By Jeffrey Nuckols
Today’s paper-intensive process for financing a home can be off-putting, especially to younger borrowers who were born into a digitally connected world. While paperless mortgages might not become the norm soon, a recent Xerox survey indicates the new generation of borrowers and a recent federal mandate are expediting adoption of “customer first” digital processes.
As the largest living generation, millennials (commonly ages 18 to 34) are tipping the scales on everything from the workforce to homeownership. Growing up amid economic uncertainty and distrust stemming from the recession, millennials had lagged from previous generations in signing the dotted line for a home loan. The tides are changing as the older tier of millennials embraces their 30s. They now make up 32 percent of recent homebuyers, the largest share for the second consecutive year, according to the National Association of Realtors.
The 11th annual Xerox Path to Paperless survey of mortgage professionals finds that the industry is making strides, engaging in initiatives that can help capture more of this tech-savvy generation and meet overall growing consumer demand for a digital, interactive experience. Three insights from the survey show how:
New Business Strategies: About 51 percent of mortgage professionals are applying new business strategies or introducing new technologies to attract millennials. Among the implementations:
- A social media presence (51 percent).
- Consumer portals (43 percent).
- Recruiting programs that target college students and recent graduates (18 percent).
- Loan programs specifically for millennials (10 percent).
Going Mobile: Communicating through mobile devices is key in meeting the expectations of digitally oriented consumers. Our past surveys indicate security concerns are one reason for mortgage companies to shy away from mobile use in their work. However, about 32 percent of survey respondents say they are using smartphones and mobile tablets for business transactions, such as accessing loan documents – that’s doubled from 16 percent in 2014.
Secure eDelivery: More mortgage firms are moving away from paper-based delivery methods such as mail and courier, opting for eDelivery technology that securely transmits mortgage documents through Web portals while creating an automated audit trail. About 78 percent of survey respondents – up 15 percent from the previous year — say they have technology in place for eDelivery of disclosures or other documents to borrowers.
eDelivery can help lenders comply with the new, timely disclosures mandated by the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID) rule. Prior to Oct. 3, 2015, it was common for borrowers to learn about the final costs of a mortgage at the closing table. Under TRID, lenders must disclose final costs and terms at least three business days before the closing date. Untimely delivery of closing disclosures could trigger closing delays and hinder the customer experience. Most survey respondents — 92 percent — expect to see an increase in their use of eDelivery as a result of TRID.
Onward to Completely Paperless
The insights above show progress toward paperless mortgages, but transforming the mortgage process to a completely digital experience will require a lot more work. This, due to the complexity of the mortgage process itself and the frequent adjustments the industry must make to their work processes to comply with ever-growing regulatory demands such as TRID.
A completely digital mortgage, or eMortgage, requires an end-to-end digital process, from the point where the borrower applies for a mortgage all the way to where the funded loan is assigned to a servicer who collects the monthly payments. Many of the capabilities and technologies required for a digital mortgage already exist. The challenge for mortgage companies is integrating these in a way that enables a compliant, digital loan-processing environment inside their walls while offering a simple experience for customers through external-facing, digital channels.
Despite the challenges, mortgage professionals are more optimistic about the pace at which the industry is progressing toward a completely digital process. The majority of survey respondents – 51 percent, compared to 33 percent the previous year — believe that half of all loans will be closed as eMortgages in four years or less. Until then, we should see more components of eMortgages, such as eSignatures that allow borrowers to sign documents virtually, come further into play.
Mortgage companies who make time and investments to “crack the code” to a seamless, digital experience while maintaining affordability have the opportunity to gain the trust and business of millennial and other digitally-oriented consumers. As mortgage banking institutions weather regulatory pressures, we can expect to see more investments in financial technology and other non-banking companies that are focused on digital mortgage innovations.
What else do you think could be done to engage the new generation of borrowers and shorten the path to paperless mortgages? Tell us in the comments below.