Changing mindsets to pursue digital transformation
BLOG VIEW: Technological changes during this persistent pandemic include remote online notary, system-to-system communication, digital signature, and more. It showed the industry what can be done if everyone works together towards a common goal, which in this example is contactless processing.
This same approach is needed to bring the residential mortgage industry into a new technological era that includes blockchain. People refer to ‘blockchain’, but let’s talk about what it means, for example.
With larger lenders doing more direct processing using automated underwriting systems, the leap to adding the benefits of technology, such as blockchain, might be more achievable. It would make sense to further automate the creation process to make this happen. And that would also translate into a different due diligence landscape.
These new blockchain-based origination systems will change the mortgage origination ecosystem and allow originators to “transform the entire mortgage value chain”. The use of distributed ledger technology will increase financial inclusion in banking and lending, while reducing the costs and time required to create a mortgage, thus creating a more efficient loan management system.
The mortgage industry has a âdataâ problem. A variety of systems and data sources make it difficult to verify the accuracy of the information reviewed at all times. One of the main characteristics of blockchain-based technology is immutability coupled with transparency and traceability of data points. These features will significantly help secondary markets, such as loan due diligence, by building confidence, while simultaneously reducing the costs and time required to securitize a batch of loans. Blockchain-based schemes, like other new-age systems, introduce new technology that is changing the norm for how loans can be generated.
Some people may wonder if old systems work, what is the need for a new age system? Today, a period of 30 days is considered the norm for granting a loan. Even if the potential borrower has a simple and straightforward W2 application, it can still take days when it could be done in minutes. If these simplistic loan applications were made easy for borrowers who meet all the requirements and easily provided all the requested information, think about saving time and how these resources could be allocated to process more complex loan applications.
What if a loan application could be approached the way credit card applications are today, with near-automatic approvals? The use of blockchain technology can not only retrieve, but also perform direct processes for property, borrower and third party data, including employment, credit, and loan application information, de automated and secure way. As an industry, we are not there yet, and it is because of the limitation of mentalities and not that of technology.
Enter a New Age state of mind
The abandonment of traditional processes does not only depend on the adoption of technologies, it also requires a change of mindset on the part of the big players in the industry, and it only takes a domino to fall. If a daring player of significant size and confident in technology chose to implement blockchain for the mortgage industry, that would inspire others to do so as well. It is a victory for consumers, real estate agents and lenders. Consider the savings if the technology applied allowed closures within hours. The buying market would now have a new problem, namely how long it would take for the seller to move out.
For these new age systems to be implemented across the industry, everyone in the industry needs to step out of their old school mindset and put resources first into technology. peak.
Specifically for the due diligence industry, this transformation will be like receiving information that has been electronically adjusted and already processed to some extent, before human interaction. Equipped with pre-adjusted information, underwriters or other mortgage professionals can then enter the decision-making process more quickly, since the initial work, such as the application or not of specific rules, has already been accomplished.
At this point, when integrated preprocessing and smart contracts are expected, this is when the industry will have the potential to flip the digital switch. More streamlined processes will result in time savings, which can be used to increase operational efficiency. It can also help invest in the creation of new financial products and services by leveraging the fourth industrial revolution with technologies such as artificial intelligence, robotics, Internet of Things (IoT), 3D printing , quantum computing and many others.
Rather than being at the end of the curve, consider the positive attributes of being an early adopter to transform the origination process for staff and clients. Once a leading player triggers the domino effect, these new-age systems have the potential to become the industry standard, and those who courageously adopt the technologies will reap the rewards.
Kunjar Bhaduri is the CTO of Wipro Opus Risk Solutions, a wholly owned subsidiary of Wipro Ltd. and a provider of risk management and quality control services.