Staying up to date with evolving technologies and trends in the mortgage lending market is vital for lending businesses. With their tech-savvy aptitudes, millennials have recently become the largest sector of home buyers, and Generation Z is next in line.
The good news for lenders is technology is here to help you connect with borrowers, not get in the way. According to a study run by ICE Mortgage Technology, 99% of lenders believe new technology will improve the mortgage application process.1
While many lenders across the country are still dealing with the new normal brought on by the pandemic and the advancements of technology. Some may be waiting for things to return to exactly as they were pre-COVID.
However, the reality is, the process of mortgage lending will never be the same. For those holding on to paper-only business models, the market will only become increasingly unfamiliar and abrasive. Now is a good time to ask if there changes necessary for your business to ride the wave of ever-advancing technology.
So, what technology trends do you need to be aware of to stay ahead in the lending arena?
Simply put, technology is speeding up the process of taking out a mortgage. This is great news for lenders and borrowers alike. Although paying the mortgage back will still take the same amount of hard work and persistence, acquiring it is becoming more streamlined.
Streamlined interactions can be linked to a number of technology tools:
- Online portals and applications
- Online databases
- Automated information verification (ie. employment and income verification)
- Electronic signatures
- Self-service cloud-based portals
Most technologies allow for fast, more efficient processes. Think of the difference between handwritten letters and email. An email allows you to send information from one location much easier and faster. However, technologies that increase speed may introduce other challenges. Especially in today’s lending market, it’s valuable to note that homebuyers are searching for a more personalized and seamless experience rather than the fastest, cheapest option.
Let’s delve a little deeper into a few of these technology trends and how they affect the lending process apart from decreasing wait times.
Omni-Channel Marketing and Service
The term omni-channel refers to a method of retail or servicing where a customer researches and interacts with a business from multiple different communication channels.
Think of the last time you bought shoes or a new phone. You probably used several if not or all of these channels:
- Perusing websites
- In-store expertise (chatting with someone at the front desk)
- Physically trying them out in-store
- Search for advice on social media
- Calling a store to find the availability/price
When a seller, or lender, has multiple channels communicating and working seamlessly together, it’s referred to as omni-channel service. When working with homebuyers, Omni-channel service may be complex to set up initially, because all of your interactions with a client need to be made known to all other possible points of contact. However, it can lead to dramatic increases in customer satisfaction as well as reducing contact times. The future of borrowing and lending revolves around comprehensive and seamless omni-channel commerce.
Electronic signatures entered the mainstream in the early 2000s, removing the necessity for all applications, agreements, and forms to be printed out and signed before being scanned again or sent back as a hard copy.
Many companies shy away from electronic signatures. Instinctively, they may seem less reliable and more susceptible to fraud. However, an electronic signature process is subject to strict compliance criteria to reduce the risk to lenders.
Setting up an electronic signature process for your lending business can be expensive compared to the simple box at the end of a form. However, saving time and reducing hardcopy paperwork makes electronic signature systems worth the initial investment for most lending businesses.
Touted by many as the future of finance, blockchain technology is just around the corner from being the mainstream method of transactions.
If you’ve heard of blockchain but aren’t sure what it is or how it works, let’s take a second to get up to speed on this growing technology. Blockchains are a type of shared database, where every new piece of information enters a new block to the chain of data, which is automatically linked to existing blocks and encrypted.
Blockchain databases are the medium bitcoin and other crypto-currencies use to track ownership of the coins. The most significant barrier blockchain breaks down is the need for a third party to complete a transaction.
Blockchain technology could change mortgage lending by:
- Creating more accurate databases less susceptible to fraud
- Making settlements nearly instantaneous
- Eliminate the need for a paper trail to track information
Although all of these seem like desired outcomes, the development of blockchain is still in its infancy, and it will take time before it becomes the norm.
The landscape of mortgage lending is shifting quickly. With younger tech-savvy homebuyers entering the market and the changes resulting from the COVID pandemic, lenders are being pushed to deal more online, sync points of contact, and plan ahead to the emergence of blockchain in finance. You and your lending business may not want to be swept up and down with every tide, but it would be wise to stay up to speed with the technology trends in the industry.
1. “Ice Mortgage Technology Borrower and Lender Survey Shows Momentous Surge in Technology Adoption.” ICE Mortgage Technology, https://www.icemortgagetechnology.com/about/news-reports/press-releases/ice-mortgage-technology-borrower-and-lender-survey-shows-momentous-surge-in-technology-adoption.