The COVID-19 pandemic has caused massive disruption for industries across the world. The mortgage industry is no exception. Amid widespread concern among consumers, businesses and communities, the U.S. economy experienced a massive slowdown. This made homeowners and potential home-buyers wary, resulting in many stepping away from the mortgage market.
Mortgage originators that invested heavily in technology before the crisis have had their efforts rewarded. In the future, these companies will likely continue to reap dividends from their investments.
Unprecedented challenge
In the early days of the pandemic, weekly mortgage application volumes fell by as much as 29.4%, according to the Mortgage Bankers Association (MBA). Experts at the MBA predicted that “potential homebuyers might continue to hold off buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook.”
This also was the time when employees in many organizations, including mortgage lenders, started working from home. Productivity took a major hit considering that office infrastructure is not easy to replicate at home. For mortgage lenders and originators, security also was a major concern. Tech systems could not be updated on a regular basis as many vendors were unavailable. For many mortgage companies, the situation became even more challenging since there were other elements to deal with, such as record refinancing demand, credit checks and queries related to existing loans.
Additionally, homeowners increasingly explored the option of forbearance, causing mortgage lenders and servicers to come under tremendous pressure to handle the sudden surge and massive volume of work. After the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, there was a deluge of calls from panicked homeowners inquiring about forbearance options. Although some lenders had business-continuity plans in place, the uncertain situation still created an extreme amount of vulnerability for many.
Overall, while operations took a hit, originators still had to go all out to ensure that business continued with some semblance of regularity. During the pandemic, it has been even more important to be strong because an originator’s response to difficult times helps determine their future relationships with their lender partners and employees.
Overcoming disruption
Throughout this scenario, mortgage companies that have deployed the right kind of technology are the ones that are able to smooth out the process to a great extent. With the help of robust technologies and enterprise automation, it was possible for them to ensure that their employees continued working remotely with no disruption in service to clients.
The originators who embraced innovative technology solutions that leverage artificial intelligence (AI), machine learning, robotic process automation and chatbots have managed to handle the situation with a minimized risk of losing clients and harming their reputation. To clearly define terms, AI is the broader field of making computers mimic human intelligence while machine learning involves programs that can learn from prior data. Robotic process automation and chatbots are programs that can interact with borrowers. According to Fannie Mae, about 27% of mortgage lenders in the U.S. were already using some form of machine learning or AI to assist with mortgage originations prior to the pandemic.
Since AI and machine learning can be applied throughout every stage of lending — including origination, acquisition and servicing decisions — they have helped lenders immensely during these trying times. Communication between buyers and sellers can be augmented with AI while technology becomes a useful tool to provide fast responses to clients without requiring additional staff resources.
AI-powered robotic process automation also has helped mortgage companies solve specific processing problems and increase their productivity. Such technologies have proven to be highly effective in improving loan processing time, quality, compliance and cost challenges. Given the intense, demanding and complex needs of clients during the pandemic, robotic process automation has proven to be highly advantageous to lenders. These software robots help plug the gaps created by disjointed systems without tremendous integration requirements or a huge IT budget.
Gaining momentum
Throughout the health crisis, AI, machine learning and robotic process automation have proven to be significantly helpful to mortgage companies in becoming more efficient, profitable and capable of delivering a better borrower experience. Automation can reduce the time to close loans, which is good news for borrowers. Combining shorter turn times with faster identification of pain points in the process makes for happier borrowers.
Most importantly, originators and lenders have been able to eschew the dependency on the human element, better match the client experience and streamline the daily tasks of employees working from home. The companies that leveraged technology were definitely in a much better position than those that were completely dependent on the human factor. The latter types of businesses were crippled to a great extent.
This also is a time when mortgage companies have realized that they cannot undertake innovation efforts — be it technological or otherwise —in isolation. Instead, many have preferred to network with partners from around the world to develop effective strategies for business continuity. Partnerships are now key, and specialized service providers have helped even established lenders move quickly toward bringing the situation under control. Successful mortgage companies have joined hands with specialized service providers to offer greater momentum for innovation requirements during these uncertain times.
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All in all, the COVID-19 pandemic has largely underscored the importance of technology in the mortgage industry. In the future, too, it is now likely that if an extreme situation arises, originators and lenders will be much more capable of ensuring that business operations can continue unabated. ●
