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7 Interesting Facts About Digital's Impact on the Mortgage Industry

The road to homeownership is a long one. Consumers spend months comparing options, scheduling in-person meetings, and printing and signing documents. Precious lunch breaks are spent calling lenders for updates or driving to offices to sign documents. It's an overwhelming process, and a costly one for lenders and borrowers alike.

The typical mortgage takes 45 days to close, but what if someone could buy or sell a home in days instead of months? Is a 7-day mortgage really possible? We think so.

The ways we connect, consume, and create are changing, and the mortgage space is beginning to follow suit. Technology has made borrowing, lending, and processing easier, and its role at each level of the real estate transaction is poised to grow.

It couldn’t come at a better time - for you or your customers. Production expenses reached almost $9,000 per loan in the first quarter of 2018, with the majority dedicated to the cost of human processing. Cost-cutting efficiencies are critical when the margin for profit is razor thin.

Digital investment has the power to benefit both you and your customers by improving productivity and management of operational risk. Here are 7 interesting facts about digital mortgages, and how technology is disrupting the mortgage industry.

Borrowers Have More Lending Options

The community bank is no longer the only option your customers have for a home mortgage. The digital space allows borrowers to compare rates and apply for loans with lenders from across the country.

And they haven’t been shy in jumping at the opportunity. The number of digital mortgages quadrupled from 2010 to 2016 as total loan originations rose from $34 billion to $161 billion, an annual growth rate of 30%. Where banks once dominated the mortgage lending space, six of the top 10 largest lenders by volume in 2016 were non-banks.

Online lenders like Lenda are trailblazers in the digital mortgage space. Lenda offers a streamlined, completely digital application process that saves customers money by cutting out the brokers and banks with their commissions and fees. They are reimagining the path to homeownership by bypassing the normal stresses and frustrations tied to mortgage origination.

Companies like Lenda and United Wholesale Mortgage that have embraced creativity are gaining customers at a time when lenders are losing growth. UWM took part in the first completely paperless mortgage closing in 2017, and over the course of the fiscal year, saw a 28.5% increase in its origination volume - the highest in the nation. The efficiency of digital processes has only strengthened UWM’s 30-year dedication to industry-leading technology and turnaround times.

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Loans Are Processed More Efficiently

The mortgage process can take 45 days or more to complete during the busy season. That’s a long time to have uncertainty cloak the most important purchase of your life.

A 2018 study by the Federal Reserve Bank of New York found that technology-based lenders process mortgage applications about 20% faster than other lenders, while decreasing the default rate by about 25%. By relying on a process that is automated and centralized, lenders are not limited by human capacity and human error.

Companies like Blend are thriving because they understand simplicity and transparency yield efficiency. Blend is deconstructing the complex mortgage process by offering simple digital solutions that enhance the consumer lending experience. Their name came from their motto: Better Lending.

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Lenders Are Saving Money

Nearly two-thirds of loan production expense is dedicated to human processing. Automated processes can enhance speed, reduce cost, and improve quality at a time when banks are reporting a net loss on each loan origination for only the second time in a decade.

And it doesn’t have to be wholesale change. Lenders can achieve incremental time savings and cost reductions by incorporating individual digital technologies on a timeframe that is comfortable for your leadership.

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Borrowers Are Saving, Too

The fact is digital mortgages don’t just benefit lenders. Your customers gain financial and logistical benefits from a more efficient mortgage process.

The mortgage industry is competitive, and lenders are always looking for an advantage over their competition. Lenders with automated processes can handle documents faster, offer lower rates, and save your customers on origination and service fees, underwriting fees, and other closing costs.

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Lenders Are Rethinking the User Experience

Some of the biggest brands in the world rely on user experiences that promote transparency, ease, and expectation. If we can get multiple status updates on a $20 pizza delivery, can’t the same be done for the mortgage process?

Lenders are beginning to rethink the user experience, and there’s plenty of room to grow. According to two 2017 J.D. Power primary mortgage studies, satisfaction with the online application process declined 18 points from 2016, and 10% felt their time was wasted during their most interaction with their mortgage servicer.

The user experience will be an important area of growth for most lenders, as digital became the top method for submitting a purchase or refinance application in 2017.

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Millennials Are Buying In

You might have heard that millennials value avocado toast over homeownership, but the newest generation to enter the market is choosing to have both. The First American Real Estate Sentiment Index (RESI) surveyed title agents and real estate professionals and found that 87% of first-time home buyers are millennials between the ages of 26 and 35.

And ease is important to them. A 2017 RESI survey assessed which technologies were effective in helping millennial home buyers close their real estate transactions. Digital mortgages led the way, with 62.4% of respondents finding it either “very effective” or “somewhat effective.”

  1. Loan approval applications/digital mortgages (62.4 percent)
  2. eSigning documents with an in-person notary (55.0 percent)
  3. Document preparation (48.0 percent)
  4. eSigning documents with online/remote/webcam notary (47.1 percent)

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Paperless Mortgages Have Arrived

Digital processes saves time, money, and allow your employees to focus on the greatest areas of need. It also benefits the environment, as paper mortgages require roughly 2.2 billion sheets of paper annually.

The paperless mortgage is no longer some distant dream - it’s already happening. The first remote online mortgage closing occurred in August of 2017, and states are racing to adopt legislation that allows borrowers to choose an ink-free, paper-free closing process. Texas saw its online notarization law go into effect July 1, 2018, and on the first day of business, lender Georgetown Mortgage closed two completely paperless mortgages.

The fact is digital mortgages are disrupting the mortgage industry, and we can’t wait to see what happens next.

 

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Do you have other facts about digital mortgages that you'd like to share?
Tweet us @Notarize.

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You have notarization questions, we have notarization answers. While we at Notarize pride ourselves on providing helpful resources (like this blog!) to demystify notarization, we’re not lawyers and don’t give legal advice. Pro tip: always check with your own attorneys, advisors, or document recipients if you have further questions about notarization or digitally notarized docs.

A New Home For a Housing Industry Veteran: Terri Davis Joins Notarize as General Manager, Real Estate

Notarize is thrilled to welcome Terri Davis as General Manager, Real Estate. In this newly-created role, Terri will lead Notarize’s continued efforts to digitize the real estate industry to benefit both our partners and their customers. For more than 20 years, Terri has been a tireless advocate and leader across several different segments of the mortgage industry, including Ellie Mae, PMI, and Fannie Mae - and we’re thrilled to welcome her to Notarize.

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