The Digital Transformation of Mortgage is More Than Just Tech


In mortgage, the digital point-of-sale (POS) has become all the rage and lenders are rapidly jumping on the digital POS bandwagon. Whether they’re deploying “off-the-shelf” digital POS solutions from the leading fintechs or developing their own systems in-house, the shift to a purchase market means lenders are now scrambling to deploy digital POSs in order to capture new business and reduce operating costs.

In general, today’s POS systems enable lenders to deliver an all-digital, fully automated, self-serve mortgage application process to consumers via the channel of their choice – desktop or mobile. The idea is to deliver a simpler, faster and more consistent mortgage experience while at the same time gaining back-office efficiencies.

By connecting these digital POSs with bank, payroll and other databases, by way of automated verification systems, lenders can now instantaneously validate a borrower’s employment, income and assets, thus significantly speeding the mortgage process. In some instances, lenders have been able to shorten the average number of days to close a mortgage loan from 50 to less than 40 days. And with a small-but-growing number of select loans, they have been able to close in as little as 10 days when the POS is integrated with automated verification.

But as Henry Cason, senior vice president and head of digital products at Fannie Mae, tells MortgageOrb in a recent interview, deploying digital tech on the front end of the mortgage process is just one part of the overall digital transformation: Lenders must be willing to revamp their processes – and their mindset – in order to succeed in the new digital realm.

Q: Lenders large and small are bolting digital POS systems to their LOSs to speed up the mortgage process and capture more business – everyone is jumping on this bandwagon very quickly right now. What is the saturation level right now? Are there any laggards left out there that are still resisting this trend?

Cason: I think any time you have a transformation that’s happening in an industry – and I believe we are going through one today – you have people who are way out in front, you have people who sit in the middle, and you have a number who want to ‘wait and see,’ even though they may know that they need to act fast on it.

We see a majority of our customers moving into digital POS for a number of reasons. One is, we’ve all been using automated underwriting for years – and they’ve been getting the most it that they can – but now it is truly about customer capture. ‘Can I, the first time I interact with a customer, capture them and convert them into a loan?’

When people talk about digital – and digital POS – they tend to think only in terms of the technology itself. But it’s really about how you use technology to create a better customer experience.

I think our customers are starting to hear from their customers that they all want a better experience. For example, don’t ask me five times for the same piece of data that you already have if I’m a servicing customer. Or, if I’m getting a mortgage through a bank, why ask me for my asset information if you already have it?

So, a lot of our customers are using digital POS systems – whether they build them themselves or rely on some of the fintech firms out there – to deploy an experience that is easy and fast and which allows them to leverage data in ways that they haven’t before. That’s really the transformation piece. Technology is part of it – but it’s really all about creating a positive borrower experience.

Q: How much are lenders putting an emphasis on the mobile piece when creating this customer experience, in your opinion?

Cason: The ones that have figured out how to create ubiquity across their digital platform – the ability to deliver this same experience across multiple devices – are the ones that are seeing success. For example, I might start the [mortgage] process on my phone and then move to my desktop.

We’re not really hearing a lot of lenders saying ‘I’ve got to go mobile’ like we did a few years ago. Today, what we’re hearing is, ‘I’ve got to create an experience that can be distributed through multiple channels – desktop and mobile.’

I think that’s the power of these digital platforms – is that it doesn’t matter how a customer accesses it, it’s going to be the same experience and they can pick up where they left off. Versus, ‘Here’s my mobile experience, here’s my desktop experience and here’s my paper experience.’

Q: So, would you say that most lenders that are creating a digital experience today are embracing the mobile piece right off the bat? Or are they adding it later in the process?

Cason: I think the lenders that are buying this technology from the fintechs are absolutely going mobile right away – because it’s part of the platform. However, the ones that decide to build it themselves, they might decide to stage it. They might start with a desktop experience and then extend it to mobile. But they’re all thinking about distribution of the experience, for sure.

Q: Do you think the shift to a purchase market is accelerating the adoption of these digital POS systems?

