Mortgage lenders offer their customers a mix of digital processes and human interactions. Both options have their pluses and minuses, and the challenge is achieving the right balance to offer a fully functional mortgage application process.
To discuss this subject,
National Mortgage Professional Magazine spoke with Nate Johnson, head of the U.S. mortgage business at SLK Global Solutions, headquartered in Dallas.
Let's start with the most important question … will an online-only mortgage application ever completely eliminate the in-person application process with a loan officer?
No, not completely. There are borrowers who have gone through an application without interacting with a loan officer, but that’s not typical. Buying a home is one of the most important decisions a person and their family ever make. Especially for a primary residence, the entire mortgage approval and closing process is as much an emotional journey as it is a financial one.
Automation and technology can expedite and clarify the lending process, but interactions between borrowers and professional loan officers are still the best way to build trust and to provide a high level of comfort for homebuyers. They want to feel that they are well-informed and making the best decisions, and many people get that comfort from working personally with a loan officer.
What are the most common complaints that you've heard regarding the digital mortgage application process?
Nate Johnson: Borrowers today are mainly concerned about three things when it comes to an online mortgage: Safety, Complexity and Time. If those concerns are answered satisfactorily early in the mortgage process, borrowers are much more likely to complete an application.
Homebuyers clearly want to be confident that the personal and financial information they provide to a lender is secure. When you consider that a 1003 application is one of the most thorough financial documents that a borrower will ever complete, their concern is understandable.
Ellie Mae’s Borrower Insights 2019 Survey
shows that 46.5 percent of homeowners said they were “Somewhat Concerned” about entering their personal information online. Overall, 30.4 percent of respondents said security was the most important aspect of applying for a mortgage online. The same Ellie Mae survey
in 2019 found that of borrowers who were offered an online application, but chose not to use it, 47 percent said they would prefer to work directly with a person and 41 percent preferred to work with physical paper.
Of course, borrowers want to understand all of the forms they’re filling out and precisely what information is being requested of them, and some are much more comfortable dealing with a live person to do so.
While completing an application, many borrowers have to stop and either clarify a request or search for the requested information. This often leads to the borrower abandoning the online application and turning to a loan professional to lead them through the process. In fact, Ellie Mae’s 2018 survey found out that 28 percent of borrowers thought an online application would be too difficult and never started one.
And borrowers want to know upfront how long it will take them to complete the application and prefer to avoid a long, drawn-out process. We have found that a mix of automation and one-on-one customer services is the best way to lead the borrower through the document collection/underwriting process, and close the loan in the shortest amount of time.
On the flip side, what are the most common complaints that you've heard regarding the in-person mortgage application process?
The biggest complaint that we see about lenders in the application process is their lack of availability. According to Ellie Mae’s Borrower Insights 2019 Survey, lenders reached out to most borrowers less than 10 times throughout the process. Mortgage providers increasingly believe that providing technological interventions across the origination process reduces the need for customer interaction. Yet the data shows the opposite: Borrowers prefer having frequent interactions with their loan professionals.
In your view, are fears of data breaches strong among those who prefer not to use the digital mortgage application process? And if so, how can a lender mitigate those fears?
The recent data breaches
that have been in the news over the last 24 months, involving both financial services companies and non-lending companies, have definitely led to apprehension among consumers about submitting their personal information online. Having the right messaging when borrowers are introduced to a mortgage lender’s technology and application platform is crucial.
Customers need to feel confident that a company is using security measures that include robust information security protocols. Every mortgage company needs an information security framework that includes server controls, encrypted online data transfer, data integrity and access to the right party. Adequate due diligence when outsourcing to a vendor is also imperative.
What is the best possible balance of the digital and in-person processes that a lender can offer?
Nate Johnson: It’s simple … analyze your mortgage processes and borrower’s buying behavior. Make sure you have your team upfront and available for every possible discussion during three main processes:
First, the loan application: First-time borrowers generally have concerns that can be addressed quickly with a conversation or an in-person meeting. A chatbot or an online application cannot provide the same level of comfort that a licensed professional can. If a loan professional needs to walk through an application with a borrower in order to have it completed, that is time much better spent than trying to have the borrower finish an abandoned mobile or online application.
Second, document collection: There are many mobile and online tools that make document collection easier. How user-friendly are they and how comfortable are borrowers using them? With the recent data breaches, borrowers are even more afraid to upload their personal information using an app that may be hosted in the cloud or on an unknown private server.
Homeowners are concerned about entering their personal information online. The key is balance. A loan professional can interact with the borrower and introduce the document collection process to them. If it’s completely online, you need to reassure them about the safety of the process.
The key is to talk to them and walk them through the process rather than, say, forwarding a link by e-mail. Borrowers from all generations–Millennial, Generation X and Baby Boomers–sometimes have to be hand-held through the process.
Finally, processing and closing: Lenders often win over the customer during the loan application phase, but then lack good follow-through in completing the loan. This directly impacts a lender’s pull-through ratio.
Lenders need to understand the importance of communication and should make sure to connect with the borrower periodically during the origination process. While e-mail notifications and dashboards are great for real-time loan updates and statuses, they do not replace the personal touch of a representative calling to update the borrower or to let them know that they are clear to close. Lenders must include periodic in-person communication in their operating procedures to keep borrowers engaged and happy.
The “Secret Sauce” is having a happy medium. Lenders are enthusiastically applying digital innovations to their mortgage lending processes, but they must give equal time to customer contact capabilities. This can be achieved through omni-channel contact center services for mortgage originations.
Lenders can outsource much of these customer contact and voice-based requirements while they focus on approving more borrowers, increasing volume and being profitable. Ultimately, I believe that most borrowers want a balanced combination of technology and human interaction. In the end, the lenders that can provide that balance will be the most successful.