By adopting a proactive approach and leveraging the right technology tools, originators can not only survive but thrive in this environment. The real estate market has always been cyclical, with ups and downs. The current downturn, however, presents unique challenges. With fewer homebuyers in the market and stricter lending criteria, originators are finding it harder to close deals.

“Instead of waiting for the market to turn around, proactive originators are looking for ways to maximize their efficiency and reach potential buyers more effectively.”

This situation calls for a shift in strategy. Instead of waiting for the market to turn around, proactive originators are looking for ways to maximize their efficiency and reach potential buyers more effectively. This is where successful mortgage professionals use technology to grow business for themselves. Here are some of the freshest technologies that cutting-edge originators use to grow their mortgage business.

Pioneering AI

LoanPass.AI is pioneering the use of artificial intelligence in the U.S. lending industry with its AI chatbot. This technology serves as an automated loan officer, enabling borrowers to confidentially shop, price and lock in loan approvals. The chatbot is designed to interact with borrowers using a set of customized questions that lead to deterministic responses from a product and pricing engine, which contains each lender’s specific pricing, eligibility and underwriting guidelines.

 The technology positions LoanPass as a transformative tool in the mortgage industry, offering lenders a way to enhance their operational efficiency, reduce costs and improve customer engagement, all of which are critical factors to business success. The company’s chatbot automates the loan generation process, which traditionally required a loan officer or call center.

This automation allows for efficient connections of borrowers to lenders, potentially increasing the volume of loans processed. Lenders can customize the chat sessions in real time, from the questions asked to the decisioning rules applied, giving them control over the loan origination process and the ability to tailor it to specific business needs.

The chatbot combines three knowledge sources: the lender’s product, pricing and eligibility guidelines; a general information knowledge base; and the extensive knowledge from ChatGPT. The chatbot can provide quick, accurate and personalized responses to enhance the borrower’s experience.

Indispensable insights

In today’s digital age, data is king. Mobility Market Intelligence (MMI) provides indispensable mortgage and real estate data, allowing originators to make data-driven decisions. In addition, building and maintaining referral relationships with real estate agents is crucial to lead-generation efforts for lenders and originators.

Given the vast number of agents, originators often find it challenging to optimize their referral outreach. To address this, many lenders are turning to data intelligence tools. MMI is a top player in providing data intelligence for the mortgage and real estate sectors.

It offers an extensive database that allows enterprise clients to pinpoint partner networks that align with their goals. It provides detailed insights into lenders, originators and real estate agents based on regions and specific transactions. By understanding market trends and buyer behavior, originators can tailor their strategies to meet current demands.

MMI assists originators in the competitive real estate market by helping them identify potential real estate agent partners and differentiate themselves from competitors. Features include the ability to search and filter agent transaction data, track agents with new daily listings, and inspect the LO Agent Wallet Share to see what percentage of an agent’s business they receive.

MMI provides tools for originators to stay in touch with borrowers in meaningful ways. This includes listing alerts for properties they’ve dealt with, custom property intelligence pages for borrowers and triggered alerts when mortgage credit checks occur.

Seamless journey

SimpleNexus was acquired by nCino in January 2022 and underwent a rebrand in September 2023. The nCino Mortgage Suite now provides the best of both worlds to mortgage lenders and originators. The system is designed to enhance the profitability of financial institutions.

The mortgage process can be complex, with multiple stages and stakeholders involved. The nCino Mortgage Suite simplifies this process by offering an end-to-end solution that automates various stages along the way. The robust platform brings together elements of the mortgage process, offering financial institutions a streamlined, efficient and data-driven approach to mortgage lending.

The suite streamlines the entire mortgage process, from origination to closing, making it more efficient and reducing manual tasks. In today’s fast-paced world, borrowers demand convenience. By offering a modern and seamless customer journey, nCino enhances the overall experience.

Originators have access to valuable data insights, and they can leverage this data to make informed decisions and improve their strategies. The suite provides an automated solution for managing incentive-based compensation, eliminating the need for complex spreadsheets and chaotic emails.

Social outreach

Social media is a powerful tool for reaching prospective clients, but it can be time-consuming and challenging to navigate. SocialCoach offers a solution that keeps lenders compliant across social media platforms. The system is a comprehensive social media management platform tailored for the mortgage industry.

It aims to simplify and automate social media marketing for originators, ensuring that the content they post is compliant with industry regulations and standards. The platform is trusted by leading brands in the mortgage sector.

SocialCoach allows originators to post and schedule content directly to their social media accounts, saving them hours of work every week. It supports various platforms, including Facebook, Instagram, LinkedIn and TikTok. This functionality ensures consistent online presence and compliance.

With the Video Catalyst tool, originators can tap into the power of TikTok and Instagram Reels. SocialCoach writes video scripts, and after an originator records from their phone, the platform takes care of editing and posting. The platform offers features to ensure that the content posted by originators is compliant. It provides built-in compliance parameters, allowing companies to decide which terms are flagged or blocked.

SocialCoach offers an analytics dashboard where companies can view activity and engagement metrics. This includes companywide social insights and personalized metrics for each originator. Understanding these key performance indicators for social media are crucial.

Proactive mindset

Arguably, one of the most important ways that successful mortgage professionals are moving the needle in this market is through mindset. Success in the current market requires a proactive mindset. Originators must actively seek out opportunities to grow their mortgage business. They need to leverage technology tools to maximize efficiency.