Cason: I think it has a lot to do with it. Purchase is much different from refi – and customer acquisition is much different in a purchase market than it is in a refi market. There’s lots more competition – and higher costs. So, I think because we’ve been transitioning to a very strong purchase market in the past 12 months, a lot of the lenders that were playing ‘wait and see’ are now investing in tech, because otherwise they’re going to be left behind. But that creates a host of issues when you’re running on very tight margins, in some cases.

Q: A lot of the digital POS systems providers have been thinking out-of-the-box in terms of integrating these platforms with other systems – for example, a lot of these POS systems are now being tied into lead generation systems. And getting some of the functionality into the hands of Real Estate agents. Because we’re shifting to a purchase market, do you think that will become a standard part of the process, too?

Cason: This is where you get into the power of digital tech. Through APIs, and the like, you’re able to connect these POS platforms with other systems, such as lead generation systems – very simply and at a cost point. That’s easy to do – and if, for some reason, you get it wrong you’re not going to be spending millions and millions of dollars.

The other thing these digital POS systems enable you to do is connect with data providers, such as our Day One Certainty platform. So, instead of asking for bank statements, you can connect into your customer’s bank account and grab the information and present it to them and say, ‘Here’s what your assets look like – does this look real?’

That’s a much better experience than getting to the asset part of the application and keying data and then having a lender say, ‘OK now I need you to provide three months of bank statements – paper copies – and when I’m done analyzing them I’ll tell you whether you look good or not.’

Now, you get this instantaneous feedback: ‘You’re assets look good enough to move on to the next step.’ That’s the power of digital – is the ability to give instant feedback to your customer, so they don’t become disinterested and drop out.

Q: What about the issue of security? Is there any potential backlash from making a customer’s information so readily available via a digital POS? Are some borrowers “freaked out” that a lender can gain access to their financials so easily as part of the initial online process?

Cason: We see it just in the context of our Day One Certainty program: If our customers cannot create that trusted connection with their borrower, the borrower will drop out of the process. Because they’re just not sure; ‘Should I share my information with this entity? Where is my data going? How is it being used?’ So we spend a lot of time educating our customers about how they can assure their borrowers on ‘Why we’re doing this; why it is secure; and this is the value prop.’ But we’re at a point in digital development where our lender customers are definitely having to deal with this. I would not say it’s a huge issue – but it’s not a small one either.

Q: What about the fact that some borrowers might want to start the mortgage process digitally but then finish up the process manually? How hard is it for lenders to create that same seamless experience between their digital channels and their manual channels, if they have them?

Cason: This is definitely an issue for some of our customers – because there’s not necessarily a steel thread through one or the other. We have heard from our customers that a borrower might want to start digitally but then they might want to talk live with somebody when choosing a product. Because you might not be able to represent price and product all that well on a screen, where customers can understand it. So, this is a big deal – it’s where traditional lenders might be able to differentiate themselves better than the ones that have gone straight digital. There are those who cannot blend the two together. And it’s so hard to know if a borrower will go down that path.

As we get into pure digital, there’s still going to be a good deal of differentiation around this topic. The ability to have a customer ask a question in a certain way, and then interpret that and say, ‘Ah, this person needs to talk with someone. Let me seamlessly get them into a call center – or get them back to their LO, who can answer that question for them.’ This is really hard to do – but the ones who figure it out are the ones who will win.

Q: A lot of the digital POSs today sport communication and collaboration tools. Can’t that help aid in the transition between digital-only and live support channels?

Cason: A lot of these platforms have had collaboration and communication capabilities for a while now. The difference today is, you can’t wait a few days or two weeks to get back to your borrower. If they’re on the line, and they need help, you need to have the capacity to get back to them quickly – whether it’s a call center, a loan officer, an underwriter or a processor. So, once again, it’s less about the tech and more about your internal process. It’s about your organizational model and the skill sets you can deliver. That then fronts or backs this front-end tech that you’ve built.

