After several years of focusing almost exclusively on compliance, it was good to see that “customer experience” was back on the agenda at the Mortgage Bankers Association National Technology in Mortgage Banking Conference & Expo in Los Angeles last week.
This is as it should be because technology is not just about preventing mistakes (though it does), but also about solving real problems, simplifying complex tasks, delighting customers and eventually becoming an essential part of how they work and live.
The buzz in LA centered around Quicken’s new Rocket Mortgage (that team, in fact, won a Mortgage Banking Tech All-Stars award), new solutions that eliminate the need for collecting, faxing or mailing personal financial data; instead favoring new mobile applications that will appeal to Millennials, when they eventually become homebuyers.
There was also discussion about big data and how it will eventually solve underwriting, marketing and risk challenges.
All exciting developments and worthy of being showcased.
But in thinking about them I couldn’t help wonder: who were the customers who would really benefit from or need these new and improved “experiences?” Highly paid tech workers in Silicon Valley and Austin? A neurosurgical resident with significant student debt qualifying for his or her first home? Serial refinancers with both insomnia and ADD who apply at 2 AM and can’t wait 24 hours for an approval?
Humor aside, what I’m getting at is that only the best, most pristine, tech and financially savvy (and sound) customers will be able to take advantage of these innovations, at least for the foreseeable future. And, for the most part, these were already the easiest and least expensive customers from an origination perspective. Okay, maybe not the Millennials, but they have yet to emerge as a major buying force, though they eventually will. And as far as the neurosurgeon is concerned, an underwriter doesn’t have to be a brain surgeon to figure that one out.)
To be clear, no one is suggesting that lenders shouldn’t develop technology that delights these customers: they should and must or they stand to lose them to fintech competitors.
What struck me though was: where are the technological innovations that will benefit the vast majority of the homebuyers and refinancers for whom banks, credit unions and brokers serve? Who is innovating for the customer who doesn’t qualify for the “easy button?”
Eventually, self-service may be the norm within the mortgage market, but today it’s not. Most borrowers and prospects want professional advice and assistance, at some stage in the process, even if it is just to get a second opinion on what they have researched online. (Probably on their computers, not their smartphones.)
Likewise, while consumers may start their home search online, somewhere along the way they usually begin to work with a real estate agent, who will most likely point them to a broker or a loan officer who they trust and they believe will get the deal closed. It is a rare real estate agent who will trust their deal to an algorithm.
For most consumers, buying or refinancing is a serious and infrequent-enough event so that they don’t expect instant gratification. (Even those that do, and who get approved in 10 minutes or less, probably still have to wait a week or so for the appraisal if it’s a purchase.)
Also, many deals aren’t simple; and increasingly many borrowers aren’t either. The gig economy and the great recession have made income underwriting in the age of Ability to Repay much more challenging.
Over the last eight years, 4 million homeowners lost their homes and became renters; many of them are anxious to own again, and will soon be eligible. These boomerang borrowers are an opportunity, but helping them will be anything but simple.
That’s why, as an industry, we need to be delivering new technology to the brokers and advisors who are solving problems in today’s tight credit environment and getting deals done. As new non-QM offerings come to market, there will be an even greater need, for example, for new automated underwriting and product and pricing solutions.
Aside from the experience, technology also delights customers, both B2B and B2C, by making products and services less expensive. But thanks to increased regulation, and with it complexity and risk, the cost to originate our industry’s products increased by more than 50%, and is now $7,747 per loan. Much of this cost has been absorbed by lenders and/or camouflaged by ultra low interest rates so the consumer hasn’t felt the full impact of it—yet. But higher processing and origination costs are beginning to be passed on.
TRID, of course, has been a big part of the recent run up in costs as well as a significant, sometimes painful learning experience for most of the mortgage/real estate ecosystem. But the industry is moving through the gestation period and once there is clarity and agreement on the outlying issues, technology will be able to lower costs and deliver a more automated experience.
Our industry’s experience with TRID, and before that QM, suggests that just developing and delivering software is no longer enough. Clients now need additional training in understanding how the new rules are changing the way mortgages must be originated, processed, disclosed to borrowers and closed. Customer service centers were designed to answer specific technical problems, not to show them how to originate loans.
From an LOS standpoint, this will require new thinking and creativity about the roles of education and training in improving the customer experience for originators and administrators.
But the good news is customer experience, which has taken a back seat to compliance, is a priority once again.
