Technology

How Automation is Shaping the Future of Mortgage Underwriting

The modern mortgage underwriting process has traditionally been defined by manual checks, an onslaught of paperwork and lengthy approval times. As part of the process, lenders typically evaluate a potential borrower’s financial situation — by looking at their income and assets, assessing credit scores and examining pertinent documents so they’re assured everything is on track for approval. 

Although this intense review process provides reliability, it can be time-consuming and error-prone and inevitably lead to higher costs. But as automation falls into play, and the development of a robotic arm is capable of continuously typing information day in and day out without rest or fatigue, the mortgage underwriting automatically becomes faster and more efficient with little-to-no human error.

How to Accelerate the Underwriting Process

One of the main drivers to speed up the mortgage underwriting process is automation. Automated systems are able to process vast quantities of data – from credit reports, tax returns and employment records — in a fraction of the time it would take an underwriter. Mortgage automation makes use of technologies such as Optical Character Recognition (OCR) and machine learning to eliminate manual inputting thereby cutting out errors while at the same time accelerating document verification.

For example, an automated solution can automatically detect when a reported income does not match bank statements and possibly be designated as a red flag that deserves more investigation by the underwriter. This means that what used to take weeks can now be performed within days, allowing lenders to provide a faster response back and in turn improving customer satisfaction.

Fewer Mistakes, More Accuracy

Because of the enormous number of documents and information that needs to be processed, manual underwriting is more likely to generate mistakes or miscalculations. On the other hand, automation offers precision and consistency which is nearly impossible to achieve manually. Machine learning algorithms have a certain level of precision to spot patterns, validate data and check details which reduces any chance of error.

Additionally, automated systems can be set to strict compliance rules that require all applications are reviewed in exactly the same way according to legal guidelines. This eliminates the danger of human bias that can otherwise propel manual underwriting decisions. Hence automation not only reduces the time but also introduces a quality in underwriting due to reliability and standardization.

Cost-Efficiency for Lenders

Cost savings is one of the biggest benefits of automating mortgage underwriting. Mortgage lenders usually allocate substantial resources to finding, training and keeping a group of underwriters. With some of those time-consuming and mundane tasks now automated, lenders can then focus their resources in other areas. Underwriters can focus on the more difficult cases, whilst machines handle those of a routine nature.

Wrapping Up

Mortgage underwriting of the future is going to include more advanced tools like artificial intelligence (AI) and blockchain. Meanwhile, AI can help strengthen the underwriting process by conducting statistical analyses of historical data to predict how likely a borrower is going to pay back. On the opposite of that, blockchain can be used to facilitate proofing documents through safe and trustable information storage which cannot be manipulated.

Moreover, Robotic Process Automation (RPA) exertion can help in automating repetitive tasks like sending notifications to borrowers or tracing loan application status. All of this combines to deliver a transparent, efficient and user-friendly all-digital mortgage experience from start to finish.

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