Narayan Bharadwaj

After a tumultuous ride through 2020, we are finally now in 2021 with plenty of hopes for better times ahead. In the middle of a global turmoil, the mortgage industry turned out to be a silver lining. With record low rates, mortgage lenders of all sizes saw record-breaking refinance volumes.

This often leaves those of us in the mortgage industry to wonder what the year has in store for all of us. While we can make very creative predictions about the “art of possibility”, we like to keep our ears to the ground and make an informed prediction keeping in line what the lenders are actually likely to do. From our discussions with lenders, we see the following developments accelerate in 2021:

  • Point of sale/Business to Consumer portal adoptions
  • Over the past five years or so, what was once considered ubiquitous and a differentiator has become “table stakes” for any mortgage bank to stay relevant. Borrowers now expect their mortgage banks to provide the ability to complete an application online, generate approvals, upload documents and exchange messages with their loan officers and processing team. The crowded field of B2C portal software companies now offers a wide variety of choices with little to no differentiation between one solution to another. We have seen lenders actively switch away from the once high priced solutions to solutions that meet standard feature requirements and decent user experience.

  • Acceleration of RPA adoption
  • Robotic Process Automation (RPA) has seen a steady rise in adoption among many lenders over the past 18 months or so. The runaway growth in volumes has left mortgage bank of every size scrambling to find resources to process the surge in volumes. Even with a drop in forecast from 2020 to 2021, total originations are expected to hit $2.7 trillion, clearly one of the highest volumes in the past decade.

    Source: MBA Originations data

    Mortgage banks have gradually stepped up the adoption of RPA as a viable strategy to automate repeatable, rules-based and high-volume tasks. While core LOS and servicing systems have improved their native features to enable more automation of rules-based and repeatable tasks, lenders are still left to deal with a plethora of tasks requiring human-computer interaction. In a labor market where it is increasingly difficult to find resources, lenders are designing smart workflows to separate tasks that can be assigned to digital workers (i.e., RPA bots) vs human workers. This strategy is helping lenders utilize their highly valued human resources to perform tasks requiring judgment and deliver better borrower experience, while managing costs and productivity.

    Over the past few years, RPA has matured from being a Proof of Concept to production grade with clearly identified areas of usage within the mortgage industry. Lenders are learning from others who have successfully adopted RPA solutions and have a much clearer view of what to expect from RPA.

    We believe that a combination of the above factors will lead to a greater adoption of mortgage-specific RPA over the previous years.

  • Maturity of data digitization solutions
  • The potential of data digitization to deliver complex automation using OCR & ICR has long been a vision for many mortgage banks and technology companies. Over the past few years, the maturity of solutions in the market has gradually improved. This maturity has bifurcated the data digitization solutions market into three categories:

    • Industry-agnostic data digitization software - Growth of technology companies offering standard data digitization solutions that clients acquire, implement and design their own data digitization solutions and use cases. This is typically seen in large lenders with extensive technology budgets and expertise who prefer a “DIY” approach.
    • Data digitization as a commodity - Data digitization solution companies who have built mortgage specific libraries and document sets offering data digitization as a commodity service. Mortgage banks consuming the data digitized by these companies still need to build specific use cases and solutions to automate their tasks using the digitized data. Mortgage banks with the ability to build custom apps and integrations with data digitization solutions consume such services.
    • Targeted solutions enabled with data extraction - This is the most mature category of the data digitization solutions market. Companies with technology and deep expertise in mortgages are developing targeted solutions to address specific problems in the mortgage lifecycle (automated loan setup, automated reviews of reports, servicing QC etc.,).

The advancement of machine learning and maturity of technologies like computer vision have led to a growth in a variety of data digitization solutions across all of the above categories. Mortgage banks now have a variety of options to choose from depending on their level of in-house technology expertise and budgets. We expect this to grow further in 2021.

Rising interest in data-driven automation:

A combination of maturity in data digitization, RPA and API-enabled core systems has led lenders to explore solutions that allow them to automate processes requiring judgment and intelligence. While RPA and digitization solutions (like automating loan setup) help in automating the rules-based and repeatable tasks, the majority of the manual tasks still require application of human judgment.

We see keen interest from lenders who are exploring solutions that integrate all the above components to ultimately deliver a decision or a recommendation on critical milestones in the loan manufacturing process. This is truly the final frontier of automation that allows lenders to automate loan manufacturing like an automated assembly line, leaving humans only to deal with exceptions, very complex scenarios and borrower/loan officer contact.

In summary, the perfect storm of low rates, high volumes, acute shortage of skilled personnel, technological maturity and availability of multiple solutions across the entire loan origination value chain is leading mortgage banks to adopt automation initiatives at a record pace. We truly hope that all these initiatives ultimately help in improving the borrower experience to improve home ownership rates of Americans.

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