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Using Tech to Take the Headache Out of Mortgages

USAA is using video to take away some of the scariness — and perhaps some of the paperwork — of buying a home.

The San Antonio company now updates mortgage customers with customized clips that show information like the closing data, items still needed, the estimated escrow and the interest rate. The idea is to take the sometimes daunting experience and boil it down. The company launched the service in October.

"It walks them through the main concepts; there's a lot of information [in the mortgage process] and this video brings out the main bullet points they need to know," said Winston Wilkinson, senior vice president for residential real estate at USAA.

The videos, which USAA partnered with Israeli firm Idomoo to create, are part of a new wave of technology designed to improve the mortgage customer experience by making it more digital friendly and easier to handle.

The tools come at an opportune time, too. While the refinance boom ended in 2014, purchase mortgage activity has been improving and the Mortgage Bankers Association projects $905 billion in purchase mortgages in 2016, up 10% from 2015 and up 19% from 2014. Additionally, purchase activity will continue to make up a large chunk of overall originations. In 2014, refis made up 40% in 2014, but are expected to only make up 21% in 2018.

Investing in these types of digital tools that enhance the mortgage customer experience is essential for banks, said Steve Williams, an analyst at Cornerstone Advisors.

"There is a huge opportunity for most banks in mortgage lending," he said. "It's still very disjointed, and not a very efficient process or a good experience for the borrower."

But, he said, many banks are still too focused on software that improves the loan process on the operational side rather than what Williams terms an end-to-end digitized process.

"I think many banks are actively looking for new loan origination systems," he said. "But the vendors [that make such systems] grew up building compliance software — which is not to be diminished — but they don't really have the skill set when it comes to creating a great digital experience with the consumer."

For example, Williams notes there are many documents needed for income verification, compliance and other aspects of mortgage lending. "There's an opportunity there to offer the customer a very visual interface, such as a checklist of documents needed," he added.

USAA is looking to achieve the end-to-end experience Williams describes. Its videos are intended for users well into the process, and company also began testing in November a product for people just starting out. Prospective buyers can fill out a pre-qualification letters digitally on their mobile devices and receive a response within minutes. Wilkinson said this is a vast improvement over the current pre-qualification process, which he admitted can be "not a very good experience."

"We get a lot of pre-qual calls into our contact center, these calls can take 45 minutes," he said. "This digital tool can replace that 45-minute conversation in a few steps."

While USAA and other larger institutions can build customized tools, mid-sized and community banks will have to push vendors to deliver something that improves the customer experience, Williams said.

Innovation in the mortgage process has been neglected because banks have been preoccupied with keeping up with regulation in mortgages over the last few years, said Tom Faughnan, senior director of residential mortgage for Buffalo-based First Niagara Financial Group.

"It's probably the heaviest-regulated area of banking, and so much on the systems side is dedicated to that, and there's a finite pool of dollars to spend on new technology."

The mortgage process must become more consumer-friendly if banks want to sustain this side of the business, Faughnan said. That means more than digitizing documents and forms; there's an opportunity for industry-wide disruption in areas such as data collection.

"The process of collecting documents is still very manual, and disjointed" he added. "You've got to get tax transcripts from the IRS, there's title searches that you need a county clerk for, many of whom work part-time. If that could be automated…it would really disrupt the industry," Faughnan said. "This is very much future-state, but something to look at."

Ultimately, the goal for banks is to make the mortgage process one that most consumers won't dread, said John Harrell, vice president of mortgage management at USAA.

"If the entire process can be done online, or on a mobile device, with a super-simple design, then it will no longer be something people just complain about at cocktail parties," he said.




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