleviate the time-consuming and tedious nature of the mortgage lending process considerably.
If a customer wants to refinance mortgage rates, for instance, they no longer have to wait for the long process of human data gathering, analysis, verification, and document handling. Instead, AI or ML tools can handle most of these tasks efficiently.
Blockchain Technology
In the mortgage industry, recordkeeping, accountability, and traceability are essential. One of the ways brokers and lenders can improve these aspects is by implementing blockchain technology.
It's a secure digital ledger that records transactions in a tamper-resistant way. Each block within a chain contains a list of transactions that can't be altered without changing subsequent blocks. This leads to a transparent and unchangeable record.
Why is this helpful for mortgage professionals?
The mortgage application process has long been notorious for lacking transparency. That's because different organizations hold details related to title deeds, government records, and bank accounts.
Blockchain addresses this issue by assigning trackable digital IDs to each property involved. Plus, using smart contracts and distributed ledgers reduces the need for intermediaries to collect and store the relevant information.
The unchangeable nature of blockchain technology enhances the security of document transfers and minimizes instances of mortgage fraud.
Fintech Collaboration
Mortgage borrowers increasingly expect to complete most of the lending process digitally. As a way to satisfy this demand, more and more brokers and lenders are collaborating with Fintech companies to provide better service and reach wider audiences.
This partnership isn't limited to newer, tech-savvy mortgage startups. It also involves more established, traditional institutions.
It often involves leveraging existing infrastructure to provide more efficient investment tools to customers, allowing them to save time and enhance their user experience. By collaborating with Fintech companies, brokers and lenders can easily adopt the technologies mentioned in this article.
Rather than integrating AI, ML, blockchain, and API tech themselves, mortgage professionals often rely on the expertise of Fintech companies.
The Benefits of Tech for Mortgage Providers
Implementing the discussed technologies offers numerous benefits for mortgage providers, including:
- Reduced operational costs
- Fewer manual errors
- Streamlined review process
- Simpler risk evaluation
- Automation of document collection
- Faster decision-making
- Enhanced customer experience
- Improved communication
- Higher transparency during the mortgage lending process
- Expanded accessibility via online applications and digital consultations
- Create targeted marketing campaigns by leveraging big data and analytics
- Utilizing AI-powered underwriting to assess alternative data sources
Final Thoughts
Undoubtedly, new technologies are significantly impacting the mortgage industry and shaping the way that providers do business. From using AI to analyze mountains of data to creating more transparency with blockchain technology, these advancements are helping brokers and sellers optimize every element of their processes.
