The Slow Market Opportunity: Mortgage Digitization

While the mortgage market will always have its ups and downs, the key to building a successful and sustainable lending business lies not in what you do when conditions are favorable but in what you do when they’re not.

That’s why slow markets are, more than a daunting prospect, the ideal time to optimize workflows and implement best practices — starting with digitizing the mortgage process.

Let’s explore why.

Why you should reframe slow markets as an opportunity to optimize processes

It might sound counterintuitive to look at high interest rates and loan volume decreases and think, “This is a great opportunity,” but that is exactly the kind of mindset that pays off when better days come.

In truth, slower markets give you the opportunity to:

• Review performance
• Identify gaps
• Implement new software
• Streamline processes

In other words, it’s a time when you can examine ways to improve processes, modernize, and get your ducks to be competitive when business picks up.

For example, we recently spoke with one of our clients, who’s a best-in-class lender. They discovered they were spending $10m on labor directly related to verifying income and employment.

Tracking where their labor dollars were going was key in identifying an area of bloated spending, which presented an opportunity to improve verification and redirect that money toward revenue-driving activities.

When the pendulum swings back to the other side, and borrowers come rushing back, lenders like them, who took the time to optimize, will be better positioned to take advantage of better market conditions and quickly recapture loan volume.

Mortgage digitization actions you can take today to improve processes

Intending to achieve the improvements described above alone isn’t enough — it requires easy access and visibility into daily operations and the metrics associated with them to inform the kind of decision-making that’ll help lenders capitalize on the opportunities ahead.

With that in mind, here are two actions you can take as soon as today to start optimizing your mortgage lending process.

1. Improve metrics tracking

Easy access to actionable metrics is crucial to continual process optimization, and digital tools allow you to better track KPIs and collect the data you need to improve processes when the time comes.

Without metrics, it’s hard to figure out where to put your energy optimizing processes during a slow market. You want to focus on metrics that help you assess overall efficiency and evaluate the performance of your partners and vendors.

To have enough insights to support process optimization, we recommend, at the minimum, that you track the following:

• Loan origination volume
• Loan processing time
• Cost per loan origination
• Labor costs by task type (e.g., how much of your labor money is going towards customer interactions vs. repetitive tasks such as income verification)

These metrics provide a solid baseline for understanding your cost and time efficiency. From there, you can identify opportunities to eliminate wasteful spending or redundant tasks so you’re better equipped to handle higher volumes.

Beyond helping you evaluate your own workflows, KPI tracking is a useful tool for finding the right vendors when you’re ready to make a technology investment.

For instance, if your cost per loan origination is high or increasing, you may want to look at areas to reduce spending, such as working with a cost-efficient automated VOI/E provider like Truework. Beyond that, Truework can also help you reduce loan processing times by automatically orchestrating verification requests across multiple methods and eliminating hours of manual work.

After all, for most lenders, the best way to modernize and optimize is with the help of technology partners (instead of trying to develop digital capabilities in-house). Because of that, it’s important to use metrics to hold providers accountable so they add efficiency to your processes, not extra work.

In terms of evaluating vendors, we recommend looking at the metrics that have the most direct impact on your cost efficiency. For example, with VOI/E vendors, completion rate is the ultimate standard to look at to ensure you’re measuring providers by the information you can actually use in your process.

2. Find vendors that support change management

Change management is difficult, especially when moving from manual to digital processes. For lenders, going digital can come with growth pains because you have sales teams that work directly with borrowers, and changing those processes often requires a significant overhaul.

But the most successful players are already doing it or have plans in place to digitize because they know it’s essential for maintaining a competitive, efficient, and cost-effective business.

Partnering with digital mortgage technology providers to modernize your lending business is an excellent way to expand your capabilities without needing to develop software in-house. That said, you want to ensure you’re picking the right vendors.

Finding providers that continually modernize and hold themselves to high, measurable standards can help you ensure a more seamless change management experience. You also want forward-looking partners that continue evolving to match borrower needs and expectations, so you don’t need another complete overhaul in a few years.

At Truework, we’re always improving our platform so it’s efficient and user-friendly. In addition to providing an intuitive interface, we make sure our product fits into your process so you don’t have to bend over backwards to reap the benefits. With Truework, you can access fast and efficient income verifications via the web app, API, LOS, or directly in your loan application.

We also know that income verification needs to be easy for borrowers. That’s why we provide several seamless and secure options for your applicants, like user-permissioned payroll data, so they don’t have to go through the hassle of hunting down pay stubs and tax documents.

Outcomes you can expect with mortgage digitization

A digital mortgage process is the foundation lenders need to capture relevant metrics and truly understand how their business performs.

In doing so, lenders can reassess their approach to reap several benefits, including more efficiency, lower costs, better customer experiences, and in turn, growth.

1. Increased efficiency

When surveyed, 62% of lenders said that their workforce was reduced in 2023. This means smaller teams are having to manage entire workloads. When you have fewer people on staff, optimizing each individual’s time by ensuring more of it is spent on high-impact activities like driving revenue and building customer relationships is even more crucial.

Digitizing and automating time-consuming parts of the mortgage process, such as VOI/E, can help smaller teams achieve more in less time without sacrificing valuable interactions with borrowers. When the market picks up, having digital processes in place to make your lenders’ lives easier can help you attract and retain top talent while avoiding the need to rehire rapidly.

2. Cost reduction

In the same survey, 31% of lenders said that cost-cutting is a top business priority. However, eliminating expenses doesn’t have to involve getting rid of the tools your team relies on or sacrificing the borrower experience.

By investing in digitization and automation, lenders can shorten processing times and loan cycles, reducing costs associated with long loan cycles.

Digitizing time-consuming steps can also provide the most cost-effective workflow for lenders. For example, Truework’s automated VOI/E platform for mortgage lenders empowers lenders to stop relying heavily on multiple verification platforms and costly legacy providers.

3. Better customer experience

When asked about digital mortgage services, 62% of borrowers said that access to online applications impacted their choice of lender, and 41% percent of all respondents said that using a single platform for the entire process makes for a great online experience.

That said, getting a mortgage can be a complex and intimidating process for customers, and many borrowers also want the option to speak with a lender. That’s why the best borrower experiences will come from finding the perfect blend of support from digital tools and experienced lenders.

By leveraging process automation for repetitive tasks like VOI/E, you free up time for your team to have meaningful interactions with customers. Less time chasing down paperwork equals more time learning about your customer’s dream home, as well as advising, educating, and walking borrowers through digital application steps.

Make the most of every market condition with Truework

Mortgage markets fluctuate up and down, and that’s outside of lenders’ control. What is in your control, however, is how well you take advantage of each environment. With partners like Truework, you can modernize your mortgage lending process and position yourself to capitalize on the opportunities that arise when the market picks up again.