With technology taking various forms in the mortgage landscape, terms such as machine learning, big data, block-chain, and artificial intelligence are becoming increasingly common.

Technology is evolving at a fast rate, and lenders need to keep up with the growing trends as new start-ups and FinTech companies join the competition.

At the core of the disruption caused by recent technology trends in the mortgage industry are three main factors:

  • New business models
  • Economic pressure
  • The convergence of mortgage and real estate business

These three factors are single-handedly responsible for the change in the whole outlook of the mortgage industry. Previously, a real estate agent was at the centre of all home transactions, but currently, the customers are the most important.

Why has tech caused such a severe disruption in the mortgage industry?

One of the main reasons why the mortgage industry has experienced a significant disruption is because lenders opted to seek ways to automate, speed up, and simplify steps of the mortgage origination process.

FinTech lenders, therefore, created a completely online mortgage application and approval process supported by centralized underwriting operations.

The Amazon effect is also taking root in the mortgage-lending sector. Today, customers are more tech-savvy and choosing their options carefully before taking up a home mortgage.

This has necessitated the need for mortgage lenders to employ tech in their processes to provide a better customer experience and services.

Trends that are responsible for the disruption in the mortgage industry

1. The digitalization of the mortgage ecosystem

The digitalization of the mortgage ecosystem

Technology has revolutionized not only the mortgage process but also the mortgage ecosystem. Everything from creating a new listing to securing a homeowner’s title insurance has been digitized.

The digitalization of the entire mortgage ecosystem has led to the introduction of electronic/hybrid mortgage closing, which is slowly becoming a norm in the industry.

The incorporation of technology such as the eSignature has provided a customizable, branded signing solution that speeds up the process and provides a sleek customer experience.

2. Single source validation and automated data collection

Without any measures in place, customer validation is a complicated process, which is time-consuming. However, with the current technological trends, acquiring a borrower’s information can be quickly done in a few steps. This data is easily collected using 1003 applications that are available online.

In 2016, Fannie Mae launched the Day 1 Certainty program that automatically passes customer details from financial institutions, which in effect speeds up the mortgage processing time and cuts down costs.

3. Self-service channels for borrowers

In today’s world, the world is increasingly connected, and customers look for instant gratification. They always want to have access to products and portfolios and compare them against similar products and portfolios. Self-service is becoming increasingly common in the mortgage industry.

Better self-service channels help provide useful information and educational tools that facilitate consumer access and cut down costs. Borrower portals are assisting customers in checking their credit scores, generate pre-approval applications, and run their files through digital underwriting processes.

4. Mobility

Mortgage lenders are devising their operations with mobility in mind in this changing landscape. People move periodically handling their mobile devices, and lenders need to make their products and services more accessible.

Mortgage service providers are creating apps with different functionalities that keep consumers up to date with mortgage rates, mortgaging processes, and mortgage information. Web and mobile apps help consolidate and streamline service provision and ensure customers can easily manage their finances.

5. Big data

The availability of mass data has made it imperative for lenders to derive actionable conclusions that help them offer better quality and diverse services. Machine learning algorithms can potentially help lenders identify trends in the market. This helps lenders provide better products and support customer requirements efficiently.

The growth of digital technology, however, carries some risk for mortgage lenders. Data theft is a significant concern, and the customer’s sensitive information needs to be adequately secured.

In a nutshell, technological diffusion has helped speed up the mortgage origination process and reduced capacity constraints commonly experienced during peak demand.

This has strengthened the ability of the mortgage market to transmit mortgage policies to households. These tech trends have also influenced refinancing decisions making them more streamlined and efficient for most businesses and consumers.