July 19, 2010

Anyone who's bought a house in the last few years can attest that the process seems outdated, with the filling out of reams of paperwork and the long, drawn-out, paper-intense closing, in which the homeowner signs scores of documents without ever actually reading them. One wonders if this might have been a factor in the subprime mortgage crisis.

A survey of 330 U.S. financial institutions conducted in early 2010 by market-research firm Lieberman Research Group, finds that most banks and credit unions are on the verge of adopting online-lending technology. While only 18 percent of lenders surveyed currently provide borrowers with an online mortgage application, 71 percent of banks surveyed say they will offer the technology in the near future. Nearly half (46 percent) of the lenders surveyed are evaluating or planning to evaluate “smart” application solutions, and of those, about two-thirds (63 percent) plan to implement a solution before 2012.

The survey was sponsored by Mortgagebot, a provider of online lending technology.

The survey found that the online mortgage channel will grow faster than any other channel through 2013. In fact, respondents say they expect their overall online loan volume to increase by 157 percent:

• Banks expect that their online application volume will more than triple (a 225 percent increase).

• Credit unions—which already take one-fifth of their mortgage applications online—expect their online applications to grow from 20 percent to 31 percent of total volume (a 55 percent increase).

The survey also verifies the importance of providing a consistent “borrower experience” by using a single technology solution to integrate all of a lender’s mortgage point-of-sale channels (Web site, branch staff, call center, or loan officers). Such integrated point-of-sale (IPOS) technology lets borrowers start a mortgage application in one channel (such as a bank Web site) and finish through another channel (for example, in-person with a loan officer). The survey reveals that 23 percent of banks and 56 percent of credit unions see IPOS mortgage technology playing an “extremely important” role in their mortgage businesses in the near future.

Working from a database of 2,391 banks and credit unions with assets of over $100 million, Lieberman researchers conducted detailed, personal interviews with 330 financial institutions (251 banks and 79 credit unions) that are not clients of Mortgagebot.

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