Big banks take on ultimate omnichannel challenge: Mobile mortgages
The way Bank of America’s John Schleck tells it, bringing mortgage applications to mobile devices — a new frontier for banks like B of A, CIBC and others — is simply the natural follow-up to doing it with car loans.
Schleck, an online sales executive at B of A, points out that the bank "mobile-optimized" its auto loan application in 2016, an experience it plans to enhance this summer by making it possible for consumers to shop for a car on the mobile app. Once they find a vehicle they like, they can then apply for a loan and get approved on the same platform. Customers will be able to complete 85% to 90% of the process on the app, he says.
Mortgages are admittedly trickier, but the opportunity is undeniable. A recent Accenture survey of more than 4,000 North American consumers found that one in five completed their mortgage purchase without using a digital channel at all.
For the average consumer, no other transaction is as time-consuming, paper-intensive or nerve-wracking as the process of taking out a home loan. It typically takes weeks and requires a raft of forms.
The development of mobile mortgage solutions, then, is a kind of ultimate test of banks' commitment to omnichannel strategies. This is so not only because of the difficulty involved in bringing such a complex transaction to mobile devices but also because, unlike with digital card applications, which can yield an approval decision in seconds, loan officers are still a critical component of the mortgage process.
"We're going after making anything that customers want to do available in any channel that they want," Michelle Moore, Bank of America's head of digital, said about the company's efforts to develop a mobile mortgage offering for its 22 million active mobile users. It plans to launch the platform later this year.
Improving upon the online experience
The goal is not merely to digitize but to streamline the application process, "making the simpler things as simple as possible and the complex things as easy as possible," Schleck said.
Bank of America's online mortgage fulfillment center, which it launched in June 2016, already allows clients to upload documents, receive disclosures and review their application status electronically. The mobile offering will copy some of these features, but it will do a lot more besides.
"Our mortgage experience is going to be awesome," Moore said. "It will give people check lists, it will give them the ability to connect to mortgage-loan officers, it will let you e-sign materials, it will let you upload documents."
As banks consider how to deliver a mortgage product via mobile devices, they are seeing it as an opportunity to build a whole new experience, rather than just recreating what they already offer online.
Take the forms that applicants have to fill out. There are 250 data fields on a mortgage application, according to Schleck. The idea of sitting down and filling it out from beginning to end is mind-numbing.
"It's not the way that normal human beings think," Schleck said. "And, frankly, clients expect us to know more about them than that. 'Why are you asking me for my address?' So we are going to be much more conversational in the way the mobile app will work."
A good loan officer will take a real interest in clients, engaging them in a conversation to learn about their priorities. The online mortgage experience, by contrast, "just feels like filling out a form," Schleck said.
Bank of America wants to eliminate that feeling with its mobile offering. One way to achieve this, Schleck suggests, is to prepopulate fields with information already known about each client.
Customers whose paychecks are direct deposited into a Bank of America checking account might not need to provide their income information; the bank would know it already. It would know lots of other stuff about them, too. Longtime customers could potentially breeze through much of the paperwork.
Racing to develop solutions
As challenging as it might be, lenders have little choice but to develop mobile mortgage offerings.
The launch of Quicken Loans' Rocket Mortgage site in 2015 was a starter pistol for the mortgage industry's race to build digital experiences. If banks don’t do something, they will likely be displaced by lenders that do.
Although few lenders offer a mobile mortgage application process as of now, "that's the way the whole industry is moving," said Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods.
"As we're getting to the point where you can share all the documentation electronically, it just seems like making this mobile is such a natural thing to do," said Holden Lewis, a mortgage analyst at Bankrate.com. "Why not over a phone?"
Bank of America isn't the only major bank working on a mobile mortgage platform. In February, JPMorgan Chase announced it was partnering with the fintech firm Roostify to build a digital self-service platform for prospective homebuyers. It is expected to launch later this year. (Just as Schleck described mortgages as the next step after car loans, JPMorgan's joint venture with Roostify comes on the heels of its partnership with TrueCar last year.)
"All of these banks, not just Bank of America, are really trying to position to attract millennials," Kleinhanzl said.
As for whether the majority of consumers will take to mobile mortgage applications the way they have taken to mobile check deposits and online credit card applications, Kleinhanzl remains skeptical in the short term.
"I would say it will take three to five years at least," he said. "You're not going to see huge volume from this."
When the day comes that millennials are the largest group of homebuyers, however, such digital solutions will see frequent use, he added.
Tackling pain points
While U.S. banks are building, at least one large North American bank is already offering a fully mobile mortgage process.
In May 2016, Canadian Imperial Bank of Commerce launched Hello Home, a mobile app for iOS devices that allows users to snap pictures of key documents, upload them with their phone and chat with a mortgage specialist if they need advice.
