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Full-Scale Digitalization for Mortgage Lenders: Why Bother?

Aug 4, 2023
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11 min read
Full-Scale Digitalization for Mortgage Lenders: Why Bother?
Nataliia Peterheria
Nataliia Peterheria
Operations Manager

Buying a house is one of life’s most exciting projects. Yet taking out a mortgage is stressful, especially if a person turns to traditional mortgage companies. Comparing rates, filling out forms, organizing documents, and waiting weeks for a decision is exhausting. As a result, this decreases the conversion rate for closed deals.

With the rise of digital services sparked by the whole world going on remote, people on both sides of the table have realized that these processes can be much simpler. Property buyers now expect a more streamlined, online solution to finding a loan, and a staggering 99% of lending companies agree that technology can help improve the mortgage application process. As a result, digitalization for mortgage lenders is a must if mortgage organizations want to maintain or increase their market share.

One example is our client, Molo Finance. Their fully online mortgage process allows taking out mortgages in two minutes instead of the common for the industry 45 days. This resulted in a 30X YoY growth for the company in 2021.
Full-Scale Digitalization for Mortgage Lenders: Why Bother? 1
With 22 projects and 10 years in fintech digitalization under its belt, Django Stars has plenty of experience to share with CEOs and CTOs looking to gain a competitive advantage in the mortgage industry.

In this article, we’ll discuss the challenges mortgage companies face with digitalization, the benefits of digital mortgage service solutions, and the process of digitalizing a service offering.

Reasons for Digitalization in the Mortgage Industry

Mortgage service digitalization addresses the shortcomings of the traditional paper-based approach to the process. Here are just some of the signs that a company is ready to make the change:

  • The company often loses documents.
  • Customers complain about slow service and too much paperwork.
  • Business is decreasing.
  • Employees often find themselves repeating work or missing important tasks.
  • Mortgage processing takes weeks.
  • The company may incur fines for non-compliance.

If a company checks any of these boxes, it loses out to competitors — fintech and digital mortgage companies that are already using mortgage process automation to offer fast, high-quality service to their customers.

Given all this, it makes sense for traditional mortgage companies to transform their processes. Still, many of them are hesitant to commit to change.

Why Are Traditional Mortgage Services Still Resisting Digitalization?

Digitalization is a challenging project for any business. To succeed, companies need to fully understand what they’re trying to achieve and overcome the fear of breaking existing workflows. For the mortgage industry, there are two additional challenges.

Too many regulations

As Deloitte notes, innovation in the mortgage industry is often shaped by regulatory considerations.

Indeed, it’s difficult to deny that mortgage services are strictly regulated, and each lending company, including lending startups, has to wade through hundreds of rules to follow, it can often feel easier to let existing processes be. Companies can reason that if employees already know how to use traditional methods, any changes will create more work than necessary.

This is both true and false. The first stages of digitalizing mortgage services carry a heavy workload: companies need to study a myriad of data security and protection rules and other industry-specific requirements to set up the platform. This work is critical, as these stages lay the foundation for all future work.

However, once companies have set up workflows and integrated digital tools for document, customer, and incident management, compliance becomes much easier. For example, AI-based document management apps can create drafts of fully compliant mortgage agreements or check if a manually created agreement meets all requirements.

So how can companies overcome the compliance hurdle? First, when developing a platform, project managers need to communicate closely with lawyers and regulatory experts and double-check that planned processes are compliant and optimal. Second, they should take time to train employees to use the new system to overcome their fear of “clicking something wrong.”

Lack of a comprehensive approach

Often, traditional mortgage companies begin digitalizing tasks in response to pressure from outside competition, but the work doesn’t pay off. As a result, managers believe that further attempts will be a waste of time and money. This is true unless the company changes its approach from partial or local digitalization to more full-scale change.

Full-scale digitalization involves all levels and areas of operations — client-facing systems, middle-office, and back-office processes. This is the only way to effectively digitalize services; if a company only focuses on one aspect, employees end up with more work, not less.

