The Mortgage sector is witnessing a substantial disruption mainly driven by the user demand for exceptional products and services. This is intensified by the fierce competition from competing banks, non-financial institutions, new-age digital banks, and fintech startups. As per a recent survey undertaken by McKinsey & Company, only 42 to 67 percent of borrowers said they were satisfied with the mortgage process, and banks fared worse than non-banks, lagging by about 20 to 30 percent. It is safe to say that there is a lot of scope for improvement in Mortgage CRM and Loan Origination Systems (LOS) in 2021.
Figure 1 - Customer Satisfaction in Mortgage Processes Image: https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/competing-on-customer-experience-in-us-mortgage
Top tech trends for LOS
Today’s tech-savvy customer needs quick, seamless, and personalized service with transparency. To provide ‘Good quality services with a few clicks’ digitization using emerging technologies is the only viable solution for giving the best loan origination systems. Another factor in making tech-forward customers is that millennials make up the largest pool of buyers and sellers in the real estate market and are a tech-savvy generation. It is beneficial for lenders to provide mortgage services with tech-forward LOS.
Figure 2 - Real estate Buyers and Sellers by age group Image: https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf
1. Robotic Process Automation (RPA)There is a huge amount of same or similar customer information pouring in daily in multiple databases and spreadsheets, with the mortgage providers. Currently, there is a lot of dependency on human labor to perform simple processes. RPA in loan origination systems and throughout the mortgage lifecycle would help in increased accuracy and productivity by replacing the mundane, repetitive, and highly time-consuming tasks. This would also help the human labor to focus more on analysis and Customer Relationship Management (CRM) to achieve maximum customer satisfaction.
2. Blockchain technologyBlockchain is a shared, immutable ledger and virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved. It is estimated that mortgage process automation using blockchain can result in savings of $177 million on a loan book of $97.7 billion for a typical lender. Blockchain technology is a game-changer for the end-to-end process right from Mortgage LOS to Mortgage Servicing. It helps in accurate record-keeping, lower costs, easier verifications, Mortgage Process Automation, security, and compliance. We have also talked about the use of blockchain technology in the mortgage industry in one of our previous blogs.
3. Cloud-based MicroservicesLOS are still largely a paper-driven procedure. Plenty of man-hours are put into each step from the loan application, disbursement, and collection. It still depends on legacy systems and includes complex regulations. Lenders need to rapidly set a LOS based on technology and automation to increase response time. Cloud-based microservices will allow lenders to digitize and implement modules step-by-step at their own pace. Using integrated microservices can help lenders to also adapt to regulatory changes.
4. Collaboration of Banks with Fintech companies for the Best Loan Origination SystemsBanks do recognize the importance of upgraded digital technology to optimally utilize resources, achieve the targeted profits, improve regulatory compliance, and transform the customer experience. Pre-Covid analysis suggested that banks that have successfully used digital technologies saw an increase in profit by 40% from a combination of increased revenues and lower operational costs. Financial institutions have a deep understanding of loan origination and other mortgage processes, supported by conventional LOS and Mortgage CRM. This is complemented by the technical prowess of Fintech startups that digitize LOS and transform the mortgage lifecycle.
5. Snowballing use of Machine Learning (ML) and Artificial Intelligence (AI)Banks do recognize the importance of upgraded digital technology to optimally utilize resources, achieve the targeted profits, improve regulatory compliance, and transform the customer experience. Pre-Covid analysis suggested that banks that have successfully used digital technologies saw an increase in profit by 40% from a combination of increased revenues and lower operational costs. Financial institutions have a deep understanding of loan origination and other mortgage processes, supported by conventional LOS and Mortgage CRM. This is complemented by the technical prowess of Fintech startups that digitize LOS and transform the mortgage lifecycle.
6. Buy now pay laterTypically, banks rejected small loans from a large number of people due to high underwriting costs and smaller profit margins. Individuals with less or no credit history were often turned away by banks and financial institutions. Now, this is where the Fintech lending companies have devised new business models and are offering “buy now pay later” loans. Consumers can get a product they want without having to fill out extensive forms. Automated application, underwriting, approval, and loan origination systems have significantly reduced costs and made mortgages more accessible. Learn from our blog how LOS platforms like inflooens can improve the underwriting process.
The way forward for LOS with Technology
Robust technology for LOS must be backed by an effective governance structure. It should consider cybersecurity, regulations, identity, and access management, and privacy protection of data to follow the company’s IT standards. This is why the choice of mortgage CRM or LOS platform is key in best utilizing the benefits of tech trends. inflooens mortgage LOS platform offers a reliable and efficient solution that encompasses the latest technologies and provides the best loan origination system.