Stephen Butler
Stephen Butler Jan 18, 2019

Putting the ‘instant’ in instant mortgages

Perhaps you’ve seen ads for “Mortgage approvals in minutes!” just by using a mobile phone. They often run during halftime of a football game or before our favorite prime-time TV shows. The “approved in minutes” concept has grabbed the attention of many consumers, but those of us in the mortgage industry know that behind the marketing gimmick lies the same old laborious mortgage approval process on the back end. And if an underwriter does not agree on an applicant’s creditworthiness, that initial approval simply sets up consumers for disappointment weeks later.

The true game changer will come when an actual approval, complete with underwriter support, takes a matter of days or hours rather than weeks. It’s important to know the difference and what it will take to get us to a real world of rapid approvals. AI, machine learning and automation all will play an important role in making one-to-two day mortgage approvals a reality.  

Mortgage myth from fact

First, let’s separate myth from reality when it comes to speeding the mortgage approval process by looking at the front and back ends of current technology-based mortgage systems. On the front end, you may submit some figures online such as your income, assets and credit score. What you may get back in minutes, or a short period of time, is an estimated pre-approval for a loan. This is only an initial estimate.

Next, you’ll need to support the numbers you entered on your phone or PC by submitting actual documentation for income, assets, liabilities, credit rating, etc. These documents then get sent to a large facility filled with people who pour over the documents in detail, asking questions and requesting more information. This creates a bottleneck that turns an “instant mortgage” into a much longer process similar to a traditional mortgage.

On average, it takes about three weeks to close a mortgage, including underwriting and all the necessary approvals. And the later stages of this three-week process mark where approvals may get denied and loans may be turned down. That often leads to people losing the house that they wanted so much.

AI leads the way to mortgage speed

To truly get the mortgage application and underwriting process down from three weeks to one or two days, we must enlist the help of AI, machine learning and automation. AI can gather, review and verify mortgage documents much faster and more accurately than conventional methods. It can turn the application process into more of an “assembly line” system that boasts efficiency and accuracy. It can also automatically scan documents, processing and verifying them quickly—which allows consumers to track the current status of their mortgage application and what, if any, additional information is required.

This type of real-time information and interaction can spare consumers the emotional swings of  pre-approval one day and rejection the next.

What’s more, AI-based automation enables mortgage lenders to put new power in the hands of consumers because it can eliminate mortgage contingencies and compete more effectively against cash buyers. According to a report featured in The Wall Street Journal, 28.8 percent of U.S. home sales in 2017 were all-cash transactions. Going head to head more effectively against cash buyers can prove important as housing inventories get tighter and people face more competition when buying a home. It also offers a competitive advantage for banks and lenders now empowered to provide rapid approvals to prospective home buyers.

This AI-based process can surprise and delight customers in ways not possible under obsolete manual methods. Consumers expect instant, “Uber-like” experiences in all aspects of their lives. Now is the time for the financial services industry to embrace change and create a better customer experience by tackling back-office processes that are ripe for automation. According to a story in Housing Wire,  millennials purchase more homes than any other generation, making up 36 percent of home buyers in 2018.

At the same time, this AI-driven approach helps banks and other lenders make their data actionable. It allows teams to identify, understand and use information in a whole new way—and in the process improve efficiency as well as staff productivity. Freed-up staff can devote more time to customer-facing work that can help build the business.

Improved efficiency matters as banks and lenders face even greater cost pressure and competition. As they look for new ways to improve productivity and reduce costs in the months and years ahead, industry leaders will turn to AI and automation.

And consumers will become more educated and aware of fact versus fiction in the “instant mortgage” concept. Their expectations for a faster, more predictable experience will increase, but so will their level of discernment.

Consumer and producer alike, we must all know what is and isn’t real in the new age of instant mortgages. But the advent of powerful technology means good news for lenders, home buyers, real estate agents … the entire industry. For when it comes time to close a mortgage—and quickly—AI and automation will open new doors.

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Stephen Butler is the founder and president of AI Foundry, a Kodak Alaris business.

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