That’s actually more key than buying a bunch of tech and deploying it. Because if you don’t have the right mindset around being digital native and you don’t have the capacity aligned to that, all you’ve done is build a really nice experience on the Web that delivers more fallout than capture.

Q: What, at this point, are the keys to further shortening closing times? Are there limitations to how fast the industry can really make the process happen, taking into account certain roadblocks such as the appraisal?

Cason: We’re very optimistic. With our Day One Certainty program alone – which is about the automation of the employment, income and asset validations – we can now go direct to source for that data, and then use it in the underwriting decision. Just automating those three processes, with data instead of paper, we are seeing large improvements in time savings; 10 to 15 days alone just for those three verification processes. And when you combine that with a better way to capture that data up front – by way of these digital POSs – and the ability to automate that into the back office for product and pricing – we are seeing a big chunk of time eliminated from the process.

But of those lenders that have succeeded in reducing the timeframe – it wasn’t just that they installed Day One Certainty and went on their way. They did it with significant process changes.

We define digital in three ways. It’s not just about the technology, it’s also about mindset. Because there’s no point in automating a process that’s bad. You have to be willing to look at that process and see how you can improve it, at the same time that you’re adopting the technology. You need to be able to both at the same time.

I think we can get close to 10 days. It’s not going to happen tomorrow – and not everyone will be able to close in that amount of time. Nor will everyone even want to close in 10 days. But I do think that over time we’ll be closer to 10 than 50 days.

Q: What about the appraisal piece? With the UAD and UMDP initiatives and some of the things that are going on out there with regard to AI – better, faster, smarter AVMs and greater cross-sharing capabilities – do you see promise that we might get to the point where the appraisal is less often a hiccup or a delay to achieving that 10-day timeframe?

Cason: Yes – and we’re already starting to see some of that now. You mentioned UMDP. As little as five years ago, we didn’t even have a standardized data format for appraisal data. But we have that now. And because of that, we at Fannie Mae are able to look at the data as we get appraisals in and be able to offer – in a small percentage of cases – the ability to not go and get an appraisal. Because we feel good about that loan – we’ve seen it before – and the data looks good. Any time you can build upon that, you have an opportunity to make [the process] better, cheaper, safer and faster. So, I see the industry as a whole – not just us – looking at different ways of doing appraisals.

Appraisals are important. We think they have their role to play in the digital economy when it comes to mortgage finance. We want very experienced appraisers working on the properties that they need be working on. And then there is a subset of properties where an appraisal might not be needed.

Q: On top of deploying tech and changing their processes accordingly, how important is it for traditional lenders to change their culture? What is the importance of change management in going the digital route?

Cason: I think change management is the number one thing that, if you get it right, you’ll be successful. And I can say that from my own experience. I’ve been in my role here for nearly two years, and we’re trying to create our own digital identity here at Fannie Mae. We’re trying to innovate at scale and transform. And most of what I do is about that change management – it’s about mindset. It’s about getting my staff to buy into the fact that it’s OK to test and learn and potentially fail – and experiment. Because we’re going to learn from it. I believe that the tech stuff is easy – it’s changing the hearts and minds [that’s challenging].

Those lenders that have spent a lot of time in either organizational change management or process change management – and are pairing that with they efficiencies of digital technology – are the ones that are rising to the top.

Q: Regulation has resulted in the mortgage process becoming more standardized: The process is basically always the same, depending on the loan type and product. As lender after lender saturates the Web with these digital POS front-ends, what is the potential for homogenization of the mortgage process in the digital realm?

Cason: Today, the mortgage process is essentially the same for everybody. But each of our customers does it differently. And we’re starting to see that even with digital. Because everybody thinks of digital in their own way – and they each have different customer sets.

I think there’s enough technology available out there today to allow our customers to innovate around the process that you’re not going to see a homogenized experience for a long, long time. Because there’s so many different ways that you can ask a borrower a question – and respond to a question – and there’s so many different ways to use alternate data sources. So, while everyone will soon be digital, how they implement it will be different. Even among the ones that are out there now, there are some key differences.

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