The Impact of RPA in Mortgage Lending

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rpa impact in mortgage lending

According to the Mortgage Bankers Association, the combination of increasing regulations and manual efforts to ensure compliance have resulted in U.S. mortgage origination costs that are three times higher than they were a decade ago. Robotic Process Automation (RPA), or the process of shifting repetitive and data-driven tasks from humans to software bots, has become increasingly popular in the mortgage lending industry for a variety of reasons, from market fragmentation to increasing regulation to evolving borrower expectations.

While mortgage lenders recognize the significant role automation could play in their business, many RPA initiatives are under-resourced and lack proper standardization around security and privacy. Business owners are also at odds with their IT departments over ownership and governance of their automation programs. These issues remain key barriers to successful implementation.

Despite these challenges, the return lenders are able to achieve far outweighs the investment. Loans typically pass through 15 to 18 system users for processing before being closed. Every touch increases cycle time, per-loan costs, and likelihood of errors. Automation reduces the dependency on humans to perpetuate origination so that loans can be processed at any time, at a lower cost, with 100% accuracy.

Here are some key reasons to consider RPA as a mortgage lender:

Improved customer experience

Loan origination is wrought with manual processes that require human touch to advance loans forward. From application to approval, a typical mortgage currently takes 30-45 days to process, according to National Mortgage News. With the increasingly competitive landscape and evolving borrower expectations, lenders are shifting to digital loan experiences that deliver greater accuracy and faster lending decisions.

Mortgage approval processes like lock requests, initial and closing disclosures, and loan service initial review are excellent candidates for automation because they contain so many repetitive steps, like document review and data verification. The increase in speed and the ease of the digital process can translate to a significantly improved customer experience. Given the increasing popularity of digital mortgage options online, companies are more motivated than ever to deliver an overwhelmingly positive experience for buyers – from application to close.

For our clients, automation has eliminated delays throughout the loan cycle, which has allowed them to be more competitive in the marketplace. As a result of automation, one lender now offers an on-time closing guarantees to their customers.

Time savings

In addition to borrower benefits, lenders also directly benefit from the time savings automation can offer. Unlike humans, robots can process loans 24/7, allowing the process to move forward on nights, weekends, and holidays. Imagine being able to turn loans in a fraction of the time, regardless of volume. One client saw a reduction in average loan closing time of 20 days.

Additionally, time-sensitive processes like lock desk can take an analyst more than 45 minutes to complete manually. The lengthy time to completion puts lenders at risk for incurring rate charges when they can't lock in the quoted rate before a refresh occurs. If a lender promised a buyer that they’d lock in a quoted rate by a certain time but they can’t deliver, they risk losing the borrower. For change of circumstance disclosures, the lender has three days to notify the buyer, otherwise they are on the hook for covering the difference.

Compliance and accuracy

In the mortgage vertical, digitizing the lifecycle of a loan has many benefits, including eliminating most human error through automation. Manually processing loan applications can increase processing costs and cycle times, as well as hinder the lender’s ability to process seasonal shifts in volume.

RPA can be deployed strategically throughout the underwriting process to ensure compliance with federal regulations. Review of appraisal, income, assets, employment, fraud, title, flood, and MI are excellent candidates for automation.

According to the Institute for Robotic Process Automation, for every 100 tasks completed by a human, 10 mistakes will be made. While it may take some tweaking to accurately capture process steps within the design of your robots, they operate with incredible accuracy. We all know that mistakes can be incredibly costly to a business. RPA allows lenders to achieve 100% accuracy in loan processing.

Cost savings

The reduction of manual processing and elimination of errors and rework adds up to significant annual savings for lenders. For example, one regional mortgage lender was able to achieve $180 per loan, on setup and servicing tasks alone, which produced more than $1 million in annual savings and over 94% in labor savings. This same lender was able to take on additional lines of business with no operational impact.

Getting started

Robotic process automation introduces the opportunity for businesses to re-imagine their processes entirely. We suggest viewing RPA as a key portion of digital mortgage transformation.

Measure the success of your automation strategy by starting with simple, rules-based processes first and moving on to more complex tasks later. Some processes may be more costly or time-consuming than others, and starting simple can help a business prove the potential of RPA. If you're just getting started with your automation initiative, start here.

Read the Wyndham Capital Mortgage Case Study   |   View the HPA Mortgage Solutions Overview