The bank started working on it in the fourth quarter of 2015, originally as a six-week "sprint" focused on reimagining the mortgage experience, which took place at the bank's innovation lab in Toronto. By the end of the year, armed with a proof of concept, CIBC executives had decided to pursue a mobile offering seriously.
Rather than integrate the new solution into its existing app — a complicated task — the $380 billion-asset bank chose to act like a startup, releasing a standalone app in a skeleton version that could be continuously improved upon.
Over the next several months, staffers from CIBC's mortgage business worked together with the digital team, legal personnel, risk officers and other employees on an ad-hoc basis to build the app. For the initial version, they tackled new home purchases and refinances — the two most common mortgage scenarios — and three customer pain points: a lack of transparency in the process, the amount of paperwork required and the need to deliver documents in person to a branch.
"The sheer amount of paper you have to provide to your mortgage broker during the process was just incredible," said Aayaz Pira, CIBC's senior vice president of digital. "And not everybody has a scanner or fax machine, so they don't actually know how to send these documents back and forth."
Although Hello Home is not yet available to Android users or to non-Canadians, it serves as an early indication of what banks' mobile mortgage offerings might look like. As you complete each phase of the mortgage process through the app, that phase is grayed out, allowing you to track your progress. Push notifications alert you to significant milestones, too.
The limits of self-service
As much as consumers have grown to rely on self-service, homebuyers want the ability to consult a specialist throughout the mortgage process — to negotiate a rate, say, or merely to clarify an aspect of the terms and conditions.
It is no surprise, then, that CIBC's in-app chat feature has proved popular.
"We've learned very quickly that in a complex digital sales journey, we have to have a balance between human touch and technology," Pira said. "So they have a human on the other end they can chat back and forth with."
Schleck says Bank of America, too, is committed to delivering experiences that are "high-touch" as well as high-tech. That is a nice aim, but 73% of consumers report that the experience of switching between their bank's branches, website and mobile app is less than seamless, according to a 2016 Accenture report.
If mortgage clients are to migrate seamlessly back and forth between the physical and the digital realm, banks will have to get better at designing solutions that enhance, even if they can't replace, human interaction.
Even for mortgage clients who prefer a digital experience — a cohort that seems likely to grow with time — "there will need to be the safety net of a loan officer available to you," said Daryl Grant, the digital solutions lead for the mortgage advisory at KPMG.
Bank of America is considering giving mobile users the ability to hold video chats with its mortgage bankers. Various legal and privacy issues remain to be addressed. If realized, however, the feature would be a mobile corollary to the bank's new virtual centers, unmanned branches with teleconference rooms where customers can talk to loan officers and other specialists.
There are some things you can't make faster
Digitizing the mortgage process can make it less painful and more transparent. Still, buying a home remains the largest purchase that most people will make in their lifetimes. It is a fundamentally involved and lengthy process.
CIBC was surprised to learn that Hello Home users take an average of three weeks to reach the approval stage, with clients switching back and forth often between the mobile app and other channels, including physical branches.
"It takes a very long time for someone to go through the entire journey," Pira said.
The Canadian bank's findings throw cold water on Moore's claim that soon "major life purchases will be able to be done at the touch of a thumb, whether it's buying a car or buying a house." Her words conjure up a simple, almost instantaneous experience.
Schleck does have ideas about how to speed up the process. For instance, lenders are required to wait a certain amount of time after providing a client with a loan estimate before they can ask for his or her intent to proceed. If the estimate is sent through the mail, the waiting time is three days for the mail plus an additional day for the client to mull things over.
"That's four days," he said. "But if I can provide it to you electronically and talk to you right away, I can gain intent to proceed right away, and I can shave three days off your loan."
Some elements of the mortgage process remain intractable. Even if the application process is sped up further, the closing process would still require a face-to-face meeting — and all of the paperwork that goes with it. Certain U.S. states, for instance, including Florida, Georgia and New York, require the presence of a closing attorney.
"There are a lot of state-specific requirements involved in that process," said Grant of KPMG. "I would be very skeptical of any platform that says it can get all the way through the closing process with a mobile application."
For Canadians, too, a sit-down meeting is unavoidable in order to complete their purchase. CIBC wouldn't say if it has any plans to bring the closing process to mobile devices, or whether that is even possible. For now, improving the application process appears to be enough.
Although Pira wouldn't share precise numbers regarding how many users have successfully completed mortgage applications using CIBC's Hello Home app, he said the bank — which expanded its digital team from 50 employees to 250 employees last year — is committed to building it out over the next 12 to 18 months so that it can serve as a robust companion to all of the other channels.
"We want to have the best bank in your pocket," he said. "There hasn't been a point when we have said this [app] was a waste of money."