Why Fully Automated Lending Shouldn’t Replace Loan Officers

Technology has taken over the mortgage industry, but loan officers offer more value than machines are capable of providing on their own.

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Are machines here to replace loan officers? We doubt it.

Automation has made the mortgage process faster and more efficient, but it is far from achieving the same level of personalization and problem-solving that loan officers bring to the table.

Mortgage technology has disrupted the industry, but is far away from replacing loan officers.

Why the Mortgage Industry Needs Loan Officers

1. Algorithm Bias

Bias and discrimination in lending, whether intentional or unintentional, make homeownership more costly and difficult to achieve for marginalized groups. Although digital platforms have the potential to reduce discrimination, they are far from perfect.

How can a machine decision be discriminatory?

Technology unintentionally perpetuates bias because it leverages questionable data sources and lacks familiarity with lending laws, industry customs and profit margins. All of these factors can exacerbate inequities in automated lending.

Berkeley study from 2019 found that fintech lenders still charged Black and Hispanic borrowers higher interest rates than White borrowers. A Markup analysis also found that applicants of color were 40% to 80% more likely to be denied than White applicants. And in some metro areas, that number was greater than 250%.

However, algorithmic decision-making technology has also reduced discrimination associated with face-to-face interactions. Research has shown that online lenders are 40% less likely to discriminate.

Digital lending solutions are assets to the mortgage industry, but only when used responsibly by qualified loan officers.

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2. Personalization

Consumers have embraced mortgage technology. It’s simple, efficient, convenient and gets them to the closing table much faster than paper-based methods. However, it doesn’t mean the human touch isn’t relevant to the lending process.

Digital offerings are essential, but not at the expense of relationships. The 2022 Borrower Insights Survey found that 23% of borrowers who applied for a mortgage within the past two years and 32% of borrowers who applied within the past three or more years said that they would prefer a focus on traditional methods with some digital tools and processes. This suggests that a hybrid approach to lending with a human touch is the solution that borrowers prefer.

Loan officers bring much more to the table than software alone. They can jump in when they see their customer struggling while filling out the application, keep customers up-to-date and engaged through their preferred channels of communication and deliver relevant and personalized support.

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Loan officers build personal relationships with their customers, which can make the difference between a single transaction and having a lifelong customer.

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3. Loan Officers Are Better Problem Solvers

Loan officers play an active role in helping their customers through the mortgage process. They collect required documentation, guide customers through each step in their journey and are there to offer advice or solve problems.

Although artificial intelligence is known for its problem-solving capabilities, these decisions are based on rules and algorithms. Loan officers have the ability to think outside the box in complicated situations.

An algorithm will never be able to:

  • Advise a customer on how they can improve their credit score to qualify for a mortgage.
  • Recommend whether their customer should make a bigger down payment or pay off debt.
  • Help a self-employed customer with an unstable income.

Loan officers can resolve breakdowns in communication or reach out to employers who aren’t responding to employment verifications. LOs can also act as their customers’ advocates by finding creative solutions or making calls to resolve issues at any point in the mortgage process.

Consumers may also need to communicate sensitive information or specific needs with their lenders. While online mortgage applications are helpful and provide useful information, they are nowhere near as detailed or valuable.

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Mortgage Automation Helps Loan Officers Serve Customers Better

Many fintech startups hope to fully digitize the mortgage process with low- or no-human involvement, but getting a mortgage is typically a stressful and complicated process. Many borrowers have also expressed a preference for a more hybrid approach to lending, mixing traditional methods with digital offerings.

As more mortgage lenders adopt digital solutions, the personalization that LOs offer will make lenders stand out from the competition.

Automation also spares loan officers from performing repetitive tasks, allowing them to focus on generating leads and improving the customer experience.

Find out why lenders are choosing BeSmartee’s award-winning Mortgage POS technology to help loan officers meet their borrowers’ needs.