Originators must be willing to continuously learn and adapt. By embracing this mindset and utilizing key technology tools, they can better ensure that every minute spent translates into business growth. Here are three easy ways to start a mindset shift.

First, educate yourself continuously by staying up to date with the latest industry trends, regulations and technologies. Attend workshops, webinars and conferences to expand your knowledge by learning from industry experts.

Next, set clear goals. Define your short- and long-term objectives. Break down these goals into actionable steps and monitor your progress regularly. Third, actively network with Realtors, homebuilders, financial planners and other industry professionals. A strong network can provide referrals and insights into market trends.

●●●

The bottom line is that current real estate market conditions demand that mortgage originators be more strategic and efficient with their time. By leveraging tools like LoanPass, Mobility Market Intelligence, nCino’s Mortgage Suite and SocialCoach, originators can navigate market challenges, optimize their operations and see tangible growth in their business. The future belongs to those who are prepared with the right tools and mindset. These loan officers will not only survive but thrive. ●

The post Seize the Future with the Right Attitude and Tools appeared first on Scotsman Guide.

These tools, as they continue to advance, are projected to drive a 7% (or $7 trillion) increase in global gross domestic product and boost productivity growth by 1.5 percentage points over a 10-year period, according to Goldman Sachs. Even now, AI and machine learning are revolutionizing the mortgage sector by streamlining processes, improving risk assessment and reshaping the lending landscape.

“Welcome to the future of mortgage origination — a future where AI and machine learning spearhead progress.”

These technologies are making processes more efficient, fueling an era of increased accuracy, reduced risk, and better experiences for lenders and borrowers. Allied Market Research reported that the global mortgage market, which generated nearly $11.5 trillion in 2021, is projected to reach $27.5 trillion by 2031, with a compound annual growth rate of 9.5% from 2022 to 2031. A main driver for this projected growth is the increased investment in software that speeds up the mortgage application process.

Navigating the complexities of this technological evolution will enable the mortgage industry to examine some of its existing challenges while ensuring that the benefits of AI are realized without compromising ethics or fairness in lending practices. Welcome to the future of mortgage origination — a future where AI and machine learning spearhead progress.

Seismic shift

The loan origination process has historically been a labor-intensive and time-consuming effort. Mortgage originators have had to scrutinize mountains of paperwork, verify financial documents and manually evaluate creditworthiness — a lengthy process that could take several weeks. The arrival of AI and machine learning, however, has brought about a seismic shift in how this process is executed, offering a host of benefits.

One of the most notable advantages of AI and machine learning in mortgage origination is the automation of repetitive tasks. Intelligent algorithms can now handle tasks such as data entry, document verification and information extraction that once required substantial human involvement. This cuts the workload for mortgage originators and reduces the chances of errors that accompany manual data entry.

The loan origination process also becomes considerably more efficient with AI and machine learning. Algorithms can analyze massive quantities of data in a fraction of the time it would take a human, facilitating faster loan approval times. Borrowers no longer have to endure long wait times for decisions on their applications, resulting in a more positive experience.

 “Ethical AI development is imperative to avoid bias, discrimination and unfair lending practices.”

In addition, AI and machine learning support a more borrower- focused approach. These technologies enable lenders to provide personalized services and faster response times. A borrower can receive real-time updates on the status of their application, the result of a more transparent and less stressful process.

AI and machine learning algorithms can analyze a multitude of data points far beyond what traditional approaches could accomplish. These technologies consider financial data and factors like borrower behavior and online digital history. This broad analysis results in more informed lending decisions, increasing the probability of approved loans that manual processes may have overlooked.

The adoption of AI and machine learning in mortgage origination can lead to substantial cost savings. Lenders can allocate resources more efficiently and reduce the need for extensive manual labor. These savings can be passed to borrowers through lower fees and interest rates.

Weigh risks

Risk assessment is a pivotal stage in mortgage origination. Traditionally, lenders relied heavily on financial data such as credit scores and income verification. Today, AI and machine learning integration unlocks a wealth of digital data sources, offering a complete understanding of borrower risk.

AI and machine learning are expanding risk assessment capabilities by examining a borrower’s online digital history, which comprises social media activity, mobile device usage, payment systems and online transactions. This provides insights into an applicant’s financial behaviors and lifestyle choices that were not previously visible.

AI algorithms identify elusive patterns and anomalies in a borrower’s digital history, enabling highly informed lending decisions. These algorithms can recognize responsible financial behavior and detect potential issues like erratic income sources or unusual spending habits, considerably minimizing a lender’s default risk.

Additionally, AI acts as a vigilant protector, combating fraud by continually monitoring online activities and transactions. AI quickly detects anomalies and suspicious patterns, safeguarding both lenders and borrowers.

AI’s objectivity and consistency decrease the potential for human error, generating more reliable risk assessments. Customized risk profiles tailored to an individual’s circumstances offer a more equitable lending environment while faster decisionmaking benefits borrowers.

Eliminate errors

Mortgage originators can modernize operations and improve lending practices by implementing AI and machine learning solutions. These advanced technologies can contribute to a more equitable and efficient lending ecosystem by reducing costs, eliminating errors and mitigating bias. Responsible AI adoption supports principles of fairness and accuracy in the mortgage industry while producing multifaceted rewards.

