Mobile mortgage: A step forward in financial software

Article contributed by ScienceSoft

When it comes to mortgages, banks receive about 10 million customer applications annually in the US. A big part of the American Dream, buying a house is one of the most important life events for many families. However, the path towards this dream is not so smooth as it could be, eating away time and energy. In their turn, banks have also been facing problems with the cost and volume of mortgage lending, making them search for technological advancements that could accelerate the lending process.

Where the mortgage challenges hide: 

Regulatory burden

Even though the regulatory compliance is nothing new to the mortgage market, banks have faced a range of new standards and requirements after the 2008 financial crisis. The lawmakers saw the need to create a new supervisor − Consumer Financial Protection Bureau (CFPB) – that would protect customers from deceptive and abusive lending practices as well as would provide them with up-to-date disclosures that accelerate the mortgage searching process.

The Bureau released Qualified Mortgage standards that not only protect customers from harmful loan conditions, such as an interest-only period or negative amortization, but also ensure lenders’ protection from potential buybacks. The latter is possible if a bank prepares well-documented and audit-worthy loan packages that include tax returns, W-2s, bank statements and more. As a result of all these regulatory changes, the volume of documents required to get a mortgage has dramatically grown to staggering 500+ pages. The cost to close a loan has also increased: with an average 12% growth, the cost to close a loan reached $7,845 in 2016 (Accenture’s Mortgage & Compliance As-a-Service study).

High customer expectations

Though the majority of customers have already enjoyed the advantages of online transactions brought by mobile banking apps, the idea to digitise mortgage process is still in its infancy. Currently, taking out a home loan is a major source of frustration for an average customer. As a rule, borrowers see this process as one of the most time-consuming, paper-intensive and nerve-wracking occupations.

Besides, the National Association of Realtors reports that Millennials have become the largest group of homebuyers in 2017. Using computers and mobile phones for almost any activity, this generation expects the same level of online experience for home purchasing. That is why by digitizing the mortgage process, banks can meet customers’ expectations by providing transparency, less paperwork and time wasted at a physical branch.

Fintech invasion

Traditionally, commercial banks have been the main mortgage lenders on the U.S. mortgage market with several major banks, such as Wells Fargo, JP Morgan Chase and Bank of America at the top. But the mortgage landscape has been disrupted with emerging fintech and start-up lenders. According to Daily Fintech, commercial banks decreased the volume of mortgage lending by 22%, while non-banks almost doubled the number of loans and currently provide about 43% of mortgages in the U.S.

For example, Quicken Loans with its Rocket Mortgage platform has become one of the most popular online mortgage lenders in the country. Between 2013 and 2016, it managed to close nearly $300 bn. in mortgage volume across all 50 states. Mortgage start-ups, such as Lenda or SoFi, are also trying to incorporate into the mortgage market with innovative solutions.

What distinguishes all these companies from traditional lenders is the exceptional customer experience and convenience they provide for mortgage customers. In particular, Lenda promises a quicker time-to-close process and fees reduction while SoFi allows borrowers to qualify for more financing than traditional financial institutions. To mitigate threats coming from fintechs and start-ups, the banking industry went for building digital mortgage solutions.

How banks digitise mortgage

Currently, traditional mortgage lenders offer a range of customer apps and platforms that make home purchasing far easier and less burdensome.

Most banks have already enabled online application process so that customers could fill in the application form at the time and place convenient for them. Some mortgage providers offer e-signatures and e-delivery tools that simplify and speed up the delivery and acceptance of mortgage documents. Other lenders introduced e-closing for easier review, signing and notarization of documents.

Still, in most cases they fail to build an integrated omnichannel mortgage solution. Comparing with fintechs, most banking solutions are rather scattered across digital and physical channels, which complicates fast mortgage closings. To open up more opportunities and make the mortgage process more effective, banks can consider building a mobile app following the fintech-like strategy.

Accelerating mortgage application with a mobile app 

Quicken Loans serves as a good example of a company trying to create a true omnichannel mortgage solution. Apart from its online platform, Quicken Loans launched the MyQL mobile application that lets borrowers track the mortgage progress on the go, make payments and sign documents electronically.

From customers’ point of view, a mobile app is an extremely convenient tool to accelerate the mortgage application process. As confirmed by a recent JD Power study, 62% of customers under 35 would use a mobile app to complete a mortgage application.

Some bigger banks have already realized the potential of mobile mortgage solutions, too. For example, after introducing an online mortgage fulfillment center in June 2016, the Bank of America decided to release a mobile solution that would enrich their mortgage ecosystem. Apart from providing traditional digital mortgage capabilities, such as connection to loan officers, e-signature, document upload and others, the app accelerates the application process itself.

When it comes to a mortgage application, a customer has to fill in about 250 data fields, making the process a real nightmare for most borrowers. To minimize customers’ efforts and decrease time waste, the Bank of America will prepopulate these fields with customer information already stored in banking systems (LOS, CRM, mobile banking, etc.). For example, customers who deposit paychecks directly into their Bank of America checking accounts don’t need to provide their income statements. In this case, long-term customers can potentially gain more profit and save time using a mobile app.

JPMorgan Chase also followed suit and decided to partner with a fintech called Roostify to create a self-service mobile mortgage platform for homebuyers. The platform will contain online forms already prefilled with personal information. Customers can assess their mortgage documents through both an online account and Morgan mobile banking as well as track all stages of the mortgage application.

Don’t play with people’s dreams

There’s high potential in digitizing the mortgage application process. Although the market currently has only a small number of integrated mortgage solutions, that’s where the industry is moving. In these circumstances, a mobile channel can become a step forward in building a comprehensive digital mortgage ecosystem.

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