How the COVID-19 pandemic kick-started digital innovation in mortgage

The social protocols mandated by the COVID-19 pandemic have jumpstarted the mortgage industry’s pursuit of digital solutions to keep origination volume in motion. Three origination leaders discussed the innovations during a HousingWire webinar on Friday: “Social Distancing Paves Way for Digital Proximity.”

Origination leaders on the webinar included Jason Cramer, managing director and head of fulfillment at CitiMortgage, Tammy Richards, chief operating officer at loanDepot, and Rakesh Sheth, head of consumer direct sales and business insights at Wells Fargo. Karthik Kumar, global head of mortgage practice at Tata Consultancy Services, moderated the webinar.

“This crisis has inspired creative thinking to its highest order,” Kumar said. “And our own U.S. mortgage industry has been quite innovative – not just the active exploring all the possibilities of video-based closings, remote online notarization regulators and investors easing restrictions, but enabling remote working by a mammoth and diverse workforce.”

Sheth acknowledged the housing market went into the pandemic in a very strong state of health, with consumer interest in homeownership fueled by historically low interest rates.

“Each customer need is going to be unique and circumstantial, depending upon where they are. But from the macro perspective, the market is very healthy, the home prices are holding up quite well, and there’s a continued lower interest rate environment,” Sheth said.

“We’ll be strongly supportive of the market going forward, and I think the Federal Reserve has indicated the market rate to be fairly accommodative in a reasonable and continued expansion.”

Sheth also credited the government-sponsored enterprises for coming out with an “accommodative guidance for supporting homeownership” that also ensures investor confidence in the secondary market. And while acknowledging the challenges in maintaining jumbo mortgages and non-QM loans on balance sheets during the ongoing crisis, he believed “the industry will continue to support products and homeownership to the extent that is allowed by the investors.”

Cramer said social distancing and stay-at-home edicts did not break the bond between consumers and retail lenders.

“It all comes down to the fact that borrowers still need a trusted advisor, and they still want a trusted advisor in their home-buying experience,” Cramer said. “We have invested pretty heavily in our retail footprints – we actually have branches and can serve those customers’ needs, along with our direct consumer channels and the correspondent [who] are able to go out to perform and provide banking services on our behalf. Once we actually have the loan in the door, we hopefully can have a customer for life.”

Richards observed that the pandemic altered how lenders determine borrower eligibility, with both parties trying to balance social distancing mandates while still eager to pursue the transaction. The solution, Richards pointed out, was digital, and she predicted it would outlast the pandemic.

“Pre-qualifying customers has never been easier with online applications,” she said. “Nobody wants to go face-to-face right now. So, the online application and also customer portals are another good way to work with our customer to be able to have communication.”

Still, not every stakeholder is rushing to embrace digital solutions. Kumar highlighted that “technology-based mortgages can save up to 2.2 billion a year sheets of paper pages per year,” but Cramer countered by observing that “sometimes folks just want to add paper and they want to touch and feel and then put a ballpoint pen or something.”  

Cramer also questioned if some highly-touted digital solutions now being used in the appraisal process are worthy of a full embrace.

Sheth noted the new importance that e-closings have taken on in what he dubbed a “low-touch or no-touch economy,” and he did not believe the technology would lose popularity in the post-pandemic era.

“My expectation is that it will accelerate,” he said. “There is always going to be a customer segment who will demand [in-person closings] and lenders will have to meet those needs.”

Richards highlighted that digital solutions are already shaping how the mortgage industry hires its next wave of employees.

“loanDepot did a virtual job fair recently and we were able to hire 400 employees through our virtual job fair,” she said. “We had 10,000 people join the virtual job fair. I think that there’s a lot of a lot of people that are wanting to find a new way to look for jobs.

Hear more of their deep-dive into the topic here.

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