How banks are streamlining the mortgage experience


More and more homebuyers, many of them internet-savvy young professionals, are depending on digital services to purchase a home. While some community banks have relied on third-party vendors to create such software to attract these new customers, others are innovating on their own.

By Ed Avis

The National Association of Realtors reports that people ages 28 to 37 are more likely to buy a house than any other age group. This cohort, called “Older Gen Y/Millennials” in the NAR’s 2018 Home Buyer and Seller Generational Trends report, makes up 28 percent of current homebuyers. And the next older group, Generation X, makes up 26 percent.

What do these relatively young buyers have in common? They like doing things online.

“I think that’s a general trend in all types of financial transactions,” says Cris deRitis, deputy chief economist at Moody’s Analytics. “We’ve seen higher adoption of financial smartphone apps by millennials than other cohorts. It’s unclear whether they like to finish complex transactions, such as mortgages, online, but it’s very clear that they use the internet and their smartphones to comparison shop.”

That means that if you want to capture this growing group of homebuyers, your community bank needs to have some kind of digital mortgage strategy—and if you don’t, the time to start is now.

What do they want?

As deRitis suggests, the one thing nearly every mortgage shopper wants—even older shoppers—is the ability to search online for basic mortgage rates and information. According to a 2018 study by mortgage software corporation Ellie Mae, 92 percent of people who bought homes within the previous year did research online before reaching out to a lender.

Quick stat


of homebuyers did research online before contacting a lender

Source: 2018 Ellie Mae study

Those borrowers who used the web before contacting the lender researched a variety of topics, but the three most important issues to them, according to the Ellie Mae study, were finding the best rate (72 percent of borrowers searched for that information), identifying how much they could qualify for (59 percent) and finding a trusted lender (48 percent).

But many borrowers take the process further than just research. The Ellie Mae study found that 43 percent of borrowers completed their mortgage application online. Those are the borrowers Anderson Brothers Bank was trying to reach when it launched its online mortgage application process a year ago.

“We’ve found that more and more of our customer base wants to apply online,” says Tim McCoy, vice president of mortgage lending for the $657 million-asset community bank in Mullins, S.C. “This is especially true when we direct them there, which we do a lot. If they call us and say they don’t have time to come in to fill out an application, we direct them to the online application. We’re having a lot of success with that, especially on the weekends.”

“We’ve found that more and more of our customer base wants to apply online.”
—Tim McCoy, Anderson Brothers Bank

Anderson Brothers Bank is using an online mortgage package called MortgageBot from fintech provider Finastra. McCoy notes that having customers complete the application online not only pleases the customers—who don’t need to leave home to start the process—but also the community bank.

“It saves the loan officer time when the customer fills out the application online,” McCoy says. “It takes 15 to 30 minutes to take a full application in person.”

Customers applying for a mortgage at Anderson Brothers Bank can also upload financial documents via the web, and in many cases, they can sign disclosures online with DocuSign.

“DocuSign is a tremendous help,” McCoy says. “We get a lot of people moving here from out of state, and, in the past, we were FedExing the initial disclosures for signatures, and they would FedEx them back. It would take maybe a week. Now there are times when 10 minutes later, they’ve received and signed the documents.
“You can imagine how much that speeds up the process.”

Advanced digital steps

Attracting homebuyers with a solid website and online application is just the beginning of what can be done online.

Customers of $1.4 billion-asset Leader Bank in Boston can apply for loans online and through a mobile app, and then other features kick in, explains Jay Tuli, executive vice president.

“The loan officer can create a preapproval letter for the borrower through a mobile app,” he says. “As the loan starts moving through the process, the borrower gets automated email notifications about each step—you are in processing, now underwriting, now approved, now the appraisal is coming, now it’s in closing. We are sending out real-time communications as we move through those steps to the buyer and the Realtor, so they’re in the loop.”

What the customer doesn’t see is even more impressive. For many borrowers, the paperwork is accelerated by Fannie Mae’s Day 1 Certainty program, which verifies income, employment and assets automatically. It’s the same with the appraisal. In some cases, Fannie Mae declares that no appraisal is necessary. And when one is required, Leader Bank’s system automatically orders one and interacts with the appraisers.

Leader Bank’s digital program doesn’t end with closing. For example, if a loan is sold, the borrower gets a detailed email explaining what happened and where the payment should be sent. Even informal processes are automated: The system can send a birthday greeting to borrowers.

“Another thing that has been extremely valuable to us is an automated survey that goes out after the loan closes,” Tuli says. “We get so much feedback from that, good and bad.”

Closing process still imperfect

The one step in the mortgage process that is often not fully digitized is closing. The mountain of paperwork that needs to be signed, sometimes in the presence of a title company representative or an attorney, still hasn’t been fully tackled by digital innovators.

“Right now, the closing process is still paper based,” Tuli says. “That can be done today in an electronic format, where the buyer gets a package online and e-signs it. However, what gets weird is, depending on the county, the registry of deeds might require a wet signature or a notary on certain documents. And certain states require lawyers to close the loan, so that’s a hiccup.”

Nevertheless, Tuli says, Leader Bank is evaluating systems to help streamline digital closings, and it hopes to launch a program this year.

“There is still room for improvement to make it a completely integrated system from beginning to end,” he says. “This will evolve.”

Leader Bank: To buy or make new features?

Leader Bank in Boston is an innovator when it comes to digital mortgages. It launched its first basic offering about five years ago.

“Five years ago, you could just kind of use a clunky website and punch in your information and apply. Now it’s much more intuitive and helps the customer along.”
—Jay Tuli, Leader Bank

“Five years ago, you could just kind of use a clunky website and punch in your information and apply,” says Jay Tuli, executive vice president. “Now it’s much more intuitive and helps the customer along. We also have a mobile app now, which, for example, allows the borrower to take a picture of a bank statement or pay stub and upload it. And the e-signing capability has gotten better. Much more of the process can be e-signed.”

Those improvements over the past half-decade have come partly from third-party companies and partly from Leader Bank itself.

“When we are thinking about a new feature, we always first ask, ‘Can we buy it?’” Tuli says. “If we can’t buy it, we ask, ‘Can we build it?’ And if we build it and make that investment, we have to be OK doing that, knowing that someone in the next few years will come out with a solution.”

Tuli says that the consumer-facing elements of his system are sourced from third parties, because many companies have developed that software. But about four years ago, Leader Bank wanted to automate the tasks behind ordering an appraisal, and decided to create that software itself. It used its homemade system for over three years until it came across a third-party system that did the job with a more intuitive interface.

“For us, it’s important to make sure we’re up with the times and we have the latest technology to make it more convenient for our customers, the back office and the sales desk,” Tuli says.

Ed Avis is a freelance writer in Chicago.