Mortgage Industry: How the Next Five Years

are Looking for US Mortgage Industry and

What can Businesses do to Prepare for it

The effects of digitalization and changing business landscape have touched

every area of life, and all eyes have been fixed on the mortgage industry of the
US to see how it adapts to the changing conditions. US Mortgage Industry has
been a large cooperative network. It is a major financial sector in the US.

The Current State of the Mortgage Industry

With changing customer expectations and tech-savvy millennials, forming the
largest share of the new dimension of the mortgage industry, it is clear that
the tech trends have started dominating the industry. Based on studies, North
American banks are expected to spend 50% of their total information
technology (IT) budget on digital technology in 2022. The major technological
advancements include primarily the adoption of “cloud” and Software-as-a-
Service (SaaS), blockchain, intelligent process automation (IPA), artificial
intelligence (AI), and machine learning (ML). Due to the advent of data
automation in the sector, lenders are working with a large amount of data and
this has led to the processes and decisions becoming more data-driven.

What to Expect Towards the End of 2020?

COVID 19 has resulted in an increase in the overall share of loans in
forbearance and a decline in mortgage rates. Besides the financial
implications, there has been a major drift in the work culture. ‘Work from
Home’ culture has shifted the work towards being digitalized. This trend is
expected to continue for the entire 2020 at least.
This paradigm shift in the culture will make data security the most important
and relevant than ever. It will lead to other pervasive challenges like data
management, resource availability, and affordability. Most of the lenders will
drift towards the cloud, offshoring/outsourcing, with automation being the
topmost priority. The fusion of AI/ML and natural language processing will
help in accelerating this shift in a more efficient manner.

Future of the Mortgage Industry in the Next 5

Years
Simplifying mortgage process, making mortgage cost-effective, quicker
turnaround time, and ease of processing mortgages will be the key areas of
focus. Technology will play a significant part in changing dynamics to facilitate
these transformations.
Some of the key go-to technology adoptions include the following:
• AI/ML-enabled chatbot mortgage adviser for enhancing customer
satisfaction by providing insight based financial product
recommendations
• Robotic Process Automation (RPA) for increased productivity,
higher customer satisfaction, and accuracy by automating the
resolution of errors and exceptions during loan origination. Other
critical functions like processing, quality control, and servicing will
also become the areas to be automated
• Blockchain for validating information from third-party vendors and
having them in one place via the distributed ledger. It will solve the
challenges of transparency and time-consumption by enabling
digital tracking with the help of a digital ID. Distributed ledgers and
smart contracts will help in the reduction of costs
• Application Programming Interfaces for workflow automation, data
consistency and accuracy, and compliance by openly sharing
information and setting up reports’ generation process accurately
• Cloud technologies for scaling solutions and implementing security
by adopting practices such as backing up data and updating of
solutions

Large, Medium and Small Size Players Should

Prepare Themselves
Anticipating the wave of technological disruptions, businesses should prepare
themselves to work with new and innovative ideas. In this drive for change,
different players would be responding in different ways. Big players would be
investing more in enterprise technology platforms after a proper cost-benefit
analysis. Whereas, medium and small size players would be investing more in
digitizing their core processes and less in digital.

Large Players
They are finding ways to create a cognitive computing environment by
optimally combining next-gen technologies and using customer intelligence
analytics to understand borrower perceptions and increase customer
satisfaction.
Some of the emerging trends that will be observed going forward:
• Blockchain can be used by them with manifold benefits such as:
• Asset tracking (tracking of physical assets like
automobiles through loan processes), Automated claims
• Know your Client (KYC) for managing records securely,
payment/settlement, provenance for showing the full
history and ownership of the asset
• Streamlining the process of financing trades,
improvisation in the process of buying and selling assets,
data tracking, and control functions for smart spaces or
IoT solutions
• They can enhance the immersive experience using AR, VR, MR,
multichannel human-machine interface (HMI), and sensing
technology

Medium and Small Size Players

They are more focused on enhancing the customer experience with working
on their core processes. They would seek the cooperation of their core
banking vendors for bringing out the advancements.
Some of the emerging trends that will be observed going forward:
• They will be investing in building compliance competency into
product development processes and low-down-payment options,
the down payment assistance programs, and an increase in loan
limits for the new homebuyers
• They will also focus on redefining and redesigning jobs to
strengthen the higher-order work by upskilling their internal talent
pool
• Since cloud computing is offered to mortgage lenders on an
alternative cost model, and they provide easy deployment, these
players can adopt this technology. This will help them automate the
process and ensure privacy
Besides size, the mortgage players can be well classified based on tech
maturity as well. The below matrix explains the adoption of different
technologies by different players.

Conclusion

As we can see, the emergence of new technologies combined with the

changing market scenarios is putting a strain on the US mortgage industry to
adapt to the changes to sustain in the next 5 years. The major technological
changes in the US mortgage industry will be the application of AI/ML, Robotic
Process Automation (RPA), Blockchain, Application Programming Interfaces
(API), Cloud technologies for automating the processes, and enhancing
customer experience. The need of the hour is also to be well prepared for the
unforeseen circumstances. Different size of businesses is going to handle these
changes in different ways. Large size players would be more focused on
investing in adopting new technologies, whereas medium and small size
players would be investing more in their core processes.