Traditional mortgage origination processes are resource-intensive, requiring ample human labor to perform tasks such as data entry and document verification. AI and machine learning automation markedly reduce the need for manual involvement. This improved operational efficiency gradually lowers overhead costs, aiding originators in allocating resources more effectively.

Manual processes are susceptible to human error — and in mortgage origination, errors can be costly. AI and machine learning excel in consistency and accuracy, eliminating the likelihood of errors in tasks that can be automated. This results in a more dependable origination process, benefiting lenders and borrowers by preventing costly mistakes.

Bias in lending, such as digital redlining, is a challenge associated with these technologies. AI and machine learning systems can be designed for transparency, auditability and continuous fairness monitoring. Ethical AI development practices and diverse, representative datasets ensure that lending decisions are based on objective criteria rather than the perpetuation of historic biases. Systematic audits and oversight are key to maintaining fairness and compliance.

Prudent navigation

The adoption of AI and machine learning in mortgage origination produces transformative benefits, but unique challenges call for prudent navigation. Because AI and machine learning greatly depend on borrower data for risk assessment and automation, ensuring the privacy and security of data is paramount.

Lenders must employ robust data encryption, secure storage practices and strict adherence to data protection regulations. Building trust through transparent handling practices is critical to assure borrowers of their data’s safety.

Ethical AI development is imperative to avoid bias, discrimination and unfair lending practices. Using diverse and representative datasets for training, routinely auditing algorithms for fairness, and maintaining transparency in lending decisions are critical steps in establishing ethical AI practices and ending digital redlining.

The highly regulated mortgage industry demands strict adherence to rules and standards. AI and machine learning integrations must align with these regulations, requiring close collaboration with legal experts to certify compliance, particularly when AI-driven decisions have financial implications for borrowers.

Maintaining transparency in lending decisions is of great importance since AI and machine learning algorithms operate in ways that can be difficult to understand or interpret. To build trust, borrowers must have explanations for how these technologies are used in lending processes.

While automation is a key advantage, human oversight remains essential. Striking the right balance between automation and human intervention affirms that AI-driven decisions support organizational goals and consider complex cases or exceptions.

AI and machine learning technologies evolve rapidly. Keeping pace with advancements and adapting systems accordingly are ongoing challenges. Investments in ongoing training — and having a keen eye for evolving best practices — are vital to remain competitive and compliant.

● ● ●

Integrating AI and machine learning into mortgage origination marks a profound shift in the lending landscape that offers promise, opportunity and challenges. AI and machine learning will modernize the origination process by providing operational efficiencies, faster approval times and better client experiences.

Borrowers benefit from faster decisions while lenders enjoy cost savings and enhanced accuracy. By implementing these technologies responsibly and addressing challenges diligently, mortgage originators can lead the industry toward a more competitive, compliant and borrower-centric future. ●

The post The Sky’s the Limit appeared first on Scotsman Guide.

Let’s start with how and why AI is used. The “how” is pretty simple. There are multiple AI services available, including ChatGPT, Claude and Jasper. You might already be using Grammarly, which bills itself as a free AI writing assistance tool.

“There are benefits to AI. If you have writer’s block when putting together a social media post on reverse mortgages, this might be a way to break it.”

Once you create an account (many are free), you can teach it to learn your writing style. Simply type in something to the effect, “Do you want to learn how I write?” The prompt is no more complicated than an internet search bar.

Now for the “why.” AI has been publicized as being wickedly smart and a true timesaver due to its ability to learn and grow in the future. There are specific concerns about AI’s use in mortgage and business lending. These include the potential to insert bias in the mortgage process, as well as possible security and privacy risks. The late physicist Stephen Hawking even warned about AI as a would-be threat to humankind, although these existential worries are thankfully not as immediate.

Overly informal

Setting aside these concerns, ChatGPT was given a writing example and a prompt to produce marketing materials on a loan program. The prompt stated, “Using an informal tone and a humorous example, write a social media post about reverse mortgages.” Here’s what the AI tool produced (emojis were removed):

Hey, peeps! Let’s talk about reverse mortgages, or as I like to call ‘em, “The Robin Hood of Mortgages”! Picture this: You’re retired, living it up in your dream house, but your bank account is starting to resemble a dried-up raisin. Reverse mortgages are like that lifeboat you didn’t even know you had!

Here’s the scoop, without the snooze-fest: Instead of sending your hard-earned cash to Mr. Banker every month, the bank sends YOU a check! It’s like they’re saying, “Thanks for being a homeowner; here’s some cash for your troubles!”

Let’s get down to brass tacks with a hilarious example: Meet Aunt Edna. She’s 75, loves her cozy cottage, and is always up for bingo night. But Edna’s wallet is flatter than a pancake, and she’s thinking, “How can I afford more bingo and maybe a fancy hat collection?”

Enter the reverse mortgage! Edna turns her humble abode into a cash cow. The bank coughs up some dough, and she can keep living in her cottage, rent-free, until the cows come home. The best part? Aunt Edna doesn’t have to pay back a dime until she’s sipping her morning coffee in the great bingo hall in the sky.

But before you start dreaming of all the fancy hats you could buy, remember to chat with a mortgage wizard to understand the ins and outs. Reverse mortgages have some twists and turns you need to know about! So there you have it, folks! Reverse mortgages can be your golden ticket to financial freedom in your golden years. Just remember, with great mortgage power comes great mortgage responsibility! #ReverseMortgageWins #CashForLife

Omitted specifics

First, the obvious: Yikes. Among other things, it’s a very rare occasion that one would address older clients as “peeps.” That writing style is more in line with a teenager trapped in high school in 1995 than a professional mortgage originator’s writing style.

