A new era of increased mortgage volumes is on the horizon, set to fundamentally transform the landscape for mortgage lenders. It’s a shift driven by recent rate cuts from the Federal Reserve – with further cuts expected – combined with cooling inflation, changing demographic trends and heightened demand for housing, among other factors.

According to the Mortgage Bankers Association, re-finance application volume has tripled compared to 2023, fueled by homeowners seeking to reduce payments as mortgage rates hit their lowest levels in 18 months.[1][2] However, for mortgage originators, higher volumes represent a challenge in the current market context, with the potential to strain existing systems and processes, create bottlenecks and longer processing times, and impact customer satisfaction.

Effectively managing these increased volumes will prove crucial to maintaining operational efficiency and competitive advantage. The imperative to do so is palpable, with 60 percent of industry leaders reporting a need to increase origination volume. To do so successfully, lenders must invest in scalable solutions, embrace innovation, enhance efficiencies, re-imagine customer experience and prepare for regulatory changes.[3]

Addressing these challenges head-on will enable the mortgage industry to embrace the kind of digital transformation that has already revolutionized other sectors. By leveraging next-generation technologies and Artificial Intelligence (AI)-enabled digital accelerators, lenders can develop all-new levels of efficiency and productivity, harnessing an ever-changing market and transforming the nature of mortgage origination in the process. Here, we explore how this future can be realized.

Overcoming Origination Barriers to Unlock Transformation

While the digital imperative for mortgage lenders is coming into focus as volumes increase, it has been brewing for several years. Disruptive technologies, shifting consumer expectations, heightened regulatory scrutiny and competition from non-traditional players are shaping the industry – pushing forward-thinking lenders to embrace innovative technologies and implement a fully digital lending process.

A quick look at the critical challenges within mortgage origination sheds light on the need for digital-first experiences, with cost a first case in point.

Top 3 Challenges in Mortgage Origination

Cost

Average origination costs have risen by 35 percent over the past three years, according to the Federal Home Loan Mortgage Corporation, driven by increased mortgage activity and demographic changes.[4] Reliance on antiquated, manual processes and legacy systems is impacting lenders’ ability to simply meet demand, let alone deliver personalized customer journeys.

Customer Expectations

Personalized and tailored experiences represent an integral expectation of today’s tech-savvy customers, who are increasingly accustomed to streamlined journeys through the rise of FinTechs and digital-first competitors. Meeting these expectations represents another significant challenge for lenders, with a tech-forward approach and digitized experiences required for customer attraction and retention. Recent research shows this in action, with 63 percent of consumers preferring online mortgage processes over an in-person process and 58 percent indicating that the availability of digital applications impacts lender selection.[5]

Time-to-Market

This is another barrier for lenders, with the industry often adopting reactionary approaches due to the lengthy processes involved in changing rigid systems and ever-evolving regulations. However, increased regulatory scrutiny and fast-moving market dynamics are now making proactivity a pre-requisite. Pre-funding Quality Control (QC) reviews are one example, with the Federal National Mortgage Association now requiring that at least 10 percent of production undergo pre-funding QC – heightened enforcement that digital transformation can match and exceed.[6]

Digitizing to Manage Scale and Build Next-generation Operating Models

While opportunities for financial institutions to embrace technology and leverage it to their advantage have never been greater, many institutions remain resistant to change and cling to antiquated, manual processes. However, harnessing the myriad digital transformation levers can enable organizations to re-invent mortgage origination, streamlining processes, enhancing agility, reducing costs and unlocking further innovation.

Intelligent Automation

Opportunities to automate processes exist across the mortgage origination value chain, streamlining activities and improving accuracy. Robotic Process Automation (RPA) can enable repetitive tasks that currently take hours to be accomplished in seconds, helping lenders increase productivity and develop greater agility to meet shifting demand volumes. Embracing such capabilities saw a leading Fortune 500 bank in the US improve accuracy rates from 90 percent to 99 percent while reducing cost per transaction by 15 percent.

AI-powered Data Extraction

The success of digital ecosystems relies on complete and accurate data. By leveraging AI-powered data contextualization platforms, lenders can improve data extraction and processing of data-intensive functions, with leading solutions capable of seamlessly extracting, contextualizing and standardizing data from myriad sources. Boosting operational efficiency in this way is the primary motivation behind adopting AI for almost three quarters of lenders (73 percent), up from less than half (42 percent) in 2018.[7]

Advanced Analytics

Lenders can leverage analytics to unlock data intelligence and access insights integral to enhancing efficiencies, reducing risk and developing a deeper understanding of customer behavior. Fueling delinquency management solutions with this intelligence, for instance, can minimize financial losses while strengthening customer relationships.

Next-generation CX

Digital transformation can also enable lenders to build a new era of enhanced customer experience. Generative AI (Gen AI)-powered chatbots are one example, speeding up response time and guiding customers through entire processes. AI assistants, meanwhile, can augment agent capabilities by providing real-time insights on customers, enabling new levels of service to be achieved. Significant opportunities exist within Gen AI specifically, with just 7 percent of mortgage lenders currently utilizing the technology but 71 percent beginning to explore its use.[8]

Realizing a Digital Future for Mortgage Origination

Effectively managing increased mortgage volumes calls for a comprehensive strategy that combines technology, process improvement, staffing solutions and a commitment to customer service. By investing in these key areas and planning for future expansion, mortgage originators can manage growing volumes while sustaining operational efficiency and maintaining a high standard of service.

Acting now is vital, with activity set to increase in the coming years: By 2026, US mortgage origination volume is expected to surpass the USD 2 Trillion mark for the first time since 2022.[9] Promisingly, partners that leverage AI-enabled digital accelerators and domain, data and analytics proficiency can enable lenders to seamlessly tap into new capabilities and successfully harness this growth opportunity.

While an optimal journey will differ for each lender, one thing is consistent across organizations: As the industry evolves, those who take proactive measures and adapt to change will be best equipped to succeed in an ever-changing market.

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