MReport August 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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34 | TH E M R EP O RT FEATURE The Edge of Innovation As the lending process gets more automated, how can mortgage professionals adapt to a more tech-savvy industry? Here's what some experts had to say. By Radhika Ojha F rom artificial intelligence (AI) to machine learn- ing (ML), the mortgage industry is going digital as lenders look at automating the mortgage process to make it faster and more cost-effective. In fact, when asked about their views on these two technologies by Fannie Mae, 63% of lenders said that they were familiar with these tech- nologies but only 27% had used or tried these tools in their busi- ness. Additionally, nearly 58% said they planned to adopt some AI solutions within two years. But the rate of adoption may be faster than we think. Quick Adoption L enders are quickly realizing the benefits of AI and similar technologies in increasing their efficiencies and streamlining processes. This is especially im- portant in an environment where production costs have risen 80% over the past five years (from just over $5,000 per loan in 2012 to close to $9,000 per loan in 2018). "With interest rates putting downward pressure on volumes and squeezing margins, in addition to ongoing compliance concerns, many are struggling with profit- ability. As a result, we will con- tinue to see more lenders looking toward automation to increase ef- ficiency and lower expenses," said John Vella, Chief Revenue Officer at Altisource. "The lenders that don't make it a priority to keep pace with the adoption of machine learning and other innovations may struggle because ultimately, emerging technologies will reshape the mortgage landscape." Customer service is another reason that has more lenders looking at machine learning for help. According to Terrell Cassada, CIO, LoanLogics, new regtech solutions are helping make the front-end look better by lever- aging information collection from borrowers and using machine learning to classify documenta- tion and enable enhanced data extraction. However, he also pointed out that many lenders were not le- veraging technology the way they should to meet this end. "They're still using their staff to review loan files manually for accuracy and completeness," Cassada said. "When they find inconsistencies in the data—and they always do— they have to go back to the bor- rower to sort things out. That's not fast nor simple, and it doesn't help lenders lower their costs, either." "Few people have sufficient knowledge to know how to leverage them successfully," Josh Friend, Founder & CEO, Insellerate, told MReport. "I have seen some lenders using predic- tive analytics to find new business opportunities, but having enough data to use these tools effectively and the ability to track the full lifecycle of a borrower is some- thing most lenders seem to lack." Despite these hiccups, the adoption of AI has been quick and is already reshaping the mortgage business. Today, lend- ers are leveraging these tech- nologies to import and scan loan documents and uncover common compliance issues and critical defects in their files. This, in turn, is speeding up origination timelines and lowering costs. "Assuming lenders are working with a trusted partner, these tools can be seamlessly integrated into their loan origination systems and other platforms to accelerate their data and document workflow processes. Over the long term, the lenders that are most effective at applying emerging technologies to streamline their most costly pro- cesses will come out ahead," said Sam Kharidi, Director of Product Management for MTS Software Solutions, Inc. Friend agreed. "AI will have a very real impact on the mortgage industry when it comes to the cost of producing a loan," he said. Advantage: AI D iscussing the benefits of AI within the mortgage process, Friend said, "It will lower cus- tomer acquisition costs by helping lenders engage with prospects, current borrowers, and past clients in more intelligent ways. By leveraging AI tools, lenders will also be able to know when to contact someone for a new loan opportunity, which will help them increase conversion rates." Additionally, these tools can also help lenders determine the best way to communicate with borrowers, whether through text, web chat, voice, or email, or any combination of these. According to Vella, one of the biggest ques- tions faced by lenders today is balancing a high-tech high-touch environment. "We're in a period of major disruption in terms of consumer expectations, and the need to adapt to an increasingly tech- savvy mortgage borrower will be an ongoing battle. It's a critical battle, too," he said. "Clearly, le- veraging technology to respond to borrowers as soon as they show interest in a mortgage or refinance is critical, along with letting bor- rowers determine how they want to communicate, whether by text, email, or phone."

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