Buying a home is one of the most significant emotional and financial decisions people make in their lifetime. The experience will either be memorable or frustrating—depending on the mortgage lender involved!
Are lenders focussing on delivering a better customer experience? Are they giving homebuyers a feeling that the lender is more of a partner in the quest for their perfect home—rather than just another mortgage company?
Let's look at the typical homebuyer's mortgage process and timeline:
- Step 1: Are we financially ready to be a homebuyer? Finalize a budget based on a credit report to establish mortgage eligibility. Get a mortgage pre-approval letter to show to realtors.
Timeline: 2 weeks!
- Step 2: Locate our dream home (probably - or mostly online search)! Make an offer. Agree on a price with the seller and sign the Purchase Agreement.
Timeline: 8 weeks!
- Step 3: Find a lender! The lender verifies the buyer's financial information and asks for a property appraisal and inspection.
- Step 4: Complete the mortgage documents. Make the down payment and close the deal. Register the house in the buyer's name and hand-over the keys - all done!
Timeline for step 3 and 4 together: Around 4-6 weeks
As you may have guessed, the process is document-intensive—and paperwork is exhausting, uninteresting, tedious, and time-consuming for both parties, buyers and lenders alike. Considering we are in the digital era, surely there is a better way to reduce stress and enhance the experience?
The faster lenders complete this process, the more satisfied the buyer will be and the more the buyer will enjoy the once-in-a-lifetime experience of buying their dream home—that’s called customer delight!
How does digital transformation help the lending process?
Digital transformation integrates digital technology into all business areas, fundamentally changing how you operate and deliver value to your customers. Beyond that, it is a cultural change that requires the organization to continually challenge the status quo and experiment with new digital workflows. Sometimes, this involves deviating from established business processes and adopting relatively new practices.
A business adopts digital transformation for several reasons. In the current business environment, the most likely reason is a basic one—to survive. Now, with the COVID-19 pandemic, an organization must adapt quickly to supply chain disruptions, time-to-market pressures, and rapidly changing customer expectations if it wants to survive.
Of course, an essential element of digital transformation is technology. But it is also about shedding outdated processes and legacy technologies than it is about adopting new technology. Digital transformation must ultimately encourage and enable innovation in every area of business operations.
Digital transformation in mortgage lending is essential if we want to improve customer experience, reduce manual touchpoints, speed up the lending process, and increase productivity and profitability.
Typically, lenders who implement digital transformation strategies reduce their turnaround time by up to 30%. One study showed that 43% of homebuyers applied for mortgages digitally in 2017 compared to 28% in 2016. Fueled by the recent pandemic, this percentage is increasing dramatically.
Despite the rise of digitization, customer satisfaction in the mortgage industry is on the decline. Why?
The future of mortgage lending is digital. By 2023, leading mortgage lending companies will have end-to-end digitization (that is, digitizing all processes from application to approval).
A Freddie Mac study indicates that the period between application and deal closure will shrink from weeks and months to hours in the next few years.
Failing to digitize, however, will put lenders at a competitive disadvantage.
A study by Forbes Insights in association with Freddie Mac reported that around 50% of lenders have achieved some level of digital transformation. Mortgage processes are currently a mix of digital for customer-facing scenarios and manual paper processes at the back end.
According to the study, only 40% of both large and small companies have the right digital tools to be considered "digitally transformed."
Instead of focusing on full-scale digital transformation, lenders are half-heartedly working the system without any real integration target in mind.
To be truly useful, the transformation to digital has to be complete.
There is still a heavy dependence on paper documents. Apart from creating environmental issues and increasing operating costs, paper files impede productivity and increase security risks.
The importance of digitizing backend operations
Backend processes in lending are laborious and paper-intensive, with 80% of invoices still being on paper.
Nintex's 2018 survey of U.S. full-time employees showed that 49% had trouble locating documents, and 43% had difficulty with document approval requests and document sharing. IDC data shows an employee spends roughly 30% of the workday searching for paper documents, and half of them admitted that they still could not find the information they needed to complete their work.
Most organizations feel that paper is their most significant AP barrier.
Without automating invoicing, you affect the department that has the most impact on liquidity and vendor relationships. Automating AP reduces the overall process time and the physical cost of the entire AP process. Research by AMI-Partners reveals that AP automation saves $13 per invoice.
For lenders processing thousands of invoices a year, the saving is considerable.
Apart from AP, other functions like HR also need digital transformation. HR and legal teams still deal with large amounts of paper documents and their storage. By simplifying search, retrieval, processing, and archival of records from anywhere, content services and document management solutions enhance employee collaboration and speed up decision-making.
How MES can help
Lenders are looking for an inclusive strategy for digital transformation. They need an integrated digital solution for data storage, retrieval, and archiving.
We'll implement your digital transformation strategies and let you focus on improving the all-important bottom line and work toward customer delight!
Yes, MES is looking out for you. Contact us for a free quote and secure your competitive advantage today. Embrace technology and the efficiencies it brings.