A MORTGAGE PROFITABILITY CRISIS THAT CAN BE SOLVED

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The push to automation in the home lending process helps both the client and the lender

One of the only good pieces of news in the past few weeks has been the falling US home mortgage interest rates.  This is allowing more and more Americans to either become a homeowner or to remortgage their current house at a better rate.  As a result of this, the competition amongst mortgage companies for clients intensifies, and along with it the pressure to get these clients financial documents approved quickly, and with little or no issues, becomes greater.

The Problem Facing Mortgage Lenders

You may not know this, but the cost for lenders to process the millions of loans that get approved in America each year has gone up, and the majority of this cost is directly related to work that could be automated. According to the quote from Marina Walsh, MVA VP of industry analysis, in HousingWire’s article, the mortgage loan production expenses have hit $8,957 per loan, which is up 57% from 2012.

While there is an increasing trend in the lending industry to pull borrower’s data from the source electronically, only 1 out of 5 borrowers gives the required consent to lenders to allow them pull the data from the source. Even then, the mortgage industry is a complex ecosystem with primary and secondary market players that do not have any access to borrowers.  For these reasons, lenders employ a small army of loan originators and underwriters to fulfill mandatory document processing steps to underwrite loans such document upload, verification, data-validity and data parsing. According to Jan 2019 Boston Consulting Group’s US mortgage industry white paper, 70% of the increase in product expenses is attributed to rising personnel costs.

Not surprisingly, another threat to established mortgage lenders and banks is coming from the ‘all-digital’ automated platforms like Rocket Mortgage by Quicken.  Rocket Mortgage claims to be able to get your mortgage approved quickly, seamlessly and with great customer service.

Introducing AREAL.ai

A potential solution for the bevy of legacy lenders fighting with the all-digital platforms and paper intensive nature of underwriting was (exclusive launched?) launched today by a San Francisco-based startup called AREAL (www.areal.ai).  The folks at AREAL say that they ‘established our company because we saw this issue in real time and we believe we can be integral in solving the problem’. Their platform is working to solve two major issues facing lenders – being able to process with complete accuracy 1000’s of different financial documents through AI and algorithms and with no very little to no human interaction.  And secondly, taking those indexed and classified documents, and parsing them in order to make AI-powered business decisions, thus taking the human work out of the initial, time consuming and costly, step in the mortgage approval process.

If you are a stakeholder at a lender and you see firsthand the issues AREAL has outlined, they are happy to demo their platform more and discuss their solution.  If you are not a stakeholder, hopefully you are taking advantage of the one bit of good news we have had in a while and buying your first home!

For more information and a demo of AREAL please contact Bill Hajjar at  bill.hajjar@areal.ai

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