That said, there are benefits to AI. If you have writer’s block when putting together a social media post on reverse mortgages, this might be a way to break it. The technology also wrote the post in about 10 seconds. Reportedly, it does learn a user’s writing style as more examples are put in. In the example above, it might not have had enough previous content to match the requested writing style.

There are pitfalls to AI content too. How was it generated? Is it unique content or does it plagiarize a post from elsewhere? If it’s original, who owns the content? A mortgage originator is potentially on the hook from the Consumer Financial Protection Bureau (CFPB) for advertising unsubstantiated content.

It is also incorrect in stating that “Aunt Edna doesn’t have to pay back a dime until she’s sipping her morning coffee in the great bingo hall in the sky.” With a reverse mortgage, if Aunt Edna dies and her spouse is still living, in an eligible circumstance, they get to continue living in the home as their primary residence. The post also doesn’t speak to the fact that Aunt Edna isn’t allowed to convert the home into an investment property. In most situations, if she moves out, the loan becomes due.

What about using AI to produce a shorter post on X, formerly Twitter, to help drum up reverse mortgage interest? The simple prompt of asking ChatGPT to write a Twitter post on reverse mortgages produced this result:

Considering a #ReverseMortgage? It’s like tapping into the hidden treasure chest of your home equity! But remember, with great power comes great responsibility. Before you dive in, consult a financial advisor (sic) and weigh the pros & cons. Your home, your future! #Retirement

Falls a little flat, doesn’t it? How many likes or shares will that post get? Likely, the inside of a doughnut.

Regulatory caution

What about lead generation? AI companies boast about the ability of these tools to help mortgage originators find leads. Below is what ChatGPT says when prompted, “Write about using AI to bring in new mortgage leads and how to communicate with clients.”

The AI Wand: Turning Data into Leads. Imagine AI as the magician’s wand, waving over a sea of data, and voila — out pops a list of potential clients. AI has the incredible power to sift through massive amounts of information faster than a blink of an eye. It identifies prospects who are actively looking for mortgages, like a hawk spotting its prey from miles away.

The Rabbit Hole: Where AI Finds Your Leads. But where does AI find these leads, you ask? Well, it’s a bit like a scavenger hunt. AI scours social media platforms, real estate websites, and even good old Google to discover people who have shown interest in buying a home. It’s like finding Easter eggs — except instead of candy, you get valuable leads.

AI vs. Manual Search: The Tortoise and the Hare. Now, let’s talk speed. Imagine manually searching for leads as being the slow and steady tortoise, while AI is the speedy hare. The tortoise may eventually find a few leads, but AI has already raced ahead and gathered a bouquet of them. AI saves you time, and as we all know, time is money in the mortgage game.

That all sounds well and good. But if you use AI to bring in leads, are you sure that you aren’t taking an action that potentially discriminates against some clients based on their race, religion, sex or other characteristics?

Meta (formerly Facebook) already landed in trouble with the Federal Housing Administration over discrimination with its targeted advertising system that uses AI. And CFPB Director Rohit Chopra has warned that more regulation is called for with AI-based lending decisions.

●●●

Bottom line, artificial intelligence can be and will be a timesaver for originators and many other mortgage professionals. Originators can rely on AI to create content, but the person using the content is responsible for what’s published. Be brave, but be careful. ●

The post ‘Hey, Peeps’ Isn’t the Best Conversation Starter appeared first on Scotsman Guide.

In Episode 022 of the Scotsman Guide Author Showcase, Carl White interviews Chris de la Motte of Sonar about his article, “AI Is Already Shaping the Industry’s Future,” in the November 2023 issue of Scotsman Guide Residential Edition.

Chris de la Motte is CEO and co-founder of Sonar, the groundbreaking mortgage experience platform celebrated for revolutionizing the digital mortgage landscape. Backed by FirstMark and Liberty Mutual, Sonar is an integrated loan origination, point of sale software, product pricing engine and customer relationship management platform, powering the entire mortgage journey from application to closing. Prior to Sonar, de la Motte was president of Simplist, one of the fastest- growing digital mortgage companies. Visit Sonar at yoursonar.com.

The post Author Showcase: Chris de la Motte, Sonar appeared first on Scotsman Guide.

The potential of AI knows no bounds — it spans from enriching the customer experience to amplifying operational effectiveness and output. AI’s capacity to expedite task management benefits both mortgage processors and originators by boosting daily accomplishments. The realm of AI already encompasses underwriting, automated document scrutiny, fraud detection and more. And the evolution toward digitization continuously molds the trajectory of the mortgage industry’s future.

To stay competitive, you must begin to harness AI within your mortgage enterprise. These resources are not intended to supplant a human role but rather to simplify it. Through the adoption of AI-driven technology, you can manage increased workloads without compromising on excellence or customer service. For mortgage originators, the incorporation of AI has brought about significant changes by promising improved accuracy, efficiency and client experience.

Mortgage originators play a critical role in facilitating the lending process, acting as intermediaries between borrowers and lenders. Their responsibilities range from evaluating loan applications to assessing creditworthiness and determining appropriate lending terms. The introduction of AI-powered tools into this domain has significantly impacted the way these professionals operate, enabling them to make more informed decisions and deliver higher levels of borrower satisfaction.

