How has Lending Recently Changed?
Plenty has changed in 2020. In the financial world, underwriting guidelines have altered for many major lenders and some mortgages became harder to get. Recent pandemic limitations pushed digitization to meet the high demand for continuing existing and new transactions; in fact, 82 percent of financial institutes expect to increase their use of technology.
Sanjiv Das, the CEO of Caliber Home Loans, mentions: “While the pandemic didn’t create the need for digitization and automation, clearer forbearance policies, and better customer service, it certainly has made mortgage executives prioritize these things — and the housing sector can emerge stronger and more customer-focused as a result.”
What does it mean for lenders and prospective homebuyers? The time is now. Since the pandemic, many lenders have revisited or implemented more advanced technology for processing mortgages. With most working from home, the right tools have become essential for Originators to complete transactions appropriately and thoroughly.
Speed and Efficiency: Maybe the main desire for the online experience. Consumers rely on banks and lenders to provide accessibility and speed when comparing loans and getting approved. The demand heightened when mortgage rates dropped and a surge of refinancing applications and loan modification flooded lenders inbox. Mortgage providers had to generate temporary changes in their underwriting guidelines due to the surrounding market uncertainty to keep up. It also helped focus on providing service to existing customers. While rate comparisons and quotes can happen in seconds, the approval results still come with an anxious waiting period. The industry is already working on ways to make the approval step virtually instant in the near future.
Online tools and Automation: Ninety percent of homebuyers are using online resources to search and compare before reaching out to an industry professional. Digitization became primarily useful for determined borrowers as they stayed indoors to limit in-person interaction.
- Virtual home tours and virtual appraisals boomed during social distancing orders.
- Video calls have become the new in-person meetings. This keeps trust, engagement, and rapport alive.
- Digital notarizations saw fewer requirements for everyone to be present physically as to not hinder a transaction from going through.
- Closings became more innovative. Agents would even do a ‘drive-by’ to give paperwork to borrowers from their car. While the closing process is one step most want to do in person, a large majority of consumers at 70 percent, say they want a more digital process when it comes to closing.
So where does the industry find the balance?
John Cabell, Director of Financial Services in the Global Business Team with J.D. Power mentions five “universals” that guide the customer experience.’
- Convenience – fast communication and user-friendly processes
- Recognition – attentiveness and customization
- Advice – professional guidance at the ready
- Trust – streamlined and secured technology
- Value – high-quality interfaces and programs
To ensure that these values can continue through a digital experience, a certain level of human interaction is required because of the complex, personal nature throughout the process. Cabell continues to express that the overall goal customers want to see is shortening the timeline from Point A to Point B for funding. Convenience and quick educational sources at the ready are other desires with younger buyers.
Millennials continue to be the largest group of homebuyers and are proof that the buying behaviors have changed. Like with other industries, millennials expect a full-on digital process with the availability to speak with a professional if needed. With more young buyers entering the market, and rates holding low numbers, these new trends will become the norm.
As of this month, Fannie Mae sees this trend to continue through to 2021. This will contribute to more refinancing and purchasing applications that the industry must be ready for.
The industry is heading towards a tech-enhanced direction. In the past, there have been too many inconsistencies, system changes, and challenges within technology that disrupts any flow and simplicity that consumers want. Now that alternate solutions have become necessary, the industry is taking action with integration for an improved process for both borrowers and lenders. To do this, institutions are realizing change must start internally. Companies like HousingWire are prioritizing opportunities for solutions. They are offering a “Mortgage Tech Demo Day” virtually, of course, to provide an overview of innovative tech companies creating platforms to implement and enhance lending operations. In the end, it all leads to the most important factor: creating a better experience for the consumer.
How can we accommodate you? We will work with you to get closer to your financial and home goals. We look forward to speaking with you.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc. with information from resources like MarketWatch, CNBC, Mortgage Bankers Association.