Why is Mortgage Lending Automation gaining traction?
Tolani Jaiye-Tikolo (Tito)
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The answer is simple - lenders need a shorter loan origination cycle at an affordable cost per origination to meet borrowers' expectations. In a normal market, a loan origination process takes about 30 days on average. In recent times, lenders have recorded on average 45 to 60 days periods for high-volume months. The ripple effect is lenders' origination cost per loan has skyrocketed and it is estimated to be between $7000 - $9000. Borrowers can expect long wait times at any step of the origination process - pre-qualification, loan application, application processing, underwriting tasks, credit decision, quality check and loan funding.
Figure 1 - McKinsey & Company adaptation of origination insight report, ICE Mortgage Technology
The Loan Origination process has grown to be one of the top automation hotspots for both bank and non-bank lenders to alleviate the burdens of long cycle time, manual processing and long underwriting tasks. Automation can also provide improved operational efficiency, reduction in loan repurchases, reduced cost to originate, and hassle-free, faster and lower-cost experience for borrowers, says Freddie Mac.
Interview
In a bid to understand the US Mortgage Lending industry, I caught up with an Industry expert on IA Simplified,?Gabriel Skelton , the Director of Banking and Mortgage Solutions at OpenBots to discuss Mortgage Lending, Automation Opportunities and Mortgage Technology.? We asked Gabriel why Mortgage Lending Automation gained more popularity.
The podcast is 25 mins long and has been broken down into several segments for consumption. The first defined Mortage Lending . The second segment (this article) discusses the push for Mortage Lending Automation.
Pardon the LinkedIn glitch ?? The full link to the video - https://youtu.be/Us4g_c8gXiU
Tolani JT (Host): And, why is mortgage automation gaining traction, you know, in your opinion,?why is it getting traction at this point??
Gabriel Skelton (Guest): So I think we saw the largest increase during the pandemic. It was catapulted by the pandemic, but for a few different reasons.
I think, you know, real competition, you know, retaining employees, how consistent the low process is. Come to think about it, if your competitors, as a lender are all investing in technology and you're not, it's difficult to compete, right? I mean, Freddie Mac released a report where they kind of compared firms that haven't invested in technology and ones that had, and they found that the ones that had heavily invested had $2,200, less per loan to cost for each loan originated.
Right. And every lender had cycle times that were five days shorter. So it's tremendously making things much more efficient. And if you're not operating in that level of efficiency, you know, you need a price up. Right. And then in terms of, you know, the rising cost of full-time employees, right? the great resignation. So getting quality employees and retaining quality employees is difficult when you utilise automation and intelligent document processing and bots. Loan processors, underwriters, and loan officers are actually happier in their roles. They're more productive. They stay at their own firms longer.
So it's something that, you know, automation, isn't here to take over jobs. Automation is here to support existing individuals, to do their jobs better. And lastly, you know, the inherent nature of originating a loan is pretty consistent, right? Things of course changed a lot, but compared to other industries, there's a certain flow that happens. And because of the consistency of the loan process, there's a flurry of repetitive tasks that make it right for process automation.
About RPA Jargon Buster (RJB)
RJB is an Intelligent Automation Consultant with over 7 years of digital transformation experience. RJB vision and mission are to create a better Digital Transformation experience for Small and Medium Enterprises (SMEs) and Mid-Markets financial services and healthcare through Intelligent Automation. RJB collaborates and partners with delivery consultancies and vendors in the US, UK and Ireland regions. For more information, send an email to [email protected].
IA Simplified is an?RPA Jargon Buster 's podcast series that showcases industry leaders to gain their perspective on the impact of Intelligent Automation on SME and Mid-market financial services, healthcare, retail and similar domains.
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