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Embracing Automation Technologies: 5 Tips for Modernizing Mortgage Origination

Embracing Automation Technologies: 5 Tips for Modernizing Mortgage Origination

In the dynamic mortgage origination market, sticking to “the way it’s always been done” is not enough to thrive. To remain competitive, companies must embrace and adopt automation technologies in a way that is both transformative and cost-effective. This means thinking about applying an automation-first approach and layering technologies on top of a legacy system to create a next-generation end-to-end origination experience. 

Why Now?

Cyclical Market Conditions

The last few years have seen a boom in origination due to rock-bottom interest rates and an excess in free cash driven by the pandemic. The ease of obtaining a refinance loan has been tempting to originators and this demand has been snapped up enthusiastically. However, as market rates start to increase, refinance volumes are dropping and with the Fed poised to introduce rate hikes at some point in the near future, this drop will be steep. Couple this with accelerating inflation and uncertain economic growth outlook, and originators who have geared their operations to rigidly focus on easy-money refinance loans risk the repercussions of this rather costly resource misalignment.

Market Disruption

What’s more, fintechs and start-ups are looking to leverage technologies that question established norms so they can create competitive advantage. Unencumbered by legacy systems, these new entrants can create an origination experience that is automated by design. This means they can handle more loans with fewer people and provide a streamlined (and effective) customer experience.

Shifting Consumer Expectations

The added pressure of customer expectation cannot be missed. Consumers now view a streamlined, AI-driven, self-service user experience not as a differentiator, but as a must-have. In fact, 84% of consumers are more inclined to do business with companies that offer an AI-driven self-service experience. This is particularly challenging for originators, as processes are largely driven by high volumes of data gathered manually and in inconsistent formats. While the tactical employment of AI to automate individual documents or steps of the process have helped make inroads into the creation of an AI-enabled experience, meeting consumer expectations requires a more radical approach.

The Future of Mortgage Originations

While today’s landscape may seem challenging, there are five key areas companies should focus on to remain competitive in the marketplace: 

1. Make Automation A Standard Practice

The process of origination must be reimagined to be automation-first. The majority of origination cases can be handled by a combination of AI-enabled technologies through every stage of origination, leveraging computer vision, machine learning, third-party data, and enhanced workflow automation. For non-standard or complex cases (e.g. those cases that include complex information, where values fall above specific thresholds or risk appetites, or where exceptions are encountered) that work can be sent to specific specialists that can handle that exception and push back into automated processing. With an automation-first approach, cases move quickly from application to closure with a reduction in the need for manual review of documents, less manual input of data and enhanced validation of information through third party sources. The improvements offered by an automation-first process include time-to-closure, the ability to meet dynamic demand requirements, and the ability to take advantage of labor arbitrage efficiencies which create massive competitive advantage for originators.

2. Be Innovative, Not Disruptive

Critical to mortgage origination success is the design of the architecture that sits on top or around the existing core systems. Loan originator systems (LOS), pricing engines and enterprise content management (ECM) systems are costly and complicated to replace. However, an automation layer can leverage API or RPA connectivity that reads and writes to core systems while delivering a modernized experience. This approach uses workflow automation systems that act as middleware, mapping data points to legacy systems centrally, and enabling any AI processing capabilities to be integrated with that workflow layer only, not to the core system. Originators can quickly and easily update or replace AI systems as the technology landscape continues to improve.

The alternative method for creating an automation-first approach is by leveraging the AI capabilities that LOS providers have started injecting into their products. However, mortgage originators who rely on their LOS to provide that AI capability risk falling behind those who have created a decoupled architecture as their critical AI capabilities become tied to the product roadmap of their LOS. By leveraging a decoupled approach, originators can modernize and transform their systems and operations without embarking on a costly core system migration and enable themselves to respond more readily to developments in technological capabilities in the future.

3. Eliminate Manual Document Processing

Intelligent document processing can drastically decrease manual document review. Mortgage origination is a document-driven exercise, requiring information from prospective customers via forms, identification documents, and asset and income verification documents. Over the last five years, the technology required to automate these documents has evolved to comfortably take the lead from human operators, combining effective machine learning, computer vision and intuitive UIs to train, deploy and monitor extraction models. In fact, the case for document AI in origination is so strong that technology giants like Google have invested heavily in creating lending document-specific products. Given these advancements and the fact that origination is, at least currently, a document-driven process, document AI must become a central pillar for the future mortgage originator.

4. Make It Painless and Personalized

While documents may dominate the current origination process, as time goes on, data will instead come from third-party data sources integrated via an API. Several solutions such as Plaid are currently available to source third-party information on income and asset verification, identification, and employment verification. As enthusiasm for these services grow, so will the breadth and depth of information available. Ultimately, the reliance on document-based and user-input data will give way to a reliance on third-party data.

By leveraging third-party data, originators will make the mortgage experience as painless as possible for the consumer by requiring only basic information from the borrower. The originator will then gather any remaining information via third parties.

Additionally, by leveraging data from third parties in combination with data extracted from documents, originators will provide significantly enhanced and dynamic time-to-close forecasts for their customers, as well as other analytics-based enhancements focused on consumer experience and operational management.

5. Enhance A Buyer’s Bargaining Power

The automation-first approach allows originators to front-load the approval process and provide both buyers and sellers with greater confidence in the probability that a mortgage will close. Because of the quicker processing times, lower origination costs, and greater depth of customer and property information enabled by automated processing, originators can conduct much of the approval process at the pre-approval stage without the burden of manual processing. Income and assets can be fully verified, the valuation of a home can be estimated, and deposit sources can be verified, thus providing sellers greater confidence that a buyer’s loan will close. The automated origination process, is not only an advantage for the originator, but also the originator’s customers; this in turn will drive additional traffic to the automated originator, as realtors and brokers seek mortgages and pre-approvals with a greater chance of conversion.

In Closing

The mortgage origination industry is facing many challenges. Uncertain market conditions, changing consumer expectations and disruptors entering the market mean originators will need to work harder than ever to meet the demands of the mortgage market in 2022 and 2023. Originators who adopt an automation-first approach will position themselves to overcome the limitations of their legacy systems, take full advantage of the information that is available to them and deliver an experience that reduces costs, increases speed to close and delights prospective customers.


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