Risk assessment

One of the primary areas where AI has made a substantial impact in lending is risk assessment. Mortgage originators rely on assessing the creditworthiness of borrowers to determine the terms and conditions of a loan.

AI-driven algorithms have proven invaluable in analyzing vast amounts of data to predict credit risk more accurately than traditional methods. These algorithms consider a wide range of factors, including credit history, income, employment stability and even behavioral patterns, enabling originators to make more informed lending decisions.

By leveraging AI-driven risk assessment tools, originators can identify potential risks and opportunities that might have been overlooked through conventional, manual methods. Assessment tools not only enhance accuracy but also speed up the decisionmaking process, allowing for quicker responses to loan applications and reducing the time that clients spend waiting for a decision.

The integration of AI into mortgage lending has also opened up avenues for creating personalized borrower experiences. Originators can now utilize AI-powered chatbots and virtual assistants to interact with borrowers in real time, addressing queries and concerns promptly. These AI-driven communication channels are available 24/7, ensuring that borrowers receive the assistance they need whenever they require it.

AI can analyze client data to understand individual preferences and behaviors, enabling mortgage originators to tailor their services accordingly. This personalized approach not only improves homebuyer satisfaction but also fosters stronger relationships between borrowers and originators.

Data analysis

Mortgage origination involves extensive documentation and paperwork, which can be time-consuming and prone to human errors. AI-powered optical character recognition (OCR) technology has revolutionized this aspect of lending by automating the extraction and digitization of information from physical documents. This technology not only reduces the risk of manual errors but also significantly speeds up application processing times.

By automating document-related tasks, mortgage originators can redirect their focus toward value-added activities, such as building relationships with borrowers and providing strategic financial advice. The optimization of tasks through AI-driven solutions enhances overall operational efficiency and improves the originator’s ability to handle a higher volume of loan applications.

The capability of AI to manage and analyze data has demonstrated great value in predicting market trends and facilitating well-informed decisionmaking. For mortgage originators, this translates to enhanced strategic planning and the ability to align lending practices with market dynamics. AI algorithms can analyze vast datasets of historic and current market information to forecast potential economic shifts, interest rate changes and other indicators that could impact lending decisions.

With predictive analytics, originators can proactively adjust their strategies, ensuring that their lending practices remain competitive and flexible to changing market conditions. This approach positions them as trusted advisers to borrowers, offering insights that can influence the timing and terms of loan applications.

Ethical concerns

While the integration of AI offers undeniable benefits to mortgage originators, it also raises ethical concerns. The use of AI-based algorithms in lending decisions must be closely monitored to prevent bias and discrimination. It’s essential to ensure that the datasets used for training these algorithms are diverse and representative, thereby preventing the perpetuation of existing biases.

Transparency also becomes crucial for maintaining trust between originators and clients. Borrowers need — and have the right — to understand the factors that influenced the lending decision. AI systems should be designed to provide transparent explanations for the outcomes they produce, letting borrowers understand why a particular lending offer was made.

As AI technology continues to evolve, its role in mortgage lending will expand. The combination of AI with other emerging technologies, such as blockchain, could revolutionize the way mortgage contracts are created, managed and executed. Blockchain’s transparent and secure nature could enhance the integrity of mortgage transactions, reducing fraud risks and streamlining the process.

In the realm of mortgage lending, AI has proven to be a game-changing innovation for originators. From improved risk assessment and streamlined document processing to personalized customer experiences and predictive analytics, the impact of AI is undeniable. Mortgage originators are well positioned to harness the power of AI to elevate their services, optimize operations and adapt to ever-changing industry dynamics.

With the adoption of AI comes the responsibility to ensure fairness, transparency and ethical use. Originators must maintain a balance between leveraging the benefits of AI and upholding ethical standards while navigating these new tools. As technology continues to advance, mortgage originators who embrace AI with a focus on its responsible implementation will undoubtedly thrive in this new era of lending. ●

The post AI is Already Shaping the Industry’s Future appeared first on Scotsman Guide.

Home mortgage lending fell to a 23-year low point in the first quarter of this year, according to Attom. Lenders originated only 1.25 million mortgages for residential properties, defined as homes with one to four units. That’s the lowest number for any quarter since 2000. As the Fed attempts to navigate a soft landing for the U.S. economy, mortgage originators are struggling with declining loan volumes and trying to make do with what they have.

Other factors, including rising costs of funds and regulatory changes to Fannie Mae and Freddie Mac, have made it difficult for mortgage companies to generate revenue. This environment has led to a marked increase in layoffs, exacerbating the challenge. To combat the dwindling workforce, mortgage lenders and their originator partners can leverage rapidly improving workflow automation technology to come out ahead when the industry eventually turns around.

Innumerable uses

The early part of this year also coincided with vast improvements to — and widespread fascination with — artificial intelligence (AI) technology. Breakthroughs in generative AI tools, such as ChatGPT, have captured the imaginations of experts and laypeople alike.

While workflow automation solutions and AI have seen increasing implementation across several industries, their uses in financial services (especially mortgage processes) have been uneven. Financial services are complex and involve nuanced, meticulous details that vary for each client, account and transaction. AI products for financial institutions need to be specifically tailored and data driven. Despite the obstacles, many use cases for AI in mortgage processes exist.

