Digital lending processes have the potential to completely disrupt the mortgage industry, with a focus on customer experience and operational efficiency. A traditional lending lifecycle tends to be fraught with bottlenecks, delays, and manual encumbrances that cost customers their time and cost mortgage providers lost opportunities. It is estimated that a single mortgage takes approximately 46 days to close and the lender incurs between $2,000 and $2,500 per loan. Digitization is essential to remove these bottlenecks and streamline the lending process.
What Is an AI-Powered Digital Lending Platform?
A digital lending platform allows home buyers and mortgage customers to interact with a lender through digital-only channels, like their smartphone, a desktop app, or a website. It may use artificial intelligence (AI) to automate the user experience, introduce personalization, and speed up decision-making at the backend. A user-facing digital lending platform must be powered by a robust mortgage technology platform that digitizes end-to-end processes from customer and wholesale engagement to origination, sales, title, and servicing. Together, these components provide lenders with the ability to process a high volume of applications, reduce underwriting effort, minimize risk, and maintain compliance.
Five Benefits of an AI-Powered Digital Lending Platform
According to a 2021 survey, 99.3% of lenders believe that technology can significantly improve mortgage processes. Homebuyers, too, want to shift to digital channels to learn about mortgage procedures (54%), obtain pre-qualification (57%), submit documents (69%), and receive updates (44%). AI can enable vital efficiencies for lenders and transform end-user experiences, thanks to its autonomous data processing and decision-making capabilities. This leads to five benefits:
- Personalized product recommendations on lending platforms
AI has been widely used by product and service providers for precision marketing. It allows the provider to target customers as per their unique demographic data and sentiment so that there is a maximum chance of conversion. Digital lending platforms can use AI in the same way, to cross-sell and upsell loan products and services. For example, an AI engine can detect changes in the user’s behavior and account details, such as when they get a new job and relocate to a different city. The platform can auto-recommend mortgage products based on customer intelligence insights.
- AI-based credit scoring to reduce errors
Customer credit scoring is an effort-intensive process, where lenders must wade through multiple documents, information sets, and risk variables to assess a person’s creditworthiness. Very often, the final call for risk scoring comes down to human judgment, which is not only error-prone but may be at risk of non-compliance. For instance, US regulatory bodies are now revisiting the rules governing credit scores for lower-income groups, which could cause scoring errors. A digital lending platform can utilize an AI engine to automatically analyze hundreds of data points related to a customer’s financial history, tax submissions, transaction patterns, rent history, and more. This offers a contextualized and holistic credit score that is not influenced by a single point of decision-making.
- AI loan document management to enhance experiences
Document management is one of the primary areas where AI can play a role. End-user platforms can be equipped with an AI scanner tool that converts photos of physical documents into structured PDFs. The lender can use optical character recognition (OCR) to automatically extract information from images and screenshots, without having to rely on a human employee for data entry. AI can automatically classify documents, index them as per regulatory norms, convert document formats to maintain standardization, and much more. This enhances the experience for both your employees and the borrower.
- AI bots for lag-less customer servicing
A digital lending platform powered by AI bots can automate a large party of servicing communications. When customers submit a query or request a piece of information, the bot can look through huge volumes of information stored in complex databases in a matter of seconds. It uses natural language understanding (NLU) to convert the query into a machine-readable form. It retrieves data based on this input and converts it back into English through natural language generation (NLG) to respond to the customer. This allows lenders to answer frequently-asked servicing queries in a few seconds, without requiring human intervention.
- AI compliance checks to manage risk and avoid penalties
Maintaining compliance in a complex regulatory environment can be challenging. For instance, new amendments to the CARES Act make room for mortgage reductions and temporary suspension of payments through forbearance policies, which are difficult to navigate. An AI-powered digital lending platform would ensure that all applications, transactions, and communication pass through the mandated set of checks and balances. The AI can be updated at strategic intervals, without having to completely rewrite business rules, to keep lending operations agile and compliant.
How to Get Started with an AI Digital Lending Platform
The first step towards adoption is to sufficiently digitize lending processes so that they are ready for AI transformation. Paper-based, manual workflows, have to be replaced by digital solutions that are standardized across the lending organization. Next, you need to build a centralized data repository that reconciles different formats and connects to diverse data sources to enable unified visibility, easy search-and-retrieval, and readiness for the cloud.
Finally, a user-facing lending app has to be in place so that customers can connect with their preferred lenders through end-to-end digital channels. The platform must simplify loan application processes (55%), shrink time to close (53%), and reduce the need for in-person interactions (49%), which are all key demands from this new generation of home buyers. To achieve this, lenders need cloud-native capabilities so that the entire platform architecture is designed and hosted on the cloud.
At Nexval, we bring years of experience in mortgage transformation, coupled with a team of mortgage tech specialists. Our digital lending solutions combine cloud-native expertise, AI, and RPA to unlock new efficiencies and customer experiences for lenders. Talk to our Mortgage Tech Gurus to know more.