An example of ineffective digitalization could be when a borrower fills out data online, but mortgage agents print off a pile of papers to check it, then manually send requests to a bank, calculate a rate, and create an agreement in MS Word. A few weeks later, the agent will send a scan with a handwritten signature to the borrower’s app. This lengthy process fails to give the benefits of a digitalized approach.

In summary, businesses can only improve processing, underwriting, and closing results by digitalizing their entire value chain and keeping the process from form-filling to approval on the same platform.

The Benefits of Digitalization for Mortgage Service Companies

Many industries benefit from digitalization, and digital transformation for mortgage services is no exception. Fewer mundane tasks and increased employee productivity are obvious benefits of any successful digitalization strategy. But there are several other advantages of digital transformation for mortgage lenders.

An improved customer experience

Most online consumers expect fast and easy service and will favor companies that offer it. Mortgage borrowers are no exception: borrowers demand a more personalized digital experience, quicker service, and more timely updates from financial institutions.

Digitalization satisfies this need. According to the survey, homeowners who used an online application appreciated the simpler application process (55%), reduced time to close (53%), and fewer in-person interactions (49%). As a result, digitalization helps businesses outperform their competitors and get a higher return on investment (ROI).

Higher productivity

Another way to beat competitors is to help employees become more productive without overloading them. Automation and electronic document management tools are ideal solutions for this. E-signatures and easy ways to photograph and scan documents help customers and employees exchange information faster, while automated systems allow employees to quickly find and verify data in internal and third-party databases.

As a result, agents that take advantage of digital transformation for mortgage servicing process applications around 20% faster than traditional lenders.
Full-Scale Digitalization for Mortgage Lenders: Why Bother? 2

Fewer touchpoints

KPMG research reveals that the traditional lending process involves over 30 checkpoints, inquiries, and interactions before a mortgage is issued and costs lenders about $2,000-2,500 per loan. But with digital tools such as chatbots, videos, interactive calculators, and e-notes, digital mortgage lenders can set up verification processes to reduce the number of touchpoints and paid requests to third parties by 15-40%.

Reduced risks of safety and compliance issues

Better and faster access to data makes it easier for companies to identify fraud and reduce financial risks. AI-supported algorithms, in particular, can highlight suspicious activity and suggest optimum mortgage rates.

Workflow automation and customization also help prevent intentional or accidental compliance violations, while a digital platform with cloud storage instead of paper stacks vastly improves the security of sensitive customer data.

In short, digitalization in mortgage services ensures a competitive advantage by attracting customers and offering financial savings without loss of quality. Still, many traditional lenders resist digitalization as they don’t have enough knowledge to set up the process.

Here’s what companies need to know to get started, based on the process we’ve used at Django Stars.

How to Digitalize a Mortgage Service

When you start your online mortgage development, don’t think how to improve what already exists. Think of what you would do if you had to create a mortgage from scratch.

Amitabh Ghatak, former CPO, Molo Finance

These words from an ongoing Django Stars client perfectly summarize the key to the successful digitalization of mortgage services. While the exact development process will vary according to digitalization needs and different software vendors, there are four core stages to any process.

1. Audit the existing service

An audit highlights the weaknesses and strengths of a company’s working processes and what could be used for transformation. For example, a well-organized database will make it easier to migrate data and set up automation.

2. List everything the system is missing

Mortgage systems usually include multiple features and integrations to set up seamless workflows — for example, an online calculator, AI-based assistants, bank APIs, database management, and automation tools. Managers responsible for digitalization should analyze the experiences of others, learn from the competition, and choose all the features to ensure the best user and employee experience.

3. Create a centralized platform

The only way to ensure a smooth workflow is to manage all processes within one platform. Even if mortgage managers have several Excel books, a shared inbox, and a pile of applications that are working for them, the company needs to combine them within one system to make it efficient. The strengths and requirements defined in the previous steps will be used as a basis for this system.

4. Teach employees how to use the new platform

Nothing will work if employees don’t understand new workflows and don’t know how to use new digital tools. Managers should take time to create guidelines, instructions, and manuals to help employees adapt to and see the benefits of new processes.

