This year is drawing to a close, and many experts are already predicting the direction mortgage lending will take in 2019.
The general consensus – not a good one. Layoffs in the mortgage lending space have already begun. Just last week, Wells Fargo eliminated about 900 mortgage jobs. And loanDepot is rumored to be laying off “hundreds.”
Sneak preview – HousingWire Magazine subscribers will hear from an industry expert in our December/January issue about a few simple changes lenders can make to keep their layoffs at a minimum. Subscribe to the issue here.
But one way lenders can keep up with the challenging lending environments is through technological enhancements. One expert, AI Foundry Founder and President Steve Butler, outlined five artificial intelligence trends that lenders should watch out for in 2019.
1. AI kills OCR
In 2019 we will see rapid declines in optical character recognition use in document processing. OCR was invented a century ago and is losing its utility in modern times, because it can’t do anything intelligent with the text it scans. OCR will give way to AI technology that enables machines to read and react to human-written content. This will enable a boom in “white collar automation” where manual document processes (such as mortgage processing) are replaced by software-based robotics processing.
2. The veil comes off “instant mortgages”
In the coming year consumers will get more savvy and educated about claims of “instant mortgage approvals.” It still takes weeks to process a mortgage and “approved in minutes” applicants can still get turned down by underwriters. Mortgage lenders will turn to back-office automation to speed the byzantine mortgage-approval process, so consumers can have a true Uber experience, where mortgages are approved in hours, not weeks. This will enable home buyers to have an approved mortgage in hand when they bid on a house, closing the competitive gap with cash buyers.
3. Mortgage processing comes back to the U.S.
Most Americans do not know that when they apply for a mortgage, most often their personal financial information goes overseas to processing centers in India, the Philippines and other low-wage countries. We have seen more “onshoring” recently and this trend will continue and grow in 2019, driven by a number of factors including regulations, increased customer complaints (and resulting reputation damage) and companies gaining a better understanding of the true costs of offshoring. With state privacy regulations becoming more strict, lenders will bring mortgage processing back onshore to the U.S. This will cause a spike in back-office automation investment as mortgage lenders try to keep processing costs down, while complying with emerging privacy regulations.
4. Lenders turn to AI to reduce the cost and time to close a mortgage
Today, it takes about three weeks to close a mortgage, from the time that the mortgage application is started, through providing information, processing, reviews and underwriting, to closing. Artificial intelligence will drive a new generation of “software robots” that automatically process mortgages, replacing slow and costly manual processes. In 2019, we will begin to see approval times drop from the current norm of three weeks, and one day approvals will become the norm within five years.
5. Real estate firms and sites become one-stop shops
In 2019 we will see more forward-thinking real estate firms and websites becoming one-stop shops for the home buying experience. Examples include Keller-Williams (with Keller-Williams Mortgage) and Zillow acquiring Mortgage Lenders of America. This horizontal model is similar to how automobile dealers also offer financing and maintenance. The new model will enable buyers to access everything they need such as financing, legal counsel, accredited inspectors and contractors, from their real estate agents, rather than having to rely on referrals and research.
