Rising Mortgage Rates: How Automation Can Help Lenders Maintain the Margin

Nexval Infotech

Nexval Infotech

The U.S. mortgage rates are touching new heights every day. Last week the interest rates rose to the highest since Spring 2020. The interest rate on 30-year mortgages jumped to 3.22% in the first week of January and to 3.64% in the second week, according to Mortgage News Daily. Many believe the interest rates might continue to climb in the future.

The Fact Sheet

  • According to a forecast by Michael Fratantoni, chief economist for the Mortgage Bankers Association (MBA), the 30-year, fixed-rate loans could reach 4% by late 2022.
  • The MBA’s Weekly Mortgage Applications Survey found that mortgage applications decreased 2.7% for the week ending 2021.
  • The higher mortgage rates caused the refinance activities to decrease by 2.2%.

The rise in rates indicates continued high demands, limited supply, and rising inflation. The post-pandemic economic recovery is also a contributing factor for the upswing of mortgage rates. This had led to a drop in demand for loans and stiff competition among mortgage lenders.

Since the nine-month high mortgage rate is discouraging potential home buyers to apply for loans or to refinance, lenders are struggling to cope with the rate-related pressure. The forecasts from the bigwigs of the mortgage industry and the predicted trends have encouraged lenders to look for new ways to maintain the same margin they have experienced in the past. One solution that has emerged as the clear favorite is transitioning to automated systems.

3 Ways Advanced Systems Can Help Lenders Respond to Rising Mortgage Rates

More Scalability and Operational Elasticity

Usually, lenders who rely on legacy systems and manual work for processing loan applications hire new employees to meet the increasing workload and the record demand from borrowers. However, 2022 started with low demand for refinancing, leaving lenders with a staff that doesn’t have much to do. As a result, they are left with no other choice than to decrease the headcount.

Automation solutions offer more scalability (both horizontally and vertically) and operational elasticity to mortgage lenders as they can quickly meet the demand fluctuations without losing out on the quality of work and efficiency. When you incorporate artificial intelligence (AI) powered systems strategically, you can alter their performance depending on your need, while lowering the risk of quality degradation and saving on overhead costs associated with training.

Quick Document Processing and Loan Approval

When there are fewer borrowers in the market, you must have a competitive edge to win them over. The key to attracting borrowers amid the rising mortgage rates is a faster approval system. If you still trust the paper-based system and traditional processes, you’ll fail to make the mark in the market. Become the lender that moves quickly by adopting automation. Document indexing that uses Optical Character Recognition (OCR) technology is your best bet for rapidly identifying documents and processing them into a digital format. Not only does it save physical storage space for files and documents but also speeds up the approval process drastically. This automation tool can come in handy for mortgage lenders to optimize workflows and make the mortgage loan process faster, thus helping you stand out from the competitors and attract customers with your quick and smart approval system.

Higher Accuracy with Reduced Costs

With fewer customers available to target, it becomes necessary to offer the most efficient system possible. Manual loan processing is prone to human errors and delays that can deter customers and cost you more time and money to correct them. With automation solutions, you can easily keep errors at bay, future-proof loan portfolios, and reduce risks for borrowers. The best part about automating the repetitive and mundane manual processes is that you don’t need to train and re-train the system.

Types of Automation Solutions for Mortgage Lenders

When we talk about automation in the mortgage industry, there are three types of automation tools that have the potential to make a difference and accelerate the mortgage lifecycle with quick results.

  1. Business Process Automation (BPA)

BPA is the use of technology to automate business processes that are repetitive and rule-based. It is the go-to technology for many businesses to improve efficiency, reduce paperwork and cut down on costs. Mortgage lenders can implement BPA in many ways, for example:

  • Automatically reading, compiling and clustering data from multiple sources and formats
  • Managing loan pipeline and other tasks while improving workflow management
  • Verifying the accuracy of information submitted by borrowers, like asset and identity verification
  • Performing fraud analysis by using configurable business rules

BPA is helpful for lenders to reduce the risks involved in manual processing and conventional data validation processes and ensure consistency in transaction processing.

  1. Robotic Process Automation (RPA)

RPA is quite similar to BPA as it also involves automating repeatable and workflow-driven tasks performed by humans. However, unlike BPA that automates multistep processes, RPA automates individual tasks, for example, submitting forms and reviewing emails, by using computer software (robots). This automation solution uses automated object recognition and optical character recognition to capture and interpret applications for transaction processing, manipulating data and generating responses.

RPA can help:

  • Access external and internal sources, collect the details of the borrowers for fraud detection, and alert loan officers of problems
  • Review the user request assignment for faster closing
  • Access loan file submission against a checklist
  • Perform data reconciliations and format data for integrated reporting

The mortgage industry is highly process-driven which makes it an ideal candidate for RPA implementation. It can significantly reduce the time to close a loan and ensure quality work without human intervention.


  1. Hyperautomation

Hyperautomation is a combination of various disruptive technologies like Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP), and Robotic Process Automation (RPA). Interestingly, hyperautomation is among the top trends on the Gartner Top Strategic Technology Trends for 2022. This effective automation tool goes beyond repetitive tasks and acts as a business logic tool with cognitive abilities. It utilizes the cumulative power of AI and RPA for speed recognition, image processing, and behavioral analysis for faster loan processing.

Hyperautomation can deliver significant benefits, like:

  • Assist loan officers by pre-screening applications and accelerating data extraction
  • Collect information from both handwritten and digital information forms
  • Validate customer information and proof documents
  • Categorize loan applications and predict loan approvals/rejections

Hyperautomation has transformative potential. When deployed strategically, it can minimize the loan processing lifecycle and reduce processing costs.

While it’s too early to say whether the worst of the mortgage rate spike for early 2022 is over or not, it is advisable to have strategies in place to boost profitability even during tough times. Making the digital shift can help lending institutions stay relevant in the competitive market and reduce bottlenecks while maintaining their margins. In order to reap maximum benefits from automation implementation, you need a reliable partner who knows the ins and outs of the mortgage industry and also excels at offering unapparelled tech solutions. Your search for a trusted mortgage tech partner ends here, at Nexval. We bring over 20 years of industry-specific experience to the table to offer unmatched mortgage automation services that optimize processes and improve ROI. Talk to our Mortgage Tech Gurus to build intelligent business solutions that accelerate growth and make your business run smarter.

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