Scenarios likely to unfold in the mortgage industry in a post-Covid world

After ending 2020 on a disastrous note due to the Covid19 pandemic, the global economy is likely to shrink by 3%. With a steady rise in the worldwide unemployment rates and pay cuts becoming a constant feature, there is considerable speculation about new houses for sale Calgary, which proved pundits wrong by maintaining a steady demand amid the pandemic. However, the economic slowdown will impact the growth of the mortgage industry.  Interest rates around the world are dropping to sub-zero, and the trend would continue through 2022.  Lower interest rates will trigger more refinance and purchase from borrowers, but at the same time, there are signs of lenders tightening lending criteria to lower lending risks. Hence, we are likely to witness lateral growth in home origination volume and home price.

Since Nonbanking mortgage companies do not have access to the central bank’s liquidity facilities, they feel the maximum impact.  Lenders are likely to reduce the number of products on offer, and there will be a decline in products like low down payments, jumbo loans, or loans against low credit scores.

On the other hand, growing customer expectations will compel lenders to improve their customer experience interactions to remain competitive. To comply with the restrictive health measures like social distancing regulations are becoming more flexible and open to adopting new technologies like eClosing. Borrowers can expect more protection from some new regulations that allow forbearance extension beyond the first 6 months, but it can result in higher delinquent loans in the future.

All processes will be more technology-driven as they can resolve various issues that require physical involvement in property transactions. We are likely to see what kind of trends in the mortgage sector will become clear on going through this article.

More use of self-service tools

Due to the Covid19 pandemic, there has been an incredible 2000% increase in customer contact center volumes as borrowers want to exercise the available options like mortgage holidays or mortgage moratoriums to manage their finances better. To meet the demand, lenders can either increase the headcount and the training efforts or take advantage of self-service tools like chatbots or IVR (interactive voice response), with the former being a smarter choice with an eye to the future.  Mortgage lenders can offer enhanced customer experience by helping customers with insights for advanced advice and recommendations. Chatbots add a personal touch that can replicate human like experience through their intuitive features that exceed customer expectations.  Chatbots effectively perform transaction requests like changing payment amounts and dates, updating bank details, etc.

Faster mortgage request processing

Electronic signatures are becoming a staple feature during the various stages of mortgage processing from inception to funding. The e-signatures speed up the process of obtaining signatures during multiple stages. It provides a unique customer experience during eClosing and funding.  Remote online notarization was permissible even before the Covis19 pandemic, but wet signatures at a few places were still necessary. The Covid19 pandemic compelled the suspension of the regulation for the need for wet signatures, and remote authorizations for real estate transactions have become a reality. More likely, some more amendments of the rules will happen to fully utilize eSign capabilities by using digital tools in every stage of the mortgage process.

The use of digital tools that facilitate eSigns and remote notarizations do away with loads of paperwork and eliminate the need for people to be physically present during the closing process, which will significantly speed up the mortgage process.

Enabling straight through processing with the help of digitization

During the tenure of the mortgage, which can be up to 30 years, changes keep happening in borrower preferences about monthly installment amount, payment source, preferred date of payment, etc., that might require alterations in the servicing systems.  Most of these requests need some time for an update because of the several processing stages that it passes through. After capturing the request at the front end, it moves to the mid-office for analysis and then to the back office for fulfillment. Except for the front office’s digitization, the other two stages are entirely manual and hence take time to update. It leads to long waiting times and frequently checking by customers with the servicer about the status.

Since most customer requests pertain to updating basic info, there is enough scope to digitize the process. Lenders can integrate the straight through process with their innovative chatbot channels and online IVR that provides a universal experience to customers.

Predicting outcomes of mortgage functions by using AI and ML models

For years the mortgage industry relied on efficient manual processes, but there is the scope of creating an error-free process that is more efficient by using AI (Artificial Intelligence) and ML(Machine Learning). Until now, lenders used AI and ML for basic data analysis only and for appraising the loan applicant. By using advanced AI and ML, lenders can find out undisclosed financial relationships or borrowers, handle a large volume of data and most importantly, foresee the behavior of the loan applicant and loan book.  With stricter regulatory requirements, increased customer expectations, usage of AI and ML is growing exponentially.  The tools help to assess the creditworthiness of borrowers and help to identify fraud. AI and ML for origination have multiple benefits like reduced credit losses, lower origination cost, higher risk-adjusted margins, lower legal costs, quick processing, and facilitate upselling products.

Speeding up the mortgage loan onboarding process

Despite accelerating the digitization of the mortgage processes, it will take some more years for the process to become completely paperless. The industry is not yet ready to use a common platform shared by all lenders/ mortgage companies involved in the process to avoid repetitive tasks and duplication.  As a result, the processing time and cost increase. Since there are too many documents involved in the various mortgage processes, it is a cumbersome task but prone to error.

To overcome the challenges, mortgage lenders can use AI/ML powered by OCR to validate documents immediately and complete the loan package in the shortest time.