Gone are those days when traditional methods were used for the lending, and there would be a middleman to go through piles and piles of regulatory documents. As recently as 2014, that percentage of middlemen was down to a paltry 10%. Not too long back, in 2006, that percentage was a much more respectable 30%. One of the main reasons was the financial crash in 2008. Lot of brokers got broke and had to shut down their businesses.
For the people, by the Silicon Valley
Often seen as a shady side of banking, the sales executive-broker relationship never seemed to put the needy borrower at an advantage. Technology is breaking the barrier and incentivizing lending salespeople to interact with potential borrowers using apps. Automation and Cloud make all the difference.
Clueless consumers will be saved from the being pushed into an unnecessary, expensive mortgage by brokers due to rules that have been put in place by Consumer Financial Protection Bureau (CFPB). One of the better known of these rules imposed by CFPB is not being allowed to charge both, lenders and borrowers, commissions at the same time. They are among the chief reasons why broking does not seem as a lucrative option in the US compared to before.
Due to technology, people no longer need to meet and avail mortgages through phones and computers. A rise in popularity for quite a few online-only mortgage firms, while many big names are losing out on their part of the market, especially to new types of players who are not afraid to adopt innovations that suit them.
Mortgage software: the multi-tasking king
Software used in the mortgage sector dons a lot of hats. It has to play the role of a gatekeeper, reviewer, assessor, loan officer, and in doing so, ensure that all processes become faster, as they are being worked on simultaneously; as compared to the previous methods, where the broker would finish things step by step. This also saves on the costs immensely. They are amongst the main reasons there has been such a spurt in online-only firms and also why a lot of older players have moved to developing online lending models.
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Intelligent, rule-based mortgage software has been known to have provisions for a simple method of submitting application forms online. Applicants can submit all related items like signatures, photographs, identity proofs, and income proofs online itself. Software can then check for eligibility by retrieving applicant credit score from third-party credit rating agencies. Loan origination software systems can also align with the credit behavior of applicants and propose risk-adjusted rates accordingly.
Speed, cost efficiency, and convenience on the cloud
If a consumer-lending system is taken to the cloud, the entire processing and loan disbursal is finished in 15 days. This will take a bit longer with legacy banking systems, filled with volumes of pages that customers needed brokers to fill. The cloud instead comes up with only relevant fields (as a lot of information gets auto-filled from big data), based on the type of loan applied. This increases accuracy and turnaround time.
A centralized database and a cloud-based interaction tool for credit-rating agencies and attorneys, help banks get just the right information for every applicant. Such steps have hastened a previously tedious process by eliminating redundant data and unnecessary person hours.
It is a win-win situation for both, borrowers and lenders, but the same cannot be said about the brokers and other types of middlemen, who won’t shift to the lending side or take some risk.
Under such circumstances, innovation has always proved it gives a helping hand. The way forward for technology is helping sustain business in changing times. And almost every organization in the world is increasing its command over automated data systems. They are improving overall margins, and thus, the dreaded bottom lines.
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