Sandy Kemsley's Blog - Not the New Normal for Mortgage Lending
Sandy Kemsley

Not the New Normal for Mortgage Lending

By Sandy Kemsley

Read Time: 5 Minutes

I gave a presentation recently (virtually, of course), talking about how intelligent automation has become critical for business survival as we learn to live with disrupted supply chains, remote work, fluctuating demand and different markets. I finished that presentation with a thought that I want to start with here: the question is not, “is this the new normal”; rather, the question is “why weren’t we doing things this way before”?

As I look back at the past year, there really haven’t been any quantum leaps in automation technology during that time. What has changed, however, is the adoption of the technology. Companies that claimed that they couldn’t work remotely because of compliance, or couldn’t automate processes because of cost, or couldn’t perform online customer transactions because of regulations, have discovered that none of those reasons are really true. The pandemic has disrupted lives and businesses, but it has also transformed how business gets done. I don’t want to downplay the human tragedy that we have seen unfold over the past year, but in the spirit of making lemonade from lemons, let’s take the lessons that come out of this and use them to survive – even thrive – in the face of economic disruption.

If you look at the new way of working, you will find leading-edge organizations were already doing things that way: the ones who embraced and leveraged intelligent automation technologies. Here’s some of the automation-fueled changes that will help you to get through the current disruption and come out stronger on the other side:

  • Allow work from home when it makes sense.
    To make this effective, automate the processes and decisions that manage work assignment and delivery to remote workers, and start doing full automation of routine tasks that don’t require human intervention.
  • Adopt more flexible supply chains.
    This includes identifying alternative suppliers and distribution channels, but also implementing flexible processes that can swap suppliers quickly in response to fluctuating demand.
  • Provide digital customer interactions where there is demand.
    This doesn’t mean that you will no longer have in-person interactions with customers, but many of them will want to do business with you online if it provides an equal or better experience. This will require a good online customer interface, but more importantly, automated decisions and processes behind the scenes so that the customer can perform complete self-service for routine transactions.
  • Consider new markets, such as the shift from commercial to consumer sales being created by work-from-home mandates.
    Handling a large number of consumer orders rather than a smaller number of commercial orders requires more automation of the order-to-cash process, and new delivery logistics for physical goods.

The funny thing is that after a year of being forced to do things virtually as much as possible, we can see that some things actually work better that way. The key is to figure out which processes are best offered online, in-person or a combination of the two.

There are many examples of technology-enabled “better ways” that have emerged, both in the creation of physical goods and in knowledge-based work.

Consider real estate:
Sandy Kemsley's Blog - Not the New Normal for Mortgage Lending

I bought a new home in late 2020, and the transaction was completely contactless, using video calls with my lawyer, digital signatures on documents, online banking transactions, and exchange of keys using a lockbox. Having done transactions like this in the past that required multiple visits to the lawyer’s office and the bank, and signing documents in triplicate, my immediate thought was that I never want to go back to the old way of doing this.

Real estate-related financial services, such as mortgage origination, have undergone significant changes to be able to serve this transaction model. A borrower’s financial situation can change in the weeks that it takes to close a deal, requiring underwriting to gather information in real time and assess the impact of changes as deadlines approach. There are new guidelines and regulations to be applied, and no financial institution wants to risk being out of compliance or underwriting a potentially bad loan.

Given the more complex environment, the only practical way to handle mortgage origination is to add some level of intelligent process and decision automation. This does not mean that origination will be completely automated: underwriters will still need to review information and make decisions that can’t be automated, but they will have access to all of the up-to-date information and be guided by best practices to ensure compliance and reduce risk. Adding process and decision automation would mean that loans approved by an underwriter that don’t meet compliance or risk rules would be routed for more senior review before final approval.

Lenders that don’t adopt intelligent automation in their origination processes will greatly increase their risk, and incur higher costs as highly-skilled underwriters spend their time collecting information rather than considering decisions. And if they’re not offering the full digital lending experience, they will lose out on an increasing amount of business as more consumers decide, like I did, that they just don’t want to do it the old way.

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