Check out this article on creating an online mortgage service for some valuable tips and insights: How to Create an Online Mortgage Service.

How Much Does it Cost to Digitalize a Mortgage Service?

As with any software development project, only a vendor can give an accurate development cost. The final number will depend on your planned product, features, and other considerations, such as

  • The project’s complexity (features, data volumes, integrations, functions, etc.)
  • Deadlines
  • The main task — whether a company needs to build a product from scratch or improve the system in use
  • The cost of third-party services
  • The cost of vendor services and type of contract

For example, at Django Stars, it took us 8 months to build an MVP for Molo, and our cooperation is still ongoing to keep this mortgage app the best in the industry. It has multiple integrations with third-party services, as well as unique features created from scratch. All of these factors went into determining the development cost for the client.
Full-Scale Digitalization for Mortgage Lenders: Why Bother? 3
Our experience with Molo and similar cases makes it significantly easier for us to give an accurate quote to new clients that choose Django Stars as its vendor. And they have all the reasons for such a decision, which we’ll consider below.

Django Stars’ Experience of Digital Transformation in the Mortgage Industry

Django Stars is a top-rated company of Python and Django developers with thirteen years of experience in full-cycle development. Ranked in the top three companies in our niche on Clutch, we’ve delivered many cases of successful fintech and mortgage projects.

  • We created a successful MVP of a mortgage app for a promising Swiss startup MoneyPark. Today, we’re continuing our years-long cooperation with the #1 mortgage broker in the Swiss market with regular updates and feature improvements.
  • We also built Sindeo, an app that took its company to the top ranks in the American mortgage market. The app includes a customer mortgage portal and an internal mortgage advisor portal with the tools, information, and guidance clients need to find the right mortgage and lender.

Full-Scale Digitalization for Mortgage Lenders: Why Bother? 4
So, any company that needs digital transformation for mortgage services will find Django Stars as a reliable partner and professional vendor.

Final Thoughts

The future of mortgage servicing is digitalization. All industry players recognize the necessity of such transformation and prioritize it. So it should be a future of companies that don’t want to lose out to neobanks, fintech, and digital mortgage companies in the race of digitalization and a fight for customers’ attention, too.

Digital tools and approaches give mortgage companies many advantages — ease of use and shorter time to close, increased productivity, reduced employee workload, and fewer risks of non-compliance. As a result, companies can win more customers, lower their costs, and enjoy higher revenue.

Yet the path to effective digitalization isn’t easy. Business leaders need to overcome their fear of failure and begin with a detailed and full-scale digitalization strategy. For this reason, it’s better to hire vendors who have proven themselves in building fast and effective digital mortgage solutions.

At Django Stars, we’re ready to become your partners on the road to digitalization. Just contact us, and let’s discuss the details.

Thank you for your message. We’ll contact you shortly.
Frequently Asked Questions
What is the digitalization of mortgage services?
The digitalization of mortgage services is the process of converting the information and operations of the mortgage application and issue process into digital format.
What are the benefits of digitalization in the mortgage industry?

The benefits of digitalization in the mortgage industry include

  • A convenient and faster application process
  • Shorter time to close
  • Higher employee productivity due to lower workload
  • Improved data safety and security
  • Lower financial and non-compliance risks
  • Lower cost per loan
What is mortgage automation?
Mortgage automation is the process of transferring manual tasks from people to computer systems. For example, an employee can request an automated report on a person’s credit history and financial status instead of manually reviewing the data themselves.
What are the challenges behind the digitalization of mortgage services?

Most often, traditional mortgage lenders face such issues as

  • An ineffective, piecemeal approach to digitalization
  • A lack of buy-in at both employee and manager levels
  • Problems integrating technology with traditional systems and workflows
  • Multiple regulations and the need to comply with them while optimizing workflows
  • A fear of new technologies among employees

Fortunately, all these challenges can be overcome with an experienced vendor and the right approach to digitalization.

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