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The Impact Of Technology On The Mortgage Process

Blog 32

For decades, obtaining a mortgage was a local process handled in person at your local bank. For better or worse, those days are long gone. With the increased adoption of the internet two decades ago, this once local process morphed into a regional process. Today, with the adoption of new technology such as e-signature and document sharing in the cloud, mortgage lending is a national process limited only by the mortgage providers ability to obtain the appropriate state licenses. Technology has and will continue to have a profound effect on our industry. With this post, we look at some of the more significant contributions of technology and what may be in store in the near future.

Access to Rates

In 1998 an internet-based company called LendingTree opened for business. An aggregator of interest rates and mortgage costs, LendingTree was one of the first companies that made it possible for borrowers to compare mortgage products from lenders nationwide. Whether through LendingTree or other similar internet based providers, an educated borrower emerged with the tools at hand to identify  mortgage providers whose products and prices best meet their borrowing needs and budget, regardless of physical location. While mortgage providers have faced increased competition because of internet-based technology, its technology has significantly increased their exposure to new potential customers.

Improved Communication

While technology is dating back to the fax machine and email has played an important role in communications, it is cloud technology that will have the greatest impact on how we communicate and share data with our business partners and customers. With cloud technology, all parties can simultaneously access, edit, upload and approve any or all documents in the closing package. Cost savings for Realtors, lenders and settlement agents comes from the elimination of the time consuming and costly cycle of having to send, edit and resend closing documents to each other and the client.

Better Rates and Lower Costs

For the new home buyer or refinancing borrower, technology has expanded the number of potential lenders from whom they can borrow. No longer are they limited to the handful of banks or mortgage providers with physical locations in their region. Conversely, mortgage lenders can pursue a much larger audience as they are no longer restricted to marketing and servicing borrowers in markets in which they have a physical location. The increased competition translates into better interest rates and cheaper closing costs for the borrower, while the lender realizes greater cost savings through economies of scale.

Instant Pre-Approval

Online application forms, instant access to credit reports and the ability for the potential borrower to upload documentation to the mortgage provider has dramatically reduced the time it takes to provide pre-approvals. For most mortgage providers pre-approvals are provided within a matter of hours instead of days. As technology improves and pre-approval algorithms are fine tuned it is expected that pre-approval turnaround times will be measured not in hours but in minutes. While the time saving here may seem inconsequential to the overall time to close, technology’s ability to help save an hour here and an hour there will compress the closing timeline.

Reduced Time to Close

With online application, automated valuations, online title searching and e-signature technology, the time to close continues to collapse. What was once a 30-60 day process can now, in some cases, be as short as 10-15 days. As we continue to move towards full e-closing technology the time to close will continue to shrink. For the mortgage provider and settlement agents this translates into cost savings as staff will spend less time having to compile and complete the closing package.

Big Data Analytics

Big data analytics technology can help a mortgage provider with both front and back office processes. By accessing data that identifies current valuations or predicts future valuations and equity levels mortgage providers will be able to provide quicker pre-approval and approvals. On the front office side, by aggregating data from the land records and other public sources the mortgage provider can identify highly targeted customer groups to whom they can market their existing mortgage products. Or identify niche markets to which they can market specialty mortgage products.

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