Prior to 2020, the mantra around the mortgage industry going back to 2016 was that launching a new “digital experience” was the equivalent to table stakes in poker. If you wanted to do business with millennials, the emerging core of the home buying customer base, at a bare minimum engaging the consumer in a mobile-friendly, online experience was required just to get a seat at the table. The message was clear: if you weren’t already invested in new digital mortgage experience, then your competition already beat you to the sale.
Quicken Loans started the game with their Rocket Mortgage “Push button, get mortgage” Super Bowl ad in 2016. Lenders immediately began to race to catch up. New investment money began to flow into start-up fintech companies like Blend, Roostify and more than a dozen other new brands. The digital point of sale (POS) was born.
Not to be outmatched, the incumbent software providers each updated and launched their own POS to stave off the encroaching technology. As mortgage industry insiders watched Quicken climb the list to the No. 1 spot among mortgage lenders, they decried that their “Rocket Mortgage” was a marketing ploy, with a sort of sneaker net of traditional processes behind it. Meanwhile, the industry scrambled. The mortgage industry caught a severe case of FOMO.
The digital POS technology explosion promised to make the loan application process a less confusing and more casual experience for the consumer. More than that, the fintechs that flooded in brought with them a promise to modernize the mortgage industry with data-rich, cloud-enabled and digitally secure workflows.
The challenge – to take a highly regulated industry forward into the digital commerce era – turned out to be a massive undertaking. It would require coordination and cooperation with government and the transformation of processes and systems within industry giants.
The digital point of sale is the perfect place to start because it’s bolted right on to the front-end of existing technologies without creating too much disruption. Of course, disruption is the whole point. Sure, new online lending operations like SoFi, Better and a handful of others are taking advantage of their lack of traditional infrastructure. Digital lending is easier for companies that were born in the cloud.
But most mortgage lenders still complete their processing in a less-than-fully digital workflow. With historically low interest rates and a healthy economy, there hasn’t been a lot of pressure to improvise and make big bets and wholesale changes. Until this year, the digital revolution has mostly been about the acquisition of borrowers.
The COVID-19 pandemic has raised the stakes on the mortgage industry. Social distancing and stay-at-home orders are driving consumer preferences. “Stuck in the past” industry methods such as face-to-face sales, paper processing and all of the traditional workflows are no longer functional ways to conduct business.
The reliance on remote and online closings has become critical, much more than an option or convenience as states have rushed Remote Online Notarization (RON) legislation through at an unprecedented pace.
Digital isn’t a marketing strategy anymore, with the health risk to older Americans driving boomers to try out the virtual experiences that they have been avoiding. Open houses need to be conducted virtually, and applications, processing, underwriting and closings all require a work-from-home workforce to get the job done.
Homeowners that have experienced a steady stream of marketing about easy, online lending have come to expect their lenders to communicate with them via their mobile devices.
Among the advancements of the past four years, moving mortgage processing into the cloud is arguably what saved the mortgage industry from disaster in 2020. The cloud has helped to accelerate online and virtual processes extending into every step of the lending process.
We are also witnessing a crossover of digital innovations from origination into servicing due to sheer necessity. The record job losses that spiked forbearances in Q2 triggered a steep ramp-up in portfolio analysis and retention workflows reminiscent of the 2008 financial crisis.
The march to digital mortgage lending emerged from the financial crisis in 2008, but the pandemic of 2020 may be the catalyst that drives us to realize a truly modern, digital mortgage process. The work of implementing TRID, URLA and ULAD and the cooperation of the GSEs to drive technology adoption for the modernization of the mortgage industry has been essential to accelerating the pace of change.
The conditions-based, rules-driven loan processing workflows are a necessity for competitive lending as the industry incorporates bots and considers AI that can take time and expense out of the loan origination processes.
In the past three years, along with the proliferation of a digital borrower experience, we’ve witnessed the re-emergence of the wholesale market driven by an array of new technology designed to make wholesale lending once again a powerful part of mortgage origination market. The next wave of innovators seeks to merge real estate and finance transactions into a re-imagined experience for the homeowner.
The next logical steps in the digital mortgage revolution are already well underway. Partners to the mortgage ecosystem are undergoing their own digital transformation. Technology companies that are parallel to the fintechs in the mortgage industry (coined proptech and insuretech) are creating their own wave of consumer experience evolution.
Some innovators, like OpenDoor and Zillow, are already merging finance and real estate in iBuyer business models. Meanwhile, companies like Matic Insurance and StreamLoan are finding ways to embed homeowners’ insurance quotes directly into the mortgage workflow.
There are still many different winning hands in digital mortgage left to play, but they all start with better data and analytics. Faster income and asset verification within the point-of-sale system, combined with accurate property data, create the building blocks of faster decisioning.
It may have taken a global pandemic in 2020 to finally push the mortgage industry to the tipping point, but the result will be a transformed lending process that will revolutionize the borrower experience, lower risk for lenders and make the loan process more efficient and predictable.