Image courtesy of Flickr, Adrian Perez
Automation makes the mortgage process more predictable and is faster, which can ultimately make both lenders and borrowers happier.
Processing loans has traditionally required a lot of paperwork with staff manually entering financial information. An underwriter then calculates the numbers, analyzes them, and decides whether the applicant will be approved. A computer, however, can handle all these tasks and can generally do so more quickly and efficiently.
Of course, when it comes to replacing humans with technology, not everyone is on board. ''If you know what you are doing, it is possible to fill in the form by hand faster than you can bang it out on some balky computer program,'' says Mike Arman, retired mortgage broker. And there can be errors with automation. ''I've seen programs that insisted a specific home was in a FEMA flood zone (with $5,000 a year in premiums) when in fact it was not.''
But you can't stop progress, and automation has its benefits, which is the reason lenders are increasingly using automation to process loans. We've asked some people in the industry who work with automation in the lending process what they think.
Ryan Brennan, president of Neat Capital , a FinTech residential lender:
''In addition to using account linking to validate assets and gather financial data directly from the source, Neat Capital has developed proprietary algorithms to underwrite borrowers in real time. This allows us to deliver real time feedback as a borrower fills out an application, so our clients gain comfort that they meet requirements prior to even submitting an application. It was really only possible to build out the technology to fully automate the process by starting from scratch. It's tough to revamp a machine when it's running.''
Anthony Piccone, president and CEO of 7th Level Mortgage , a New Jersey based mortgage company:
''Ninety percent of our process can be and is automated from point of sale through loan approval. Clients can go online and securely make a mortgage application and can upload any and all supporting documentation required by the loan. Even though the majority of the process can be done with little input or action from processors, we have elected not to automate the process to that level. Our firm will likely never automate to the point that the customer loses the personal touch required during the mortgage process.''
''While automation helps us lower costs by eliminating manual functions typical at most lenders, more important, automation helps us deliver home loans in a fast and transparent manner. At the end of the day, we have been clearing loans to close in 10 to 15 days versus industry averages of 45 to 60.''
''In some ways, it has shortened the process significantly. However, in other ways, it has its own issues. There is no panacea, and a person is typically always required.''
''Automation makes the process easier for homebuyers to understand and helps them gain confidence and certainty that they will receive financing. It's also helpful for a homebuyer to not only know right away that supporting documentation is needed but also the reason behind it. When going through our application, potential issues are flagged and explained to the borrower, resulting in a substantially faster and more straightforward process.''
''There are savings realized by lenders that are often passed onto customers. Also, because of automation, homebuyers are often able to close faster and thus get better pricing, lower fees, and better interest rates.''
The government-controlled entity Fannie Mae, which backs, along with Freddie Mac, about half the loans in America, recently announced that it has a new mortgage underwriting system: Desktop Underwriter (DU). ''The lender doesn't gather and submit the documentation - Fannie Mae does, and the entire process is automated and instantaneous,'' says Casey Fleming, author of The Loan Guide: How to Get the Best Mortgage . ''We, the lenders, gather the basic information and confirm the identity of the borrower. We then submit the loan through DU. DU pulls credit and then issues findings as to whether the loan is preapproved or not.''
Automation can benefit both lenders and borrowers, but humans are still necessary at certain points along the way, generally near the start of the process, to answer questions, and to handle atypical situations. Automation, however, makes the mortgage process more predictable and is faster, which can ultimately make both lenders and borrowers happier.
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