The most obvious of these uses is in customer service. Generative AI has the potential to enable virtual mortgage agents, which can create appropriate responses to client questions and provide helpful guidance. When incorporated into the mortgage provider’s back office, AI-enabled virtual agents can offer applicants detailed information about their loan without sifting through countless files and hours of research.

The implications for the mortgage industry, however, go beyond that. With notoriously long funding times, the mortgage process primarily involves communication between the applicant, lender and third parties such as brokers who request documents and other data. Originators need to determine the documents they have and the ones they need, then individually contact applicants and third parties with requests.

With generative AI, mortgage providers can automatically request, collect, process and archive the necessary documents from all parties involved. Going a step further, AI-enabled agents can then analyze the state of the mortgage application and decide on the next best action to move the loan toward closing. By automating these processes, mortgage providers can save innumerable hours and focus on other tasks.

Dramatic efficiencies

Similarly, intelligent document processing innovations — extracting the contents of a document, identifying the data points and understanding their meaning in regard to the mortgage application — can dramatically improve the lending process. Today, mortgage processes involve manual scanning of documents to find, sort and catalog all relevant information.

With intelligent document processing, mortgage providers can instantly consume all the information they need upon receiving a document. With this and other types of automation, lenders can liberate themselves from countless work hours where they previously would have needed to manually process documents and extract information.

Fraud is one of the largest expenses for mortgage providers. They spend exhaustive hours and resources on combating mortgage fraud cases. Countermeasures must be equally potent as fraud schemes grow increasingly sophisticated. Mortgage providers can also use AI for fraud-detection purposes.

AI-based anti-fraud systems can automatically review massive amounts of data and detect patterns of behavior typically associated with fraud. While it might take a person many hours to review each instance one by one, AI systems can scan thousands of cases in a matter of seconds. In cases where the evidence is inconclusive, AI systems still do the heavily lifting and the automated system can flag them for manual review. At the same time, knowledgeable workers can apply their expertise to the most challenging cases.

Improved experience

AI can also improve general workflow automation. Mortgage and financial processes involve a number of manual and highly repetitive tasks. These tasks soak up significant time and resources, even though they generate little revenue. As the mortgage industry experiences a wave of layoffs, fewer people are doing these monotonous (albeit necessary) tasks, thus slowing things down and negatively affecting revenue.

By instantly completing these tasks and gradually improving the processes, AI-enabled workflow automation steadily and meaningfully increases efficiency. Contacting applicants and transferring data across legacy systems that cannot communicate with each other occupies a significant amount of time for mortgage companies. Automating these tasks can help mortgage providers overcome labor shortages, create consistent processes and increase profit margins.

In all cases, new AI and automation technology tools increase efficiency and impact the cost to serve, the time to funding and the application-to-funding ratios. By automating some of the time-consuming yet most important steps of the mortgage process, companies can fund loans faster and deliver a better client experience.

AI will continue to evolve and adapt in the coming years. This technology will improve and more is yet to come. It will reshape how the mortgage industry goes about its processes. It is equally crucial for mortgage providers to carefully consider the products they need and to not just pick one that is popular. It is easy to fall into the hype and invest in the “new big thing” for the sake of it. Mortgage professionals must assess their needs and find tools that fill any gaps.

● ● ●

While current economic conditions are unfavor- able for the mortgage industry, nothing is permanent, and the pendulum will swing the other way sooner or later. When that time comes, the people who prepare now will be the ones who come out on top. By implementing ideas that increase efficiency, mortgage companies will improve their operations and set themselves up for success in the years to come. ●

The post Prepare for When the Pendulum Swings Back appeared first on Scotsman Guide.

One part of this experiment was absolutely right. ChatGPT pointed out that financial advisers need “emotional intelligence, empathy and the ability to build trust and rapport.” These are qualities that cannot be easily replicated by artificial intelligence.

“How do mortgage professionals embrace technical automation solutions and balance them with a personal touch? It starts by looking at what’s important to clients.”

AI and similar tools are poised to become the standard in modern business, but human touch is still critical. Businesses should take advantage of these tools, as well as automation, to free up time to focus on the strategic and personal touches only a human can provide. Creating the space to layer in a personal or human touch can take a business to the next level, and it can be a true competitive advantage for those who get it right.

So, how do mortgage professionals embrace technical automation solutions and balance them with a personal touch? It starts by looking at what’s important to clients. You can then understand where AI and automation can best support your business, and where human touch can add even more value.

Vital tools

Over the past year, across nearly every industry, there has been a huge shift from “growth at all costs” to efficiency — driven primarily by macroeconomics. Rather than pouring more money into growth initiatives, many mortgage lenders are tightening their purse strings and looking at their expenditures, processes and systems to figure out how to operate more efficiently.

ChatGPT couldn’t have entered the scene at a more perfect time. It has felt like an answer for many businesses and employees as they try to figure out how to increase output while decreasing costs. AI is still relatively new, but automation has been around for a while. At its core, automation has always been one of the most effective ways to optimize operations, increase productivity, lower operating costs and save time across an entire business operation.

“Clients want to work with people and businesses that understand them and treat them authentically, rather than a cookie-cutter approach.”

