Mortgage lenders improve the bottom line with back office optimizations

According to Fannie Mae, 41% of mortgage lenders are focused on customer-facing technology as the means to greater competitiveness.ⁱ   While improving the customer experience is a necessary priority, community banks and credit unions may be selling themselves short by failing to streamline the entire lending process.

Even simple back office optimizations can lead the way toward greater profitability, but only 29% of lenders are placing the need to streamline business processes as a top priority.ⁱⁱ

Optimize, but Keep the Customer Focus

Moody’s Analytics reveals that home buyers of all ages want some fairly simple digital options, such as the ability to compare rates online. Additionally, the number of individuals who complete a mortgage application digitally is on the rise in nearly every generational borrower segment PwC indicates that the number of Gen Z borrowers using an online lender was 2.2 times higher in 2019, over the previous year, and millennials increased their use of an online lender 1.5 times year-over-year.ⁱⁱⁱ 

Customer satisfaction with digital offerings is also evidenced by J.D. Power’s 2018 U.S. Primary Mortgage Origination Satisfaction Study. Satisfaction with mortgage originators jumped 10 points from the previous year, due mostly to increased consumer use of digital and mobile channels.^iv

The J.D. Power 2019 study reports similar findings, revealing that overall satisfaction scores surged 140 points higher, on average, when consumers had real-time access to the status of their loan.^v  Unfortunately, the wave of customer happiness dried up temporarily in the second quarter of the year as a 54% increase in the number of mortgage originations over the previous quarter strained the existing capacity of lenders, dropping satisfaction sixteen points quarter-over-quarter.^vi

The industry’s failure to meet customer expectations during periods of high activity underscores the need for community banks and credit unions to consider digital solutions that also focus on optimizing back office functions. It is also important to note that while 61% of respondents expect a fully digital mortgage application process, 49% of millennials actually used a mix of channels to complete the process.^vii  Twenty-one percent of Gen Xers and 30% of Baby Boomers do the same.^viii

Omni-channel interactions stress the need for back office optimization. Paper or manual processes introduce opportunities for errors as information is entered from multiple touch points. According to evaluations conducted by the National Center for Biotechnology, the number of errors occurring for every 10,000 manual entries averaged 650, or 6.5%.  

Banks and credit unions can take a big hit on simple errors. According to Scott McCarthy, author at BankDirector.com, mistakes have a way of multiplying throughout the lending process. An incorrectly entered social security number, for example, poses risks to the organization since the customer cannot be accurately vetted, but also sets the institution up for regulatory compliance issues due to inaccurate reporting.

Digital processes, on the other hand, provide a single source of truth for all data, providing visibility across the organization. In addition, data is automatically vetted for accuracy and loan officers are alerted to missing information or errors.

Digitization can also offer more efficient workflows, stronger pipeline management, and access to a wider range of rating models to reduce risk.

Gaining the Insights to Deliver Bottom Line Results

According to McKinsey, financial institutions can realize a 50% improvement in productivity and customer service by automating processes, such as workflows and decision making, as well as residual processes, like resource planning.^ix  But how do banks and credit unions know when they are on track toward bottom line results? To realize the greatest improvements in efficiency, as well as profitability, banks and credit unions need to also incorporate data analytics into digital mortgage solutions.

The ability to measure operational processes to internal as well as industry standards provides a basis for comparison, allowing lenders to assess current states and plan for precise improvements. For example, access to loan conversion data, including detailed insights such as the number of loans closed by branch or officer, and the average number of days to close, make it possible for sales and operational teams to pursue efforts that improve outcomes.  

Insights into customer behavior also help banks and credit unions to increase the number of customers or members who complete the mortgage origination process. Information indicating when customers and members abandon an application and seek in-person advice, provides a roadmap toward improvement that can generate higher customer satisfaction as well as an increased number of closings.

As consumers move more toward digital channels, expectations lean toward faster and ever more efficient processes. To attract and maintain market share, community banks and credit unions need insights to focus their efforts and keep the back-office humming.

_{i “Mortgage Lender Sentiment Survey Special Topics Report.” Fannie Mae, Second Quarter 2019. Web.
ii  Ibid.
iii   “2019 Consumer Digital Banking Survey: PwC. “PwC Digital Consumer Research, June, 2019.” Web.
iv  “Transitioning from the Traditional.” MReport. Daily Dose, Nov. 8, 2018. Web.
v  “Mortgage Customer Satisfaction Improves but Loan Boom Reveals Foundation Cracks, J.D. Power Finds.” J.D. Power, Nov. 14, 2019. Web.
vii  Ibid.
viii  Ibid.
ix  Joao Dias, et al. “Automating the Bank’s Back Office.” McKinsey & Company. McKinsey Digital, 2012. Web.}