The year 2019 came to a dismal end with the mortgage industry facing rising interest rates and a shortage of affordable housing. As more and more consumers were found looking for housing but not having the means to afford it because of mounting housing prices, the situation only became worse.
Growing interest rates also meant that each mortgage loan became more costly for borrowers, so that lenders were found struggling to figure out how to improve demand. It was also more difficult for the mortgage industry to recover from these less than desirable conditions in the face of high origination costs and slow turnaround times. Mortgage automation and advancing technologies did not prove to be useful despite mortgage lenders having them at their disposal.
In sharp contrast, 2020 is promising to be the year that the mortgage industry has been waiting for as mortgage processing is transforming into a digitally driven endeavor, with mortgage automation really starting to hit its stride. Mortgage lenders are looking to make the most of automation technologies as the industry is beginning to adopt them for the many opportunities they present. This includes faster loan processing times and lower error rates in mortgage origination.
Moreover, the fact that mortgage automation adoption is set to take off in 2020 means that mortgage lenders will increasingly be facing stiffer competition, thus driving down mortgage rates and making housing more affordable once again. To get an accurate understanding of just how the mortgage industry is forecasted to behave this year, let’s explore the trends that will define the industry in 2020.
Pre-Approval Will Become Fully Automated in 2020 Through Online Portals
It is no secret that, for the most part, the mortgage process is highly paper-based and analog at present. Mortgage loan files can consist of even 700 pages worth of documentation, which is not easy to work through. In 2020, however, mortgage automation and AI will transform manual processes into digital ones.
Post 2019, online portals will become the norm as chatbots help prospective borrowers understand the degree of commitment that is needed for their mortgage loan to be approved. Moreover, RPA bots will help identify and categorize mortgage files so that validating them should be a breeze. The current manual pre-approval process will be completely upgraded to an automated one so that borrowers can upload personal documents by themselves and take matters into their own hands.
What this means for the mortgage industry is that RPA bots and automation will turn analog processes into completely digital ones so that new advances in technology can help replace archaic processes that have been around for decades. This will, in turn, speed up pre-approval times as underwriters can review 700 pages of documentation in a few minutes as information gets methodically grouped into categories and only the most important information is highlighted for the underwriter to review.
Mortgage pre-approval automation will also remove extensive unnecessary back office administration and result in greater efficiencies in 2020. Further, the reduction in the amount of paperwork that needs to be analyzed will improve decision-making. Communication between the underwriters and the borrower will also improve as automated notifications will keep the borrower in the loop on where the file is in the pre-approval process.
To Sum it Up:
• Online portals will help the pre-approval process by replacing the current analog, paper-intensive process with automated verifications and notifications.
• Automated verification of documents will make decision-making simpler and faster and only the most important information contained in the file will be sent to the underwriter for review.
• Borrowers will be able to upload personal documents on their own terms, thus speeding up the pre-approval process.
• Chatbots and RPA bots will replace other forms of communication given how efficient they are in processing information and returning results.
• Back office administration will be eliminated entirely in 2020 as online portals require very little interference from human representatives or administrators.
• Reduced paperwork will also help underwriters with simpler and more accurate decision-making during the pre-approval process.
• The pre-approval process will also be made easier for the borrower as automated notifications will be sent out the minute the decision has been made, thus eliminating the need to constantly check in to get an update on the application’s progress.
The Loan Assembly Line Will Rely Exclusively on Software in 2020, Not Human Intervention
In 2020, mortgage lenders will make the push to completely automate mortgage loan processing so that no human intervention is required. In fact, all existing processes will rely on software systems to validate borrower information.
Rather than have one underwriter go back and forth with the credit bureaus to verify the credit score of a borrower or rely on the loan officer to contact the employer to ensure that the information presented on the application is accurate, software will now be implemented throughout the process to collect, analyze, and authenticate borrower information.
Not only will software be responsible for validating all borrower information presented in the application, it will also be used to order pre-approvals, property appraisals, and more. The manual checklist approach that has been used for decades will be replaced with streamlined and automated checklists in 2020, such that all documents can be collected and properly verified in seconds.
Also, the need for a loan officer to make calls or have their coworkers execute a task like ordering an appraisal will be made obsolete with the use of software. Every step in the loan assembly line from loan origination to underwriting would be undertaken without any need to involve manual help as automation technology immediately sets about carrying out all the necessary tasks in quick succession until the entire process is complete.
This means that software systems will be the new norm and that automated checklists will replace manual ones so that loan processing times will improve. Moreover, the rate at which errors occur will also fall this year as incorrect data or missing data will be immediately identified and addressed. Finally, it will cost lenders less to process a mortgage loan as less personnel are required to complete the same process. Instead software systems will manipulate and analyze the data as well as order property appraisals on behalf of the lender.
To Sum it Up:
• This year, mortgage automation will leave human intervention out of the mortgage processing equation.
• Humans will no longer need to validate borrower information but leave it up to the software systems in place to decide what is falsified information and which application to reject automatically.
• No human intervention will be needed to ensure that all documents have been properly submitted for each mortgage loan application.
• Property appraisals will be ordered directly using the software, so no human involvement will be needed to execute routine or administrative tasks.
• No steps in the process will be mistakenly overlooked or forgotten since mortgage automation platforms carries out all processes uniformly and consistently without errors.
• Mortgage processing costs will decline as more automation software is used and fewer manual underwriters are needed.
• The loan processing times for each mortgage application will also decline as all borrower documentation can now be verified automatically and within seconds.
