Mortgage approval and originations are complex processes for borrowers and lenders. Loan applicants are bogged down with demands for paperwork, signatures, and then more paperwork, hurting their customer experience in banking. Lenders, on the other hand, are tasked with conducting their due diligence, checking off a laundry list of tasks, and clearing the way for full approval in time for the buyer’s closing date.
The Mortgage Process
The mortgage process is relatively long compared to other types of loans and banking activity. This includes a pre-approval process with, KYC, credit checks, and income verification, property appraisal, and finally executing the loan. This kind of process takes at least 30 days on average, then going up to 45 to 60 days depending on the lender and market conditions.
The stakes are high for everyone involved. Delays in receiving paperwork and/or signatures, meeting with customers to discuss terms and conditions, or other aspects of the approval process are the quickest way to frustrate your customers and generate bad word-of-mouth around your brand. These delays also create workflow bottlenecks that kill your organization’s productivity and impact overall ROI, by driving up overhead costs and losing customers.
Even with long timelines from mortgage application to approval, these unexpected delays can wreak havoc on your organization. What should be more frustrating is that these errors are preventable: Digital document processing offers simple solutions to many of these problems, accelerating application processing so that your customers are happy and your internal operations run like a well-oiled machine.
Currently, mortgage applications many inputs from the prospective borrower, either with hard copies at a branch office or documents submitted via email. This inefficiency. Has led a major lender to note: “only a small percentage of our mortgage applications are completed fully and accurately the first time. This caused numerous customer call-backs to clarify and supplement the required documentation. Obviously, this is a source of frustration for the customer, and a significant cost factor for us.”
According to a report from Accenture, 20 percent of consumers already conduct all of their banking activities through digital platforms. Since customers already have the familiarity and trust to use digital solutions, financial institutions can use similar digital tools for mortgage applications and other more complex banking activities.
Here’s a look at the specific steps in mortgage processing that can be addressed by a paperless management and communications platform.
Employment Verification and Paperwork Requests
Mortgage processing requires a lot of paperwork and documents coming from consumers. In many cases, loan officers aren’t aware of the paperwork required until they dig in and start piecing together the applicant financial information. These paperwork demands can vary widely, especially for customers who are self-employed or rely on other less typical sources of income.
Self-employed workers, for example, often have to submit a wide range of documentation to prove their current earnings and up to two years of their earning history. Unlike borrowers who receive W-2s and regular income, self-employed consumers represent greater volatility and potential risk. This means extra attention must be paid during mortgage loan processing, but the extra work can also pump the breaks on what would otherwise be a fast approval.
Self-employed borrowers represent a large portion of consumers—more than 10 percent, according to the Bureau of Labor Statistics—so banks can’t simply turn their backs on these borrowers. A better method is to install a business solution that supports this intensive paperwork solicitation. A paperless management platform can turn a painful process into a relatively pleasant one: The digital solution can send out virtual requests for documentation and manage existing paperwork so that nothing gets lost in the shuffle.
In addition, data from this paperwork can be collected and organized so that the income information is easy to read and understand. Meanwhile, borrowers can also submit their paperwork via digital channels, requiring just minutes to perform a task that, in other circumstances, might take several hours or full business days.
Even outside of income verification, this platform can help gather essential documents and keep them organized in a digital environment.
Performing KYC and other Regulatory Compliance Checks
The new financial standard designed to mitigate fraud, money laundering and other unlawful practices—known to the banking industry as “Know-Your-Customer,” or KYC—has been a disruptive element for many institutions, particularly when it comes to processing mortgage loans. A survey from Thomson Reuters found that many financial institutions are still grappling with KYC on several levels, facing regular challenges regarding compliance while struggling to handle KYC in an efficient manner.
The survey noted that institutions generating $10 billion or more in annual revenue have seen their average expenses related to KYC rise to $150 million. Even at that scale of revenue, the cost implications of poor KYC practices can kill a company’s bottom-line.
More than ever, businesses need a software solution that can help them remain in compliance while helping facilitate and manage KYC for each loan applicant. With a document management and communications solutions in place, KYC can be efficiently performed at a minimal cost, and without running the risk of accidental compliance breaches.
Tasks like customer ID verification and customer due diligence can be streamlined to benefit the financial institution as well as the customer, by minimizing the time and resources required to effectively fulfill these requirements.
Signing Mortgage Documents
The final rush of paperwork to close a mortgage deal can be intensive and time-consuming. It only gets harder when parties struggle to find time for a face-to-face meeting to review the terms and complete all necessary signatures fro the mortgage.
A digital solution is able to facilitate faster closings, to the benefit of the lender and the consumer. Consumers can review loan terms and conditions on their own time, without taking up time from the lender and/or agent. Paperwork can be signed remotely with an esignature, without any delays, and delivered instantly to all necessary parties. If any questions arise, the platform can be used to manage communications, resolve issues and clear the way for all necessary paperwork to be signed.
Most importantly, all of these actions offer security that is compliant with federal financial regulations, ensuring that banks can facilitate these transactions through the digital platform without running the risk of organizational non-compliance.
Enhanced Customer Experience in Banking
It costs more to get a new customer than to retain an existing one. Banks and financial institutions have made great strides in digital transformation and customer experience. Per Forrester's Customer Experience Index, a change in customer experience ratings for a multichannel bank leaves $124 million on the table for every 1-point decline in its CX Index score.
The mortgage approval process is the perfect opportunity to enhance the customer experience and build loyalty. Lenders should use tools and digital processes that make the borrower’s lives easier through a collaboration portal, instant KYC document sharing, eforms, and digital signatures.
With a more streamlined and instant process, lenders can collect the necessary documents faster, and borrowers can get an answer faster on approvals. Leading the way for more efficient processes and improving the customer experience in banking.
Mortgage loan approvals deserve close attention and efficient, error-free processing. A digital CX solution for banking, focused on enhancing the customer experience in banking and operational efficiencies is able to support and improve those processes, cutting down on time, reducing errors, and breaking up bottlenecks that slow down individual workers and the organization at large.
Looking for a way to improve CX in banking with quicker mortgage processes? Lightico specializes in expediting customer interactions, such as mortgage interactions through the use of innovative smart automation and collaborative tools and resources. By equipping your agents with critical tools that operate in real-time, Lightico tackles mortgage applications efficiently and effectively. Request a demo to see for yourself >>> Here
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