Mortgage Lending: Overcoming Back Office Challenges with Automation

The Burden of Manual Processes in Mortgage Lending

It’s perplexing that mortgage lenders are still burdened with manual processes. Picture this: loan documents often span three to four hundred pages, requiring physical scanning and manual data entry into systems. 

At the top of the financial services stack, investment banks have harnessed technology to gain a competitive edge. However, many mortgage lenders find themselves at the bottom, focusing primarily on the present and avoiding substantial technological investments.

When loan volumes are high, lenders often respond by hiring additional staff instead of investing in technology. The downside of this approach becomes evident when market conditions change, leading to decreased loan volumes. 

Lenders are then left with substantial fixed costs that they cannot easily shed, putting a strain on their bottom line. This financial pressure forces some lenders to discontinue specific offerings. Smaller lenders face even greater difficulties, as they need more scale to weather these challenges effectively.

The Persistence of Manual Processes

The persistence of manual processes in mortgage lending is striking. Let’s take a closer look at the day-to-day operations of a typical loan process. For wholesale lenders, brokers submit mortgage loans to the originator for processing. 

The loan documents are scanned and sent through various channels. Sometimes, these documents are indexed or classified, while other times, they require manual indexing. Once indexed, data extraction is necessary to input information into the loan origination system.

Some lenders have taken steps to automate data extraction using Robotic Process Automation (RPA) bots. However, the manual review persists when the loan reaches an underwriter. 

The underwriter must meticulously examine appraisal reviews, credit assessments, and income reviews and validate all documents to ensure they meet borrower income and property criteria. This manual verification process consumes significant time.

The Need for Intelligent Automation

While manual processes prevail, the mortgage industry is beginning to acknowledge the urgent need for intelligent automation. Lenders can no longer rely solely on humans to perform these tasks accurately and efficiently. 

Intelligent automation involves using technology like RPA, Intelligent Data Processing (IDP), and Generative AI (Gen. AI) to streamline and augment human processes.

The Benefits of Intelligent Automation

Intelligent automation offers several benefits for mortgage lenders:

1. Increased Throughput: By combining human expertise with automation, lenders can process loans at significantly higher speeds, potentially tripling their throughput.
2. Enhanced Accuracy: Automation minimizes the risk of errors in data extraction and processing, ensuring that loans meet the highest quality standards.
3. Efficiency Gains: Underwriters can reduce the time spent on each loan, focusing on exceptions and complex cases rather than routine tasks.
4. Cost Savings: Automation can help lenders save over $2,000 per loan in origination costs, a crucial factor for mid-sized lenders.

Choosing the Right Automation Partner

For mid-sized lenders looking to incorporate intelligent automation into their processes, selecting the right partner is essential. Here are some considerations:

1. Cost Model: Look for partners with an economic model based on a per-loan transaction rather than traditional software licensing fees. This approach reduces upfront costs and aligns the partner’s success with yours.
2. Industry Expertise: Partner with providers who understand the intricacies of the mortgage origination process, as this will expedite the implementation of automation.
3. Start Small, Think Big: Begin with manageable automation initiatives to build familiarity within your team and gradually expand to more complex processes.
4. Future-Ready Solutions: Choose partners that offer scalable solutions, allowing you to add automation as your needs grow incrementally.

Conclusion

The mortgage lending industry is at a pivotal moment where embracing intelligent automation is beneficial and crucial for survival. Lenders, particularly mid-sized ones, must shed the burden of manual processes and invest in solutions that can significantly increase efficiency, reduce costs, and enhance loan quality. 

The time to act is now, as the mortgage market is ever-evolving. By following a strategic path, lenders can unlock the full potential of intelligent automation and stay competitive in an increasingly demanding industry.

Need help with lending solutions? Reach out to Fintech team to learn how similar firms are using this technology.