• In 2020, every step in the loan assembly line from mortgage loan origination to underwriting and closing will be executed systematically, without any discrepancies, exclusions, or errors.
Greater Use of UAVs for Property Appraisal Is Expected to Occur in 2020
Unmanned Aerial Vehicles (UAVs) will take over the aerial photography domain in 2020 when it comes to property appraisals. Lenders will look to drone pilots and private UAV aviation companies to perform quick recons of the home to gain more accurate information before property appraisals can begin.
Mortgage lenders will depend on UAVs to get a more accurate idea of the square footage of the property and to identify all its features and amenities. In fact, UAVs will be used to help appraisers collect and document the necessary data that needs to be reported during the entire valuation process.
In 2020, more detailed images of the properties at different heights will result in better data capture. More accurate data for property appraisals will lead to more precise valuations, which will then lead to better investment decisions for both lenders and borrowers.
The visualization of properties and aerial mapping will truly transform the mortgage industry as more detailed, high-resolution images are made available. Drones and other UAVs can capture images where other forms of aerial photography fall short, especially when it comes to up-close shots.
Further, fraudulent approaches from the borrower’s side will be prevented as drones accurately capture every detail of the property in question, thus limiting the number of legal battles over encroachment or other issues that might arise.
UAVs will also provide a low-cost alternative to hiring helicopters so that expenses can be cut down. In fact, by using an inexpensive drone, both fuel costs and the cost of hiring a pilot will be eliminated, resulting in lower costs for property appraisals for lenders.
What all this means for lenders is that UAVs will lower aerial photography costs for lenders and provide more accurate data to work with so that property valuations are more accurate. This, in turn, will allow lenders to make better lending decisions.
To Sum it Up:
• UAVs will be used to capture more detailed images of the property being appraised in 2020.
• These drones will spell lower costs for lenders as they become an inexpensive alternative to hiring helicopters or relying on satellite images.
• Greater accuracy in the appraisal data will result from using UAVs as more images can be taken in less time and from a closer range.
• Appraisal valuations will also become more precise, leading to better investment decisions for both borrowers and lenders.
• UAVs will also speed up the collection and documentation of appraisal data, making the entire appraisal process more efficient.
2020 Will Mark the Beginning of Risk-Free Underwriting Due to the Incorporation of More Advanced AI
As algorithms and other such technologies become more advanced, self-learning systems will be used in the loan origination process to better organize and “read” all the paperwork that is submitted. These systems will also identify borrower employment histories, personal details, and past payment patterns with greater ease and accuracy.
Allowing machines or algorithms to sift through all the paperwork and analyze all the important variables frees underwriters to use their experience and judgement on more complex applications.
Moreover, AI and machine learning will help underwriters process data from various sources to automatically identify fraud, detect defects in the application, and scrutinize borrower behavioral patterns so that applications that are fraudulent or incomplete can be weeded out early on.
In 2020, lenders will rely on machine learning to make better borrower default risk assessments. Underwriters will be able to predict the likelihood of a borrower defaulting on their loan with greater accuracy so that they can take proactive steps to avoid default.
AI and machine learning will help make data analysis more detailed, accurate, and insightful such that stronger forecasts and more effective planning can be brought into the picture. Organizational targets will also be met easier as less uncertainty is involved in the mortgage underwriting process.
The rise in AI capabilities and complex data analysis in 2020 will mean that software will increasingly be able to manage the entire loan processing cycle by itself, especially when it comes to underwriting the loan.
Risk-free underwriting will be the norm as more uncertainty is eliminated from the underwriting process, leading to more accurate forecasts for future borrower behavior and better investment decisions for lenders.
Underwriters productivity will also increase as less time and resources are needed to come to a solid lending decision and less personnel, and therefore human error, is involved in the process.
To Sum it Up:
• AI and self-learning systems will be used with greater frequency in 2020 to generate more useful insights and better organize and read all the data.
• All potential risks and problematic borrower activity will be accounted for with the use of machine learning, so that underwriting becomes a more exact science.
• Advanced software and algorithms will incorporate more complex data analysis capabilities in order to generate more accurate lending decisions in less time.
• Risk-free underwriting will become the norm given that software will be able to better predict future borrower behavior based on the assessment of past credit histories, employment records, etc.
• AI will help reduce human error and discrepancies, reduce the time it takes to process a mortgage application, and hence, improve the underwriter’s productivity.
• Lenders will rake in greater profits as less risk is involved in the underwriting process, so that fewer borrowers will be granted mortgage loans that they cannot afford to pay back.
2020 is set to be the year that advanced technology really comes to the forefront when handling critical mortgage back-office tasks. Online portals are set to automate the entire pre-approval process, while machine learning is forecasted to improve the accuracy of mortgage underwriting by reducing risks throughout the process.
Mortgage automation is also predicted to rule the roost by validating borrower information using only sophisticated software and relying on automated checklists to ensure that all loan files have been processed completely. Ordering appraisals and credit checks without human intervention will also be left for AI to manage and self-learning systems will be in charge of identifying fraud and organizing data so that mortgage loans can be approved in minutes, not days. To sum it up, 2020 will be the year when mortgage back office vendors will increase their reliance on technology to deliver more efficient service to their clients.
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This article is brought to you by Expert Mortgage Assistance, an end-to-end mortgage loan servicing solutions provider with expertise in prime US residential and commercial mortgage markets. With over a decade of experience in this field, we understand the minute details involved in successful mortgage origination and are familiar with the complex intricacies that often get overlooked during mortgage processing.
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