The specialist mortgage market is the place to watch at the moment with faster growth than its mainstream counterpart. Added competition from a host of new entrants to the market will force all lenders to raise their game.
Technology has had the greatest impact on how we conduct our business today. It drives how we underwrite, risk assess, product design and communicate and no one can afford to ignore the enhancements it has already made to the market, and the future changes it will bring.
The mortgage market is not in isolation, and as we’ve seen in the insurance and banking sector, technological development has brought rapid change, major efficiencies, broadened offerings and reduced timescales. Technology has changed expectations and accessibility to information.
Two of the most recent major technological enhancements to the mortgage industry have been the electronic decision-in-principle (e-DIP) and automated valuation models (AVMs). These alone have dramatically changed the industry. Prime lenders are moving towards a total online application process in order to decrease timescales, and although the specialist market is more complex, technology will eventually enable it to move in this direction too. Those who aren’t riding the crest of this wave will struggle to maintain their market position.
New avenues
Technology has opened up new channels of communication and sales for the mortgage market.
Where customers would have once gone directly to a bank or broker for their mortgage, a growing percentage now go online for mortgage information and research. Consumers are savvier then ever and consumer connectivity is forcing lenders to seriously address their online presence and business models to enable easy access to their products.
Customers excited by the prospect of owning their own homes aim for speed on their loan decisions. Delays in mortgage approvals can cost money and cause stress. As a result, lenders and brokers who provide a prompt and undemanding mortgage process are able to gain the competitive advantage and push the market into a new era. Ultimately consumers want a quick and painless process to get their mortgage.
Everyone knows that paper is a problem for the mortgage industry. It is by no means the fastest, most reliable, or cheapest tool for the job. And yet, 90 per cent of the documents in the workplace are still processed that way.
The pressure is growing for faster processes to reduce mortgage documentation requirements. Lenders want to minimise the paperwork burden without ending up with a loan that isn’t saleable or doesn’t meet the requirements of regulators. As the industry continues to move towards the all-electronic mortgage, lenders will continue to explore ways to manage the data they require to process loans.
AVMs are growing rapidly with lenders increasing their uptake of online valuation services in order to streamline and improve the application process. Gains in efficiency, speed of service and increased competition are the drivers in the advancement of this technology. The AVM option is much cheaper than the cost of the full appraisal traditionally required of home loan applicants and AVM availability is increasing rapidly within the specialist area. The capital markets attribute a higher risk to AVM business and it remains to be seen which lenders will pass this on as a fee.
The future
Without doubt technology will be the bedrock of the future of the market.
Improved online applications will open up the market and push competition to embrace a fast turnaround in approvals. The market will no doubt see a dramatic increase in e-DIP and AVM tools as lenders and brokers want to have an approval at the point-of-sale, giving customers a firm loan decision as soon as possible. Many lenders already use AVMs in their back office operations and once properly integrated with automatic underwriting systems, brokers will see a fully automated process. The electronic signature holds the potential to this entirely online mortgage offer and there would be nothing blocking the holy grail of the paperless mortgage.
Technology has changed most of what we do today. As brands and technologies are invented and replaced, the majority of us still enjoy the personal touch and prefer verbal contact with a trusted broker in our financial matters.
Brokers base their business on a trusted relationship between themselves and their client. This will never change as client relationships will always be paramount, but technology will allow brokers to enhance them. However, new online technologies and the abundance of information available may eventually lead brokers to a new way of communicating with customers. Brokers will meet changing needs through new channels of communication in addition to the traditional meeting. Voice Over Internet Protocol (VOIP) is one development that enables brokers to become online advisers, reducing costs and meeting a growing customer requirement for instant access to information.
Lenders that use new technology will have a profound effect on their competitors but this won’t be the end of traditional lenders. There will be a wide adoption in technologies used across the industry as everybody looks to get a slice of the e-business marketplace.
Innovation in service levels and a quick turnaround in applications will be the key factors for lenders who wish to dominate the marketplace. The technology for electronic identification verification, credit checks, automated conveyance and online case-tracking is already available. It is improving everyday and the future for the specialist market is technology.
Brokers need access to lenders’ products through online systems with instant offers and this is the route we will see more and more frequently. Within the next three years, brokers should be able to complete the process in a matter of hours, providing clients a more efficient service.
With a slower economy and housing market and tougher competition, technology will be the key to success.