A 2020 research report from McKinsey & Co. revealed that automation can even be a powerful tool for a sales department. According to the report, early adopters of sales automation consistently found increases in time spent with customers, higher customer satisfaction rates, efficiency improvements of 10% to 15%, and potentially higher sales of up to 10%.

As more companies integrate these tools into their workflows, automation becomes even more vital in their bid to stay competitive. A 2017 study from Redwood Software found that 70% of IT experts think that a switch to automation is mandatory for business evolution.

New opportunities

For legacy industries built on relationships and trust — such as real estate, mortgage and financial planning — the transition is bound to be a bit slower. It’s also sure to include hesitancy from both professionals and their clients due to the nature of these industries, but automation can unlock new opportunities and improve the overall client experience. The trick is to understand and integrate the right tools that will enhance business and foster opportunities to develop relationships with clients.

Clients want to know they are getting the best interest rates, advice or service in a timely manner regardless of whether it comes from a machine or a person. This makes it smart to leverage automation where it can make a difference — whether that’s delivering a quick response to acknowledge receipt of a document or analysis of client information to make sure nothing is missing.

Building rapport requires seeing things from the client’s point of view, actively listening to their worries and empathizing with their concerns. Professionals can’t just rely on their credentials; trust is established gradually by following through on commitments, being transparent and showing dedication to the client’s success. A Vanguard report found that clients were more likely to trust their advisers when they believed that their functional, emotional and ethical needs were being met. When the right tasks are automated, it frees up bandwidth to engage clients directly in a manner that increases their confidence in your expertise.

It’s also important to create personal touchpoints that aren’t always sales related, such as sending resources to help their business, thank-you notes or even a birthday gift — simple things that show you care beyond just making a sale. Each client has unique needs and preferences, and it’s important to tailor your offerings, services and approach to meet them effectively. This is especially important when it comes to building client relationships.

Clients want to work with people and businesses that understand them and treat them authentically, rather than a cookie-cutter approach. For example, surprise your client who is a dog lover with personalized treats for their pet, or get them tickets to see their favorite sports team. (Check with a compliance expert before handing out any gifts.) It’s these personal touches that impress clients, earn loyalty and increase referral business.

Careful balance

To get the balance right, there are principles to follow when walking the tightrope between automation and personal touch. Automation can bring many benefits (including increased efficiency, time and resources for creative tasks), but it can also help to facilitate valuable touchpoints with clients.

Whether it’s an automated birthday reminder or a handwritten note, the impression will not be missed by the client. For example, sending a small gift to a prospective client is a task that can be automated, yet it still creates a highly personalized connection.

During an urgent or sensitive situation, clients should be attended to in personal ways. Offer them a way to reach you or an associate with pressing matters. It could be as simple as sharing a cell phone number or an after-hours answering service that relays messages. Automation is great for supplementing processes whenever possible, but it shouldn’t compromise relationships or the human element of business when it matters most.

Maintaining a strong partnership with clients requires finding the right balance between using technology to automate processes and providing personalized service. It involves consideration about which parts of a business can benefit from automation while staying deliberate in areas that still need a human touch. Here are a few easy ways to immediately begin integrating automation in your daily workflow.

Scheduling tools. Leverage automation tools to schedule appointments with clients. These tools allow clients to easily book a time, limiting the time spent on back-and-forth conversations to schedule a meeting while freeing up time spent on administrative tasks.

Messaging and communication tools. Automate and schedule communications to provide additional information, status updates on applications or answers to any common questions.

Customer engagement tools. Improve relationships with clients and business partners by leveraging automation tools that can manage, track and enable regular interactions and touchpoints. You’ll stay on their radar and make them feel valued.

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In reality, humans and machines have to work together to provide optimal service to clients. Automation and tools like ChatGPT are not a replacement for human connection, but they are powerful tools that can address tasks, boost efficiency and make time to foster even better personal relationships. ●

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We don’t know the answers to these questions just yet, but evolution appears to be occurring quickly. There has already been a frenzy of media attention surrounding AI that has helped students write academic papers, has created photos and songs that mimic the styles of famous artists, and has the ability to answer your questions in a conversational format.

“AI systems will raise concerns about privacy, along with the potential for the data to be misused or shared without consent.”

To better understand the real-world capabilities of this next-generation technology, ChatGPT was consulted with the following question: Is AI the real thing or a wizard behind a curtain? The system took some time to generate a response, but that may have been because the free version was used.

Here is ChatGPT’s answer: “The idea of AI being a wizard behind a curtain is a metaphorical reference to the Wizard of Oz, a powerful being hiding behind a curtain and manipulating events from behind the scenes. While AI can certainly be a powerful tool that can impact many aspects of our lives, it is not inherently mysterious or manipulative. AI is a field of computer science that focuses on developing algorithms and systems that can perform tasks that typically require human-like intelligence, such as recognizing speech, images, or patterns in data.

“AI systems are designed and developed by teams of engineers, researchers and data scientists who work to create systems that can learn, adapt and make decisions based on data and experience. While AI has the potential to transform many industries and aspects of our lives, it is ultimately a tool that is created and controlled by humans. It is not an all-powerful being that can control events from behind the scenes.”

A powerful tool

With the potential for AI to be a powerful new tool, how will the commercial mortgage and real estate industries use it? History may provide some answers.

More than 60 years ago, a crude form of a new technology was pioneered that allowed users to organize information, perform calculations and analyze data in a computerized table format. It might be hard to remember that far back, but when spreadsheet applications were introduced, many wondered if their jobs would become obsolete.

