The State of the Digital Mortgage Experience 2020
When I started writing this article in February, I had a different plan for what I’d cover. Since then, of course, COVID-19 has swept the globe, put much of the United States under lockdown orders, and led to soaring unemployment that will have ripple effects in the mortgage market for months or years.
Despite it all, though, people continue to buy and refinance homes, which means there’s still an appetite for mortgages. And because today’s mortgage customers are facing unprecedented levels of stress and uncertainty, it’s more important than ever that lenders provide a digital mortgage experience that makes the mortgage process as easy and seamless as possible.
Here, we’ll take a look at five ways the COVID-19 pandemic has changed borrower expectations for the digital mortgage and what lenders should be doing to meet those changed expectations.
1: Demand for Non-Purchase Loans Is High
In past discussions of the digital mortgage experience, we’ve focused mainly on people buying homes. But in 2020, the bulk of mortgages have been (and likely will be) refinances, loan modifications, and other non-purchase transactions.
The year’s refinance boom hit hard in early March, when mortgage rates dipped to the low threes. Now, the CARES Act is offering forbearance to any homeowner unable to make mortgage payments. In the coming months, as forbearances expire, lenders and servicers will likely have to work out loan modifications with thousands of homeowners who opted for forbearance.
To keep up, it’s essential that lenders power their Originators with platforms that make the refinance and loan modification process as seamless as taking on a new loan.
2: Digital Processes for Everything
Mortgage customers have expected mortgage applications to be available online for years, but in the age of stay-at-home orders, they expect a lot more to be online, including…
- Virtual home tours. In-person home tours are outright banned in some places; in others, homeowners prefer not to open their doors to strangers. In both cases, more people are turning to virtual tours using video call platforms like FaceTime, Facebook Live, Zoom, and others.
- Virtual appraisals. Letting an appraiser into a home used to be a standard part of the mortgage process. But with social distancing precautions in place, many homeowners are, again, unwilling to let a stranger in. Technology will have to pick up the slack, via apps that enable digital appraisals and systems that check for GSEs that permit appraisal waivers.
- Remote digital notarization. E-notarization has been common for years, but, prior to COVID-19, most states still required parties to be in the same physical location. We’re seeing more and more exceptions as states recognize that requiring people to be in the same room could prevent purchases from going through.
- Digital close. Even before the pandemic, 70 percent of people wanted a more digital process at close. Strict restrictions on physical gatherings will force the issue.
What’s more, most Originators are now working remotely, without access to their usual in-office tools.
For lenders, the message is clear. Success in an era of remote transactions requires three key tech components:
- A digital application that’s easy to complete online.
- Partnerships with tech providers that make it possible to complete the rest of the homebuying process.
- An end-to-end origination platform that lets remote Originators easily handle the entire homebuying transaction without setting foot in an office.
3: Reduced Tolerance for Frustration and Stress
The mortgage application process is notorious for the frustration and stress it can cause. A traditional application may require a borrower to answer the same questions over and over, fax documents to multiple sources, then print and sign and scan and return – it can be a lot.
While borrowers are able to tolerate that level of stress in normal times, our current times are not normal. The uncertainty caused by the COVID-19 pandemic means we’re all experiencing heightened stress levels, which in turn makes us more distractible and less able to focus on challenging tasks.
For lenders, this means it’s more important than ever to eliminate potential sources of stress and frustration whenever possible from the origination process.
One of the easiest ways to do that is to adopt a platform that enables an end-to-end digital origination experience. This type of technology can ease borrower frustration and stress by…
- Pulling in data from third-party sources (like bank accounts) so borrowers don’t have to hunt it down and enter it manually.
- Running a simultaneous dual AUS to find customers the best rates and products in real time.
- Using secure document portals, e-signature, and other digitized resources that enable borrowers to complete the entire application in one sitting, from one device.
- Generating real quotes and rates that update in real time, as information changes.
Digital mortgage technology also makes it possible for Originators and Brokers to get borrower commitment on an initial call, which is crucial in an age of stress-depleted attention spans, where a customer might never return to an abandoned application. Crucially, this tech can also lower the cost of originating each loan and even help drive revenue.
4: Human-Powered Digital Communications
We know that mortgage customers generally want both digital tools and processes and human support. Millennials, currently the largest cohort in the homebuying market, are more likely than older customers to want frequent communication and in-person communication.
So how can Originators and Brokers deliver that when it’s impossible to actually meet face to face? Understand these three key communications basics:
- Every borrower is different. You probably have the ability to communicate in a handful of ways: email, text, phone call, video call, etc. Ask each customer which they prefer and make a point to use that communication method when you contact them. It will show that you’re invested in them as a person and that you’re making the effort to make their mortgage experience a good one.
- Trust comes from transparency and accessibility. You need to win a customer’s trust to close their mortgage. Whatever communication channels you use with customers, be sure that you’re available to answer their questions, that you’re transparent about the process, and that you check in proactively. These things will help demonstrate that you’re invested in their wellbeing in addition to their potential mortgage dollars.
- Video call is the new face-to-face. These days, we’re using video call apps for everything from work meetings to happy hours to church services. If you’re unable to meet a customer in person, make video calls an option. They’re not a perfect replacement for face-to-face conversations, but they can make for easier, more engaging conversations than you’d have over the phone – and that, over time, strengthens your relationship.
5: A Need for Explanations and Reassurance
While people are still buying homes, they’re likely also more cautious than they were a year ago. With unemployment numbers up every week and the stock market more volatile than it’s been in more than a decade, many would-be homeowners may be thinking twice about taking on a long-term debt like a mortgage.
As such, homebuyers will likely want more – and different – information from their Originators or Brokers than usual. Customers may, for example, want to know whether they’ll qualify for forbearance if they lose their jobs. Or maybe they’ll be curious about how forbearance might affect their credit.
These are important questions for Originators and Brokers to be prepared for. In some cases, for example, taking advantage of a forbearance may affect a customer’s ability to get a refinance in the future.
Others may be able to avoid forbearance altogether by opting for a cash-out refinance, which could potentially preserve their credit and offer benefits to the mortgage lender and servicer.
By being a source of trusted information about not just the mortgage process but also homeownership more broadly, Originators and Brokers can ease homebuyer uncertainty in a time when they need that most.
In the Age of COVID, Experience Matters More than Ever
While many Americans’ finances have changed dramatically in the past few weeks, homeownership is still a dream for the majority of us: in 2019, 84 percent noted that homebuying was a priority, up from 75 percent in 2018. And with interest rates low and forbearances at nearly six percent of all loans, refinances and loan modifications will play a big role in 2020’s mortgage activity.
But because of the pandemic we’re living through, mortgage customers can’t tolerate increased stress or uncertainty. Lenders can cater to their needs by providing digital tools and partnering with companies that facilitate digital processes to make the mortgage experience seamless, ensuring that Originators and Brokers are communicating frequently to reduce confusion, and empowering Originators and Brokers to provide robust support throughout the mortgage origination process.
Together, these efforts will ensure that the digital mortgage experience is one customers embrace, even in the challenging realities of 2020.
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