Since the spring of last year, mortgage lenders have experienced a fall in loan volumes as interest rates rose. Combined with the rising cost of funds, lenders have seen a serious decline to their net interest margins. This problem is not limited to the mortgage industry. Affirm, one of the largest personal lenders in the nation, noted a 223% increase in cost of funds year over year in their last quarterly report.
Amid all this, new regulatory changes to GSEs (i.e., Fannie Mae and Freddie Mae) have introduced new compliance risks that affect mortgage lenders. These changes require a massive amount of manual labor and have led to staffing shortages, lest mortgage providers pay costly fines.
Things seem dire for lenders, and they must adopt novel strategies and implement new technologies to overcome these current challenges. Automation plays a part in many industries, but its use is especially important to the lending industry now.
Robotic process automation (RPA) is a widely-used solution across many industries. RPA uses technology to automate tasks, and in many cases, RPA is quite useful at this, potentially freeing up significant man hours. However, RPA is best at automating simple, repetitive tasks that do not require analytical problem solving. Financial processes, particularly mortgage and commercial lending, are complex and multifaceted and are notoriously difficult for RPA to handle. In those cases, RPA is actually slower than having a human doing the same work. Newer, better technology is required to make automation viable for lenders.
Intelligent process automation (IPA) combines the automation technology of RPA with artificial intelligence (AI), machine learning and big data analytics. The amalgamation of these new technologies allows IPA to go beyond the capabilities of traditional automation. While a traditional RPA tool can scan a document and pull all the relevant information, IPA can understand the meaning of the information inside the document and how it relates to the organization’s policies by using AI in order to determine the best location and use of such data to move the process forward in real-time. It can also track employee workflows and changes across systems of record to “quarterback” a process from end-to-end. IPA can contact loan applicants requesting the necessary documents and take them where they need to go, all without the need for a knowledge worker to step in.
IPA, and especially its use of AI, can help lenders with compliance and fraud detection. By automating the manual work, IPA eliminates manual errors, which in turn helps reduce risk of compliance issues. AI can also detect potential fraud by analyzing patterns, identifying signs of fraud and even gathering additional evidence needed to verify a fraud alert.
While the mortgage industry seems to be more precarious than it has been in years, the implementation of IPA can help lenders of any size. Given the challenges with compliance, volumes and costs of funds, IPA is one of the most valuable tools available to lenders today and can do a lot of the heavy lifting while the team focuses on pursuing growth and ensuring that their customers are satisfied. That being said, automation is not only a solution for when things are slow. IPA can help an organization become more efficient and scale its business no matter what kind of environment they are in.
Joseariel Gomez is the founder and CEO of Shastic, an IPA-as-a-Service platform that allows financial institutions to increase efficiency and improve processes. As CEO, Gomez oversees all departments at Shastic and takes part in designing Shastic’s platform itself. Gomez founded Shastic in 2009 and has directed its growth for over a decade. Gomez started Shastic as an SMS messaging platform. While Shastic was able to improve communications, financial institutions needed to automate more processes. Gomez realized that robotic process automation was the right solution for the moment and addressed the problems bankers were facing. Gomez decided to switch directions and develop AI-integrated RPA solutions for banks and credit unions. Through Shastic’s use of AI-integrated RPA, banks and credit unions can extract meaning from unstructured data. Gomez’s strategic process saves on costs and improves customer satisfaction.