Technology is now a central part of the mortgage infrastructure. According to the latest Borrower and Lender Insights Survey, technology has the potential to improve nearly every mortgage process, from application and origination to servicing and refinancing. 90% of lenders believe that technology could improve application processes, and 70% said that it significantly reduces the time to close a loan. If you are looking to invest in cutting-edge digital infrastructure in 2022, there are eight trends to watch.
1. Servicing costs will increase, necessitating servicing process automation
Up until 2019, servicing costs saw four years of continuous decline – but shot back up again due to the pandemic. From $143 in 2019, the total direct servicing costs per loan increased to $160 in 2020, and this trend will continue in 2022. This is a major reason why some banks have actually stepped back from mortgage servicing in the last two years. But to keep up with market demands, mortgage providers need to adapt to and not avoid servicing requirements. This is why servicing process automation will be an important trend in 2022, helping businesses do more with less.
2. In-person interactions will decline and AI-bots will become more prevalent
Nearly half (49%) of homebuyers in 2020-2021 engaged in fewer in-person interactions. On the one hand, social distancing and mobility restrictions may hold customers back from physically meeting loan officers. On the other hand, the current generation of home buyers are digitally savvy and have grown up with the internet and chatbots. AI-enabled virtual assistants (also called virtual loan officers) will therefore be a top trend for 2022. It will also help businesses stay available for customers without increasing the headcount – which brings us to the next trend.
3. Businesses may have to lay off employees, but still remain agile
The demand for home loans and mortgages is witnessing a flux, and this could result in staffing challenges. The Mortgage Bankers Association expects a 33% decline in loan origination in 2022, reaching $2.59 trillion this year. It could further decrease in 2023 to reach $2.53 trillion. This leaves mortgage businesses with a lot of idle capacity, resulting in large-scale layoffs ( a trend already noted by industry analysts). But this doesn’t mean that businesses can afford to decrease capacity overall. Instead, they must invest more in technology tools and automation that have room for scalability when demand shows resurgence, without adding to headcount.
4. There will be stiff competition from non-bank digitally native players
Non-bank players already have a firmly established presence in the mortgage sector, and this trend will gain further momentum in 2022. In 2020, non-banks issued over 2 in 3 mortgages, with digital natives such as Blend planning to go public. To stand shoulder to shoulder with this competition, traditional lenders and established mortgage businesses must consider digitalization. This includes online portals for customer interaction, backend automation to streamline processes, and the use of AI for personalized experiences.
5. Document management will help adapt to a complex regulatory environment
Amid a challenging economic climate, the Consumer Financial Protection Bureau (CFPB) has increased its scrutiny of mortgage practices and practitioners. In a 2021 announcement, it promised that it would hold servicers accountable for compliance with existing laws as well as the new ones rolled out in August 2021. The onus is on mortgage businesses to maintain clear records, auditable logs, and a document trail, without data duplication. Digitally-enabled document management will be indispensable for compliance and also help drive agility.
6. Cloud platforms will help attract millennial home buyers with a high risk-appetite
Clever Real Estate’s Millennial Home Buyer Report: 2022 Edition reveals interesting insights about the future of home buying. 90% of millennials would buy a property without seeing it, up by 10% from 2021. 1 in 6 millennials would be willing to pay $100,000 more than the asking price. This indicates a high-risk appetite, but not necessarily an eagerness to engage with traditional loan officers or go through a protracted mortgage application and approval process. Cloud lending and servicing platforms are better suited to the needs of this generation, providing convenient and low-touch experiences.
7. Mortgage companies will lay the groundwork for blockchain and NFTs
This is an emerging technology trend for the mortgage industry, one that could come of age in 2022. According to research, nearly 40% of banks will offer blockchain and cryptocurrency services in the next three years, and there are important use cases for mortgage. From purchasing property lien as NFTs to smart contracts based on blockchain technology there is enormous potential. Already, startups like LiquidMortgage, Milo, SALT, and several others are making inroads in this space. Businesses must reinforce their digital infrastructure and move beyond manual, paper-based processes if they are to benefit from this trend.
8. Automated tools will help elevate the employee experience
Amid tough market conditions, the employee experience in mortgage has taken a beating in the last four years. Companies like Better.com made the headlines for the wrong reasons when it laid off 900 employees last year over a Zoom call. Overall, the average employee tenure at Mortgage companies is only 2.29 years, costing the business thousands of dollars in turnover and training. Losing highly skilled talent in the digital era can also be damaging to business productivity. That’s why mortgage companies must focus on easing workloads (especially mundane and iterative tasks) by investing in automated tools. This will add more value to an employee’s workday, increasing workplace satisfaction.
These eight technology and industry trends will shape the mortgage business in 2022. Companies that are able to stay on the right side of digital transformation will see major wins and lasting profitability. Speak with our tech gurus today to know how you can incorporate the latest technology trends like artificial intelligence, RPA mortgage bots, and mortgage automation into your business.