The housing industry will continue to see high loan volumes and rapid fintech innovation in 2021. In the residential mortgage sector, I expect origination volumes for refinance and purchase loans to continue increasing until June, then start to slow down as refi volume falls off. As mortgage forbearance plans begin to end in February and March—unless Washington comes up with another round of mortgage relief—mortgage bankers will start having issues with collections, foreclosures and bankruptcies, as rising unemployment numbers are showing us that many Americans are still facing a tough economic road ahead.
On the positive side, technology is reaching a high-water mark in the mortgage industry today. If you were to compare the pace of industry innovation to that in electric cars, a few years ago the electric car would get 50 miles to an electric charge. Now it can get more than 320 miles, and the pace of improvement is accelerating. I believe 2021 will bring similar transformational change to the mortgage industry, particularly when it comes to automation and shorter loan closing times. Already, many in our industry are looking to new players—such as mobile-first, personal finance company Sofi—and witnessing their impact on accelerating loan closing speeds.
We’re seeing an extraordinary number of new technologies for both loan origination and servicing areas. Many of these new tools are a direct result of the pandemic and the need for lenders and servicers to conduct business remotely while saving time and costs.
For example, there are new automated technologies emerging that are enhancing underwriting processes, such as automated borrower income and asset verifications, borrower self-appraisals, and tools that allow lenders to determine a borrower’s ability to repay their loan based on their tax return.
Lenders will also be implementing new technologies that are focused on acquiring a greater share of their customers’ wallets. Companies like Sofi are showing r lenders how to upsell consumers on additional products and services. I also think we’ll see more technology companies providing reps and warrants for their services to reduce loan buyback risks. As an example, LoanBeam, provides self-employed borrower analysis which enables lenders to analyze this borrower segment faster and more accurately.
One particular innovation I’m excited about is technology that automates source document review and analysis combined with automated quality control (QC) technologies, which will enable lenders to save an exceptional amount of time and money. Currently, lenders need to perform pre-closing and post-closing audits, but this work takes an extraordinary amount of human time and effort. We’ve just introduced QC technology that cuts auditing times in half. After lenders send us their documents, we run it through our artificial intelligence (AI) engine, which automates 50 percent of the auditing process. Loans that need additional review will then be analyzed by our expert human staff.
The best thing about it is that it continues to get “smarter.” As more and more people use our QC technology to audit loan files, we anticipate as much as 80 percent of the total work will be through AI. We have customers that have beta tested it successfully and plan to roll it out to the industry this spring.
My last observation is that we truly live in a global community. More lenders are seeing the benefits of outsourcing critical pieces of the loan manufacturing process so that loans are being worked on and defects are being reduced 24 hours a day, 7 days a week. Other parts of the world have been developing U.S. mortgage expertise for decades and that experience is now available at a fraction of the cost of U.S. staff. Some of the benefits lenders are deriving are increased margins, shorter closing times, reduced staffing problems and reduced staff burnout.
The mortgage industry has a lot of challenges with higher volumes, but technology and global resource availability is answering the call.