As Lenders Work To Automate Everything “Automatable,” Why Do We Still See So Many Manual Processes?

We’ve heard quite a bit about the digital transformation that has swept the mortgage lending and real estate services industry over the past four or five years. Accelerated by historically high refinance volume and the pandemic-fueled lockdowns, mortgage related businesses have had little choice but to sign on for massive automation and technology investments.

And yet, as what we could describe as “Phase One” of the digital transformation – the adoption of core systems like POS and LOS – moves into the stage of “last adopters” and neo-Luddites, we still see an average time-to-close around 50 days. We still see way too much keyboard mashing; voicemail tag or stare-and-compare in spite of advances in AI, RPA and open API. Unfortunately, there are still considerable gaps and chokepoints in far too many workflows. And where those places exist, it’s likely you’ll find an emailing or manually typing human bridging the gap between otherwise effective systems.

Why is that? To start, we can’t deny the considerable power of inertia. Perhaps it’s the top producer with 30 years of experience who simply doesn’t have time to stop and document in the CRM. Perhaps the loan officer is too busy taking applications or chasing leads to sit in the office for training on a “back office” process. Maybe it’s a top executive who’s “always done it this way.” Perhaps TRID has only entangled the loan process, but it’s now a well-established reality we can’t ignore. Regardless of who refuses to get on board with a new technology, buy-in is still a necessity to the process of automation.

Similarly, fear of the unknown is a natural and prevalent human inclination. It’s not easily overcome, and it only gets more difficult to convince a professional or a team to change the way they do things if the training and/or implementation of a new system is lacking or downright poor. The same holds true where the solution being installed simply doesn’t work well; doesn’t truly fit the workflow or business needs or simply isn’t easy to use. How many times have we seen the example of frontline team members, frustrated with the new LOS, who find rogue, third-party apps and use their smart phones to workaround that expensive new platform?

In many cases, however, we’re still using email folders as project trackers or playing phone tag because, even though the great tech we’ve implemented is working and is being used optimally by the whole team, it doesn’t match up seamlessly with the other pieces of the operation – manual or automated. These gaps or in-between places in the workflow invariably revert to a need for manual processing to push a file from one stage to the next in the mortgage transaction.

It’s here that the next wave of automation, Phase 2 if you will, is already starting to happen.

And the holdouts are…

One of the most obvious chokepoints in the mortgage process is also one of the first to occur. The good news is that it’s also one of the first, mostly manual processes in the early stages of becoming (more) automated. No L.O. or specialist relishes the TRID-mandated Loan Estimate (LE) or even less formal closing fee estimates. These can vary from state-to-state; county-to-county and even city-to-city. They also seem to change day-to-day. Yet we still see the professionals charged with producing LEs proudly displaying their Excel templates and tapping into stagnant sources of information for that task. There are probably some still using Google or making calls! There’s no longer any need for that, as a number of good closing fee calculators, updated constantly and professionally for accuracy, are available to lenders and title agencies alike.

Another roadblock in the mortgage process will probably always be a little troublesome, but it could definitely benefit from more automation. At more than a few points of the transaction, consumer data and information is required. This process is executed all-too-often by way of phone call, email, text message or even fax. It’s a lot to expect that, someday, a first-time homebuyer will come to the transaction ready to provide each point of information needed without being prompted. But lenders and service providers could still make the input/extraction process simpler. Consider the number of gaps and opportunities for delay between the various stages of the process. It starts with the provider requesting specific information via email, text or phone call. Here’s the first opportunity for confusion and delay. Once the real estate professional or buyer/seller understands what’s being requested and inputs that information into a return email, text or phone call (voice mail?), the next opportunity for delay or even error comes as the provider accesses the data (perhaps the underwriting assistant is out of office for a few days and not checking voice mails) and then inputs the data (after extracting, somehow, from a text or phone call) into the LOS.

This type of manual but critical processing happens throughout the home buying process. Yet we wonder why it takes six to seven weeks to close on a home.

It’s not just the “what” but the “how” slowing the process

When a transaction is dependent on the collaboration of multiple parties and providers working on the same file, the importance of clear, efficient communication cannot be overstated. Yet this is another area where, as an industry, we’re getting better, but we still have a long way to go. Consider the age-old frustration of REALTORS with title agencies; lenders with appraisers or AMCs…and consumers with all of them. This frustration often starts and ends with delay and silence. Calls that are not returned in timely fashion, if at all. Reports or documents that take weeks to produce. Emails that go unanswered. Questions that go unanswered. Yet it also remains unanswered as to why our industry still insists on using a myriad of communications channels, only some of which are secure. One title agency might be using the U.S. mail for some requests while another sends an email or, better yet, a link to a U&P protected portal. After all, who doesn’t want one more app on their phone or bookmark for their web browser? One real estate agent might call in some missing information. Another might drop by with a hand-scrawled note to be interpreted and then hand-keyed into the system. A text with the borrower’s Social Security number? Sure, why not? Security be damned – as well as accuracy and timeliness! For a lender seeking to improve this traditional headache in the transaction, it can start by ensuring most (if not all) vendors and their vendors and partners have and are using systems that easily integrate or work with the lender’s LOS.

And then there’s underwriting. Another traditional source of LO frustration – justified or not – this is another traditional pain point in the process. Admittedly, there will always need to be some time for deliberate, unrushed consideration in the process. AI will not completely replace some level of human decision-making when it comes to measuring the risk of a potential loan. Remember the uproar over “desktop underwriters?” It’s likely that, even if AI reaches some level of being foolproof, consumer and regulatory sentiment will demand constraints on the unrestricted use of technology to determine credit worthiness. Yet, there is no doubt that there are dozens of ways in which effective technology could speed the underwriting process.

There aren’t many mortgage-related processes left untouched by technology. Even the headache-inducing processes we’ve mentioned are all being targeted by an increasing number of new solutions.  Phase Two of the digital transformation has already started with early adopters. But the mainstream is only starting to turn its attention to automating these gaps and chokepoints. They’re starting to identify the areas where they still have too many employees doing manually what technology should be doing for them. It’s coming. It just can’t happen fast enough…especially for the buyers and sellers waiting over a month for an exchange of keys.