On March 30, 2022, our SVP of Strategy, Mike Fullalove spoke about mortgage automation at the FTT Lending 3.0 event in London. We asked him to summarize his thoughts in an article.
Owning a home is a milestone for most adults. However, the home-buying journey can also be a fraught one, not least because of the many moving parts and players that must be brought in to complete the process.
If you’re applying for a mortgage, it’s not enough that you pass a credit check, or that you have the income to support the monthly payments. You may also need to bring in a solicitor, a surveyor, and other professionals to determine the viability of the loan, or the strength of the structure you’re attempting to purchase.
As you might imagine, digital innovations in the mortgage industry can be challenging for these same reasons. When we think about mortgage automation, we not only have to think about the related technologies…
…we also need to think about the mortgage ecosystem that already exists, and that we need to tap into.
For the most part, people looking for mortgages are still turning to traditional means. They will generally go to a mortgage broker, because they want the expertise of someone who knows the industry.
They want someone to reassure them that they are on the right path, and they also view these services as generally ‘free’, as the brokers tend to be paid by lenders.
This, of course, is understandable, as buying a home will likely be the largest purchase they make in their lifetime. Yet, there’s space for the kind of advice and reassurance that mortgage customers want within mortgage automation.
With this in mind, the first opportunity for mortgage automation revolves around those borrowers who already have a mortgage, and simply want to renew or change their rates at the end of a given period. This should be straightforward to implement, as the lender already has all the customer’s data.
Offers can be customized according to the customer’s information, and then presented within the user interface. This allows customers to simply choose what makes sense to them.
In this way, non-useful and extraneous information is removed, and customers can focus on offers that have already been vetted as viable. The simple design of the journey should negate the need for protracted discussion with a broker, even with the option available.
The second opportunity here for the digital mortgage industry, which can align with how most homebuyers avail of mortgages, is to create a broker journey that can dramatically reduce time-to-money.
With the broker leading the process, mortgage automation can be used to streamline the transfer of information, as well as security checks, using APIs to effectively synergize custom loan offers.
Existing technology can also be utilized to automate database cross-checking, and a tracking system can be put in place to mitigate some emotional pain points for home buyers.
For the more confident or technologically savvy, the option to be their own broker, or to choose a non-human broker, might also be in the cards for the future.
Finally, the third and most obvious option is to make applying for further related loans easier and more efficient.
Homeowners will want to make home improvements over time, or their homes may need repairs over the course of the life of their mortgage. Offering a simple digital mortgage journey to existing customers looking for additional borrowing should be part of any lender’s playbook.
This should be relatively easy to set up, so long as customers are within their original loan-to-value range, and no major detrimental financial events have occurred since they first opened their loan. The approach to this can also be configured according to a customer’s profile, offering hybridized services when required.
Whenever we try to introduce digital innovation to an industry, particularly something as complicated as mortgages, we need to truly look at the ecosystem that already exists.
Disruption is important, as that can move the industry forward, but that isn’t the only path open to us. It also may not always be the most viable path for firms that are already established in the market.
There are times when it is best to play to strengths, and to add to those strengths by bringing in the right technology partners and platforms that will allow established and established firms to compete with new players on their own terms.
After his panel appearance, Mike was interviewed by the FTT team and a recording is now available.
