How data and AI are reshaping mortgage origination and retention

Data and artificial intelligence (AI) play a key role in transforming home loan arrangements. And the big winner could be the customer.

“Australia is one of the most progressive countries in the world when it comes to adopting tools based on real estate data and artificial intelligence (AI) in the mortgage origination process. New Zealand is even more advanced.

This is the view of James Vaughan, head of data products at CoreLogic, who says that intelligent use of data has the potential to remove many pain points from the mortgage origination process and help to build long-term customer loyalty.

Eliminate tedious mortgage loan procedures

It’s no secret that drafting home loans can be a tedious process. The traditional approach may require a lot of controls and extensive documentation. Along the way, the same customer may be contacted several times regarding the same information.

It doesn’t just cause delays. It can hurt a hard-earned customer relationship.

A new generation of emerging lenders is quickly gaining a competitive advantage by taking a different approach – one that is heavily data-driven and AI-driven.

Melissa Christy, Head of Lending at 86,400, explains: “Data is essential to us. We have decided not to have any supporting documents. The data is collected in advance and we can use CoreLogic’s AVM for rental income, so we don’t wait for things like letters from realtors. This makes the business lean and relieves the back office staff.

Smart use of data doesn’t just benefit lenders. It can also speed up response times and provide a more competitive product to customers.

Shaun Lordan, Product Manager at Nano Digital Home Loans, says, “Home loans are a highly regulated space, there are many processes to think about. But instead of a patchwork approach, we use data to run processes in parallel.

“This dramatically reduces the time it takes to ‘yes’ and the unit costs – savings that we pass on to the customer through lower rates and zero charges. “

Of course, supercharged, data-driven approvals aren’t suitable for all loan applications. Human intervention will likely always be necessary, especially for unusual or complex transactions. But as a guide to how quickly decisions can be made when data is tapped into, Nano Digital Home Loans set a personal best of less than 10 minutes – from inception to unconditional approval, for a mortgage refinance.

Data innovation in mortgage origination

Besides income and expenses, a key factor in the loan origination process is the suitability of the property for security. This is an area according to James Vaughan: “Can often be seen as a bottleneck in the process. “

CoreLogic is changing that by using analytical and digital tools to help speed up this assessment – and therefore approvals, using high-quality real estate data. “We are further strengthening high-quality data,” notes James.

He adds, “The security assessment is very important in the loan approval process. CoreLogic has 40 years of market data and we use contemporary data feeds to enrich this story.

“Data and machine learning (ML) can discover just about anything about a particular property. This supports an assessment that improves the experience for buyers, owners and lenders. “

Latest advances in image recognition and AI

The additional data CoreLogic can factor into an assessment helps create a remarkably holistic picture of a property.

Today, CoreLogic can see if a property could be in a risky location, such as an area prone to bushfires, or if it is close to the shoreline, or if it could be exposed to other potential impacts of the forest. climate change such as flooding. CoreLogic can even reveal if a property has been refurbished and is in good condition for resale.

“Millions of property images are available in its databases, and by using this data with machine learning, we have the ability to analyze these images to create a more complete picture of a property,” says James . “We can rate about 80% of the properties across Australia with a high degree of confidence. “

“Better data means better decisions for lenders – and CoreLogic designs its systems and services to help find that data quickly, to support faster approval times.”

Agility makes it harder for traditional lenders

As James Vaughan observes, new and emerging lenders are not as burdened by the legacy systems faced by some larger and more established lenders. Yet the same factors that make these new lenders nimble can also make it difficult for the rest of the market to compete.

“It’s definitely easier to be nimble and make changes when you’re building a system from scratch,” says Melissa Christy. “Instead of annual system upgrades, we make adjustments every fortnight, every sprint, to stay ahead of the competition.”

While data and AI can help increase agility, lower unit costs, and improve time to ‘yes’, it can also help eliminate the ‘slow no’. After all, no one likes to be hung up on loan approval, especially in today’s booming real estate market.

Lenders can also use the data to be more transparent, even when the news isn’t so good, helping a client understand why they’ve been turned down for a loan, and from there, have conversations about how. the customer can position themselves more favorably in the future.

For example, a real estate appraisal might show the client was aiming too high, but real estate data can also be used to show locations within the borrower’s financial reach.

Beyond origination: improving relationships and retention

Data and AI can also form the basis of valuable customer retention tools. And in a competitive market that matters.

A 2020 survey by ActivePipe found that 95% of customers direct to lenders said their bank had done nothing to stay in touch with them beyond transactional emails.^[1]

Research has also found that only one in ten mortgage borrowers feel some kind of loyalty to their lender.

According to James Vaughan, data can help lenders win the hearts and minds of borrowers.

“Predictive analytics leveraging property data is definitely being used more effectively to retain customers,” he says. “This allows lenders to go beyond giving the customer a statement showing their loan balance. Instead, they may seek to determine the amount of equity the client has available. This can be a real driving force in retention conversations, as we know how heavily people are involved with ownership.

“Smart lenders are now mixing real estate data with loan and customer information to drive retention systems. “

He adds, “AI helps the best loan officers engage with customers at the right time, with the right offer, and with the right conversation. This allows loan officers to engage content, such as livability or a more suitable loan product, and retention rates can be profoundly affected.

[1] Home loan study: what motivates borrower loyalty after settlement?