The Hidden Risks of Caution in Mortgage Loan Origination
By:Tim Von Kaenel
November 15, 2019

The Hidden Risks of Caution in Mortgage Loan Origination

One of the great paradoxes of the way mortgage technology has evolved in recent years is that, even though individual solutions have emerged to address isolated parts of the mortgage lending process, those point solutions haven’t reduced one of the biggest potential sources of mistakes in the system: human error.

At a typical mortgage lender, the origination process often involves a Loan Advisor working with assistants and processors to piece together data from multiple platforms. With multiple people working from multiple systems to structure every loan, the opportunities to introduce errors abound.

Of course, every loan gets reviewed by an underwriter to ensure that the information it contains is accurate and that borrowers are eligible for program guidelines. But given the high stakes of this review, that’s a time-consuming process. 

One of the big promises of the digital mortgage is that it reduces the potential for mistakes by streamlining the process of originating loans before they’re handed over to underwriters.

Creating Systems with Human Error in Mind

The digital mortgage accomplishes this by using software that pulls together information from multiple platforms so that Loan Advisors can structure loans single-handedly, from a single platform.

But reducing the number of people who touch each loan doesn’t mean eliminating humans from the lending process – far from it. Humans are an essential part of mortgage lending: while 72 percent of borrowers expect a digital lending process, 65 percent also want to be able to talk to a human who can answer their questions.

Younger, less-experienced borrowers are especially fond of human interaction: a 2019 Ellie Mae survey found that more Millennials want to communicate in-person with their lenders than either Gen Xers or Baby Boomers.

And lenders know that having their Loan Advisors and other employees build relationships with borrowers is one of the most effective ways to build loyalty.

To understand how removing human error without removing humans can help the mortgage lending space, it helps to take a look at organizations that are considered “high-reliability.”

Research from the National Institutes of Health identifies US Navy nuclear aircraft carriers, nuclear power plants, and air traffic control towers as “high-reliability” organizations facing complex and demanding challenges.

They achieve their high reliability by developing systems that acknowledge human error exists and providing as much support as possible to prevent that error from causing problems. As the NIH puts it, these organizations “anticipate the worst and equip themselves to deal with it at all levels of the organization.”

This is necessary because, even when you’re doing demanding work where getting things right matters a lot (as in mortgage lending), it’s not physiologically natural to maintain a state of fear or alertness. Instead, it’s natural to relax, and when we relax we inevitably miss important details.

With resilient systems supporting us, though, we don’t need to be constantly vigilant; the checks and balances of the systems do much of that work for us. In mortgage lending, the digital mortgage offers Loan Advisors and underwriters such a system.

Outsmarting Human Error with Digital Mortgage Origination

When working with software that enables digital lending by interconnecting back-end systems, Loan Advisors can structure loans faster. 

Because that software handles once-manual tasks, the loans produced are less likely to contain human errors. 

And because the software that powers a digital mortgage pulls data from multiple sources (bank statements, digital pay stubs, credit reports, etc.) using automated processes, that information is more likely to be accurate.

When the underwriter receives such a loan, their review process is likely to be faster. This makes for better outcomes for everyone involved in the process:

  • Borrowers can enjoy faster loan approval.
  • Loan Advisors can focus their time on building relationships with customers and potential customers rather than micromanaging their colleagues as they prepare a loan for underwriting.
  • Underwriters can process more loans more quickly.
  • Lenders can close more loans in less time.

The Digital Mortgage Means Less Caution… and Less Risk

The digital mortgage is more than just a glossy application that borrowers fill out. A true digital mortgage must include a digitized back end that streamlines data from multiple sources and minimizes the opportunities for human error to cause problems. This reduces the need for caution by reducing the opportunity for errors to be introduced.

Cloudvirga offers those back-end components, which let lenders serve their customers better, keep their Loan Advisors and other employees engaged, minimize underwriting risk, and enjoy better returns on mortgage loans. 
If you’re interested in learning more about how Cloudvirga can help you streamline your operations, download our whitepaper, Reengineering the Origination Workflow.

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