Rather than eliminating jobs, spreadsheets automated repetitive tasks, performed complex financial analyses and empowered data-driven decisions. Spreadsheets are commonly used in the commercial mortgage process and across many other business tasks. The technology may have eliminated some low-level jobs, but it also freed workers from the drudgery of data-intensive and time-consuming tasks.

In recent years, the potential of big data captivated the technology industry with its ability to create large and complex data sets from various sources, including social media, scientific research and business transactions. One of the main promises of big data is that it can be analyzed to reveal insights, trends and patterns that were not previously apparent.

By using AI technology, these analyses are now possible through machine learning algorithms, which can recognize patterns across various media such as text, images and videos. Once patterns are recognized, AI systems can make rule-based decisions based on the data. Combined with natural language processing technology, AI can interpret, understand and generate human language.

For the commercial mortgage industry, this has profound implications. AI has the potential to automate the analysis of narrative text in loan documents, thereby saving valuable time that people can allocate to more complex and strategic tasks. This technological advancement can make the industry more efficient and facilitate higher-level decisionmaking.

On the market

There are companies using AI technologies in commercial real estate today. To enable collaboration during the construction process, OpenSpace uses 360-degree cameras and computer vision to create digital replicas of construction sites. These videos capture a record of the construction project, allowing teams to remotely monitor and document progress. This saves time and money for travel and prevents budget overruns due to change orders.

CompStak uses AI technology to collect and analyze large amounts of data from a variety of sources (leasing brokers, property owners, public land records, etc.) and subsequently provide analyses of commercial properties, leases and sales. By identifying patterns and trends in the data, users can have deeper insights about potential risks and opportunities.

Similarly, Skyline AI (which was acquired nearly two years ago by JLL) is a platform that analyzes commercial property data to predict investment opportunities. The system collects and analyzes data from financial statements, tenant information, property values and other sources. The platform then utilizes machine learning algorithms to identify properties that are likely to generate strong returns, thereby enabling investors to make well-informed decisions.

Future transformation

How might AI transform the industry in the future? Digitizing loans is a challenge today as a commercial mortgage deal can include hundreds of pages of documents. Sorting, organizing and maintaining different versions of these documents are manual tasks.

AI could be used to automatically classify and sort loan documents by type, such as tax returns, rent rolls, financial statements and correspondence. Natural language processing may help accelerate the digital transformation of the data and documents by analyzing and identifying common patterns, structures and relationships in existing loan documents.

Key data, such as loan amounts, interest rates, repayment terms and collateral information, could be extracted in a standardized manner. Once extracted, the data could be checked for inconsistencies across the various documents. Additionally, by analyzing the language in the loan agreements referenced in the promissory note, AI could identify potential inconsistencies with representations and warranties, default provisions, lease expirations and payment schedules.

The right data

For AI to be accurate, it needs a large and diverse set of data that is representative of the types of necessary documents. In commercial real estate, this would include loan applications, financial statements, appraisal reports, sales agreements and more. These documents also have a varied narrative language.

For instance, a promissory note might contain the language, “For value received, the undersigned (whether one or more, “borrower”) promises to pay to XYZ Bank (“bank”) the sum of three million and no/100 dollars ($3,000,000.00).” Another promissory note might read, “In return for a loan that I have received, I promise to pay U.S. $3,000,000.00 (this amount called “principal”) plus interest, to the lender, XYZ Bank.” After analyzing the documents and accounting for the variability in the narrative text, AI could extract key pieces of information and other relevant details, such as in the example above: the lender’s name as “XYZ Bank” and the loan amount as “$3,000,000.”

To accelerate the digitization of commercial mortgages, AI could analyze documents to generate uniform templates for different types of documents, such as loan agreements, promissory notes and security agreements. With the import of standardized data, AI algorithms could automatically prepare loan documents by having previously identified where data is in the text. The algorithms could be customized for borrower- or loan-specific information.

A borrower’s financial information could be used to generate specific loan covenants or clauses. Machine learning rules may include specific regulatory or legal requirements such as zoning restrictions, environmental regulations and land-use laws. Using AI technology to translate loan data and documents could increase efficiency, reduce costs and improve accuracy.

Future challenges

Introducing a new technology has potential benefits but also brings challenges. AI systems will raise concerns about privacy, along with the potential for the data to be misused or shared without consent.

As with any technology, AI systems are vulnerable to cyberattacks that could further compromise sensitive information. AI needs safeguards to ensure that the technology is used in ethical and responsible ways. AI systems are only as good as the data on which they are trained. So, if the data is biased or incomplete, the results generated by the AI will also be biased or incomplete.

Additionally, users need to understand that AI algorithms may produce unexpected or undesired results. It is important for technology solution providers and lenders to be alerted to these potential issues and take steps to mitigate them. A review by humans, not robots, will be necessary at every stage of development and use.

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It’s going to take time, but AI may become a revolutionary business tool that will automate repetitive tasks while enabling faster and more accurate decisionmaking. We are off to see the wizard, but this may be a very long yellow brick road to the Emerald City.

This journey will take the commercial mortgage industry to some new and unfamiliar places that may even be a little scary. There are challenges to using AI, but there also are many potential automations and outcomes that have yet to be imagined. Toto, it feels like we’re not in Kansas anymore. ●

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