The future will be digital

In the years to come, technology will be involved in every step of the mortgage process, from initial online research all the way through to close. The onus is on every mortgage company to embrace the future or be left in the past.

I’ve just returned from the Digital Mortgage Conference in San Francisco. Over the course of two days, I watched 40 live demos, visited numerous trade-show booths, and conversed with the owners and managers who run these companies. I could feel the genuine sense of excitement as entrepreneurs demonstrated how their technology will make a part of the mortgage transaction easier or cheaper or more efficient.

All parts of the transaction were covered, including consumer facing apps, documentation- gathering and verification, underwriting, e-signing, e closing, appraisal ordering and management, marketing and CRMs, and home insurance.

As the conference came to came to a close, it became apparent to me that most of the technology required to digitize the mortgage process from start to finish already exists. Unfortunately, we’re not quite ready for it yet.

In 10 years, the mortgage process in Canada will be far different than it is today. The first step is for companies to use a combination of third-party solutions and in house technology to digitize the process from start to finish. Once full solutions are available, consumers must be open to a digitized process, and regulators need to allow for a fully digital closing.

Consumer behaviour has already begun to change because many people are now used to doing their banking and making other financial transactions using a digital platform. Ratehub.ca’s 2016 Digital Money Trends report found that 87% of Canadians trust banking online, 73% of gen x-ers and millennials use rate comparison sites, and 30% of baby boomers and 47% of millennials applied for their most recent credit card online. The next step is mortgages.

However, provincial and federal regulators need to update their policies to allow the digital mortgage process to be legally binding and compliant. Currently, digital signatures and in-person ID verification are not universally trusted by all regulators.

In the US, some states allow webcam notarization, where the signer appears before the notary via webcam to verify their identity. Many other states are considering allowing similar legislation. And two government-sponsored enterprises that securitize mortgages, Fannie Mae and Freddie Mac, are both in favour of webcam notarizations for mortgage closings.

Those who become part of this change will be handsomely rewarded. Some of the largest venture capital firms are making significant investments in the people and technology they feel will emerge on top as our industry changes.

There are also other benefits for the industry as a whole. A digital mortgage is not only convenient, it’s also less expensive. Lenders will profit from lower operating costs, which will improve their margins.

But what about the human factor? Humans are no longer needed to open a chequing account, sign up for a new credit card or purchase a GIC. Canada will soon have all of the technology that makes humans no longer needed to get a mortgage.

However, will they be wanted at some point in the process? Will a consumer be comfortable enough to go through the entire process without consulting a professional in the mortgage industry? I believe some form of human touchpoint will remain in the mortgage industry for years to come, simply because a mortgage is different from other financial instruments in its complexity and scale.

While future of the Canadian mortgage industry will be digital, the winners will be the businesses that also understand how and when consumers want a human touchpoint. There will always be a place for human guidance, advice and assurance, even when mortgages are fully digitized.

James Laird is president of CanWise Financial and a co-founder of Ratehub.ca.