36
2023 TRENDS:
DIGITAL MORTGAGES, SERVICING,
AND DEFAULT SERVICING
Like the Starbucks or Chick-fil-A app, the
process of applying for a mortgage continues to
advance to a similar application. Between 2020
and 2022, with an increase in home buying due
to low interest rates, originations were projected
to be more than $2.5 trillion, adjusted down in
2023 to $1.98 trillion, which is 35-40% higher
than average annual originations between 2010
and 2019.
1
Post-COVID-19 pandemic surveys of
consumers show that about 60% of purchase and
refinance borrowers prefer an online mortgage
application process with an emphasis on speed.
Satisfaction levels drop by 15% if the application
decision takes more than 10 days.
2
Beginning
with post-financial crisis compliance spending
fueled by Dodd-Frank CFPB requirements, tech-
nology investments have shifted to improving
the borrower experience. Not only do customers
prefer a streamlined process, but also technology
can also be used to meet regulatory standards
such as fair lending. It also keeps loan approval
processes as short as possible.
3
e latest technologies include artificial
intelligence and machine learning coupled with
user-focused tools such as:
• Application forms that automatically popu-
late key information like name, address, and
Social Security number
• Upload features for documents like tax
returns, bank statements, and income docu-
mentation
• Verification tools that check income and
employment with credit agencies in seconds
• Online instructions, frequently asked questions,
digital chat boxes, and 24-hour call centers
e improved digital application process
speeds up the experience with fewer mistakes. One
Freddie Mac study showed that mortgage lenders
who incorporate digital mortgage technology
reduce the average processing time by 63%.
4
CLOSING, POST-CLOSING, AND SERVICING
In addition, an after the application is
approved, digital systems enable lenders, with the
encouragement and support of Freddie Mac and
Fannie Mae, to automate appraisal and title or-
dering, agent communication, and underwriting,
as well as transition to post-closing requirements
once the closing—possibly also held via a virtual,
digital venue—is completed. e use of technolo-
gy and digital platforms continues into servicing,
which includes default servicing, of loans. Digital
loan servicing systems generate reports, track
repayments, calculate interest and fees, and, more
importantly, provide the end-user borrower with
the ability to manage and track their loan and
request assistance. ese systems include the
ability to facilitate servicing transfers, incorpo-
rate e-notarization and e-signatures, and with
artificial intelligence (AI) programming, help
predict economic factors that might impact loan
performance, and in turn allow lenders, servicers,
and investors to better prepare for defaults and
loss mitigation.
5
STANDARD BEARERS: IMPROVING
CLIENT EXPERIENCE AND REDUCING
COSTS
Research team Forbes Insights, in conjunc-
tion with Freddie Mac, studied the development
and growth of digital mortgages, with a subtitle
of "An Industry Race Toward the One-Hour
Clear to Close." One lender, United Wholesale
Mortgage (UWM), stands out in the digital
mortgage space, providing an entirely online ex-
perience, including electronic signing and digital
documentation with payroll providers, and even
FaceTime closings in certain states. Contrasted
with the industry average of 40–42 days to close,
UWM averages under 16 days to close and aims
to meet a 10-day average to close.
6
Pulte Mortgage, a lender working with their
own construction company and focusing on new
construction, stands out as an early adapter of
1
https://nationalmortgageprofessional.com/news/mba-revises-originations-forecast-downward-2023
2
Id
3
https://www.grantthornton.com/insights/articles/banking/2022/how-tech-turns-the-mortgage-mire-into-opportunity#
4
https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/mortgage-cycle-time-benchmark-study.pdf
5
https://www.grantthornton.com/insights/articles/banking/2022/how-tech-turns-the-mortgage-mire-into-opportunity#
6
https://sf.freddiemac.com/content/_assets/resources/pdf/other/freddie-mac-future-of-lending.pdf
Legal Industry Update By: Michele Garcia Gilbert
