How Technology Will Change the Mortgage Lending Industry
In the 16 years I’ve been a part of the mortgage lending industry, I’ve seen a fair amount of change. But I foresee even bigger shifts to come. These changes will be driven by technology and big data as well as the impact of generation Y and even social media. The increasingly complex regulatory environment that mortgage lenders are contending with will also be a factor.
Risk and Regulation
Today, the risks of litigation and government intervention are greater than ever, resulting in mortgage lenders’ renewed focus on risk management and regulatory compliance. More and more, government is regulating the kind and quality of home loans that mortgage lenders offer their customers. This narrowing of allowable transactions is resulting in a commoditization of home loans.
With fewer mortgage options available and simpler transactions becoming the industry norm, technological automation of the process is now a real possibility.
The fact that generation Y (born in the early 1980s to the early 2000s) is as big, if not bigger, than the baby boomer generation is significant. The millennial generation was born into the age of the internet; it was there when they grew up, so there was no learning curve. For instance, they won’t hesitate to log into an application using their Facebook user name and password. And they expect transparency and mobility; they assume they will be able to apply online, receive status updates and view notifications via their smart phones.
Today’s consumer wants more control and transparency. We’ve seen this happen in other industries such as the travel industry, which used to be driven by personal relationships and is now partially driven by the internet.
Facing the Future
Big data will also play into the mortgage transaction of the future. Like it or not, big data has all kinds of data about us, including what’s in public records, our credit report, our social media activity, etc. What if we allowed potential homebuyers to log in to our online application system using Facebook?
Currently, most mortgage lenders have a loan origination system (LOS) or pipeline that is closed to consumers. However, in the future, I believe mortgage lenders will begin to open up this process so the consumer will work with the loan originator in the same system. The consumer will drive data entry, giving the consumer more transparency and control.
Once we open up the loan origination system (LOS) to consumers, we will see a much quicker close time.
All of these changes underscore the importance of using technology to drive innovation instead of just responding to a need. It’s the difference between being proactive and reactive. Honing a company’s technological strategy should be just as important as revenue forecasting. In fact, the two are irrevocably intertwined.