BLOG VIEW: If you have seen the movie “I, Robot,” you may remember the scene in which Will Smith’s character was speeding along the highway in a self-driving car. After rogue robots surrounded his car to eliminate him, he switched to manual operations. Later, a massive accident in a highway tunnel instigated by the robots caused Smith’s character to be chastised by his police officer supervisor because he was driving manually. In other words, he should have left the driving to the car because that’s what it was made to do.
In the real world, self-driving technology is evolving rapidly. There are companies spending billions of dollars on this technology. Companies such as Google have been working tirelessly for nearly a decade to perfect this technology in hopes that it will change the way we approach driving. This technology is so high in demand that in July 2016, luxury car maker BMW promised to produce a fully driverless car by 2021.
Try to imagine what self-driven mortgages would look like. Just like self-driving cars, they would not be for everyone – but they could allow prospective borrowers to provide all of the information needed at the beginning of the process, and then the system would provide updates and guide the application along the process without interaction from a borrower or an originator.
Similar to how a self-driving car must detect obstacles in the road, a fully automated mortgage process could, using the right mix of technology, track a borrower’s financial circumstances from first contact through closing and help the borrower make the right maneuvers to avoid obstacles and keep the mortgage process on track.
For example, if a prospective borrower’s income decreases during the origination process, the system could automatically obtain this information from his bank deposits and provide an alternative lending option. This would prevent the borrower from being locked into a mortgage he can no longer afford and protect the lender from a potential default.
Such a system would need to have access to all of the appropriate borrower information, at all times, along with an algorithm that allows it to make decisions on its own. Unlike self-driving cars, this technology would not cost billions of dollars; it would be more like a few million dollars. Mortgage companies with substantial budgets and access to funding would be able to develop this kind of technology, which, in the long-term, could help them produce higher-quality loans, as well as satisfy customers.
On the other hand, smaller mortgage companies would need to work with technology providers to acquire such a system. This would require a significant capital expenditure – but it could reduce human errors that might result in costly regulatory actions down the road.
When technology is driving the entire loan process, it becomes imperative that it properly addresses compliance. The aforementioned system would continually review loans to ensure they are compliant with the latest state and federal regulations, which will enable the loans to be more easily sold in the secondary market. It’s possible that one day, these systems will be able to adjust almost instantaneously as regulatory changes take effect.
Although the concept of a self-driven mortgage process might seem far-fetched, most of the technology needed to accomplish it is already available today. It’s just that the mortgage industry is not yet fully using it. Automated income verification, automated asset verification and automated underwriting are now coming into use – next is automated compliance and the wider use of decision-making algorithms that will enable mortgage lenders to automate even more pieces of the process.
In order to accomplish a truly fully automated, “self-driving” mortgage process, the mortgage industry will need to put the same level of energy into it that the automotive industry is putting into self-driving technology for cars.
Although consumer comfort levels and regulatory requirements might ultimately limit how much of the mortgage process is automated, the mortgage industry can get pretty close. The question is, when will the industry start to move in that direction? Don’t be surprised if it is sooner rather than later.
Pramod Karachur is project manager for IndiSoft, a provider of compliance, vendor management and valuation solutions to the mortgage industry.