"Every big business, no matter how big, is at risk"
Time-consuming, awkward, unnecessarily complex… the mortgage process is often miscategorized by customers and brokers alike. However, according to Anthony Sherman (pictured), co-founder and CEO of Sonar, the root causes of these inefficiencies stem from various bottlenecks.
And, as someone with over 20 years of experience in the field, he identifies the primary issues: manual processes, document overload, and communication delays.
“Anything that requires a human to check a box, review a document, reach out to a borrower...those things add time,” he told MPA. Sherman’s background as a loan officer and his experience running operations for several companies gives him a unique perspective on how manual processes and the complex requirements of origination slow everything down.
Borrowers and brokers alike are affected by these inefficiencies. For brokers, it's not just the time lost to administrative tasks. These slowdowns can also limit business growth.
“A lot more time is spent on things that are manual processes,” Sherman added, making it difficult for brokers to focus on expanding their client base. The knock-on effect of dealing with the intricacies of the mortgage system is a barrier to scaling their operations.
The adoption of modern technology presents a potential solution to these issues, but resistance within the industry is palpable. Sherman attributes this to a “legacy mindset”, with many lenders reluctant to embrace change due to the systems and practices they've become accustomed to.
“There's a huge misperception of technology being an expense rather than a longer-term investment,” he said. The cost of implementation, combined with concerns over data security and compliance, means many are hesitant to transition to more efficient systems.
Yet, the evolving demands of consumers might force the industry's hand. According to Sherman, customer expectations are changing, and this will inevitably drive the adoption of new technologies. In his view, mortgage lenders are already under pressure to meet the standards consumers expect from other industries, especially as borrowers look for more seamless, transparent processes.
Fraud is another critical issue that the mortgage industry is grappling with, and it's one that technology could help solve. Sherman acknowledges the increasing risk of fraud in the business, particularly as the volume of digital transactions grows.
“Every big business, no matter how big, is at risk in terms of data security,” he told MPA, emphasizing the need for robust controls and processes to mitigate this threat. For Sherman, technologies like multi-factor authentication and single sign-in systems are vital to reducing vulnerabilities, particularly given the number of third-party systems involved in the mortgage process. With these technologies, he sees potential to limit the “extra entry points” that can compromise data security.
One area where Sherman sees considerable promise is in improving the customer experience through automation and artificial intelligence (AI). Traditionally, the mortgage business is cyclical, with periods of intense activity followed by lulls. These boom-bust cycles present a challenge for maintaining high levels of customer service.
“When things get really busy, the consumer experience diminishes because you're just trying to do all these nuanced processes,” Sherman told MPA. He believes technology can alleviate this by automating workflows and providing real-time updates to consumers, reducing the anxiety associated with waiting for critical milestones in the process.
“Milestone updates are huge for consumers,” Sherman said. The ability to receive immediate feedback on document uploads, for example, is a game-changer. Using AI, systems can automatically verify documents and give feedback in real time, cutting down the traditional waiting period of several days for a manual review. This creates a more consistent and predictable experience for borrowers.
When it comes to the most impactful uses of AI, Sherman is unequivocal: “Documents are probably the biggest impact item.” The sheer volume and complexity of paperwork in mortgage origination are overwhelming for human eyes, but AI excels at recognizing and processing the nuances of different documents. By handling document verification and compliance checks, AI can not only speed up the process but also reduce the risk of human error.
AI’s potential extends beyond document processing. In areas like underwriting and risk assessment, AI can analyze vast amounts of data against thousands of pages of regulatory guidelines to ensure compliance and identify risks more efficiently than a human underwriter ever could.
“Traditionally, underwriters would check information against a huge set of requirements...where AI can actually help streamline understanding all the different nuances,” Sherman explained. The speed and accuracy of AI in these tasks promises to reduce the cost of origination, a saving that could ultimately benefit consumers through lower fees.
At the heart of Sherman's vision is a mortgage process where technology complements human expertise rather than replaces it. By automating routine tasks, brokers and underwriters can focus on more complex, value-adding activities. This shift, Sherman argued, will make the industry more efficient and responsive, enabling professionals to better manage fluctuations in demand without compromising the quality of service.
In the long run, he envisions a win-win scenario where technology reduces overheads and speeds up the mortgage process while enhancing the customer experience. As brokers and lenders adapt to these tools, they can allocate their resources more effectively, and with less time spent on administrative tasks, they can focus on growing their businesses. Ultimately, Sherman believes that embracing technology is the only way forward for an industry historically resistant to change.
