In recent years, new technologies have been introduced to increase efficiency, reduce costs and improve the borrower experience during the home loan process.
For example, there is now Digital Verification, which allows borrowers to electronically share their financial information with lenders, including bank account statements and payroll.
This in turn allows banks/lenders to verify income, employment and assets without bothering the borrower and requesting massive amounts of paperwork.
At the same time, it improves accuracy and reduces errors, as the information comes directly from the source.
However, many people see getting a mortgage as a huge hassle and stuck in the Stone Age. While I agree with them, I would be lying if I said it hasn’t gotten easier.
However, it still takes a month or more to get a mortgage, which doesn’t seem good enough in today’s day and age.
The personal touch has declined dramatically.
Which brings me to a new study by Fannie Mae to better understand the adoption rates of these technologies.
Fannie Mae conducted a survey among recent homebuyers who purchased a property with a mortgage originated by the company between January 2023 and November 2023.
One of Main results of the survey There was a study that suggested that the use of in-person communication channels only when obtaining a mortgage (e.g. in person or over the phone) had “decreased significantly”.
In other words, there are fewer people applying for mortgages, and far fewer people are going to their local bank branch.
They simply don’t have to anymore thanks to today’s digital mortgage applications, e-disclosures, e-signatures, and the aforementioned digital verification process.
There has also been a shift in basic human behavior. How often do you call someone instead of texting them?
Even my dad has taken notice, and now sends a text message instead of making a traditional phone call.
With younger generations, a phone call can seem terrifying. Who will do that?!
While I don’t completely disagree with you, I do appreciate the odd call from time to time. Call me nostalgia.
However, as you can see in the illustration above, personal channels are becoming much less common, while the hybrid approach is taking center stage.
Until 2020, a personal loan was the main channel for obtaining a mortgage. Today, this percentage does not exceed 33%, while the percentage reaches 55% in the case of obtaining a hybrid loan.
There are also online-only sales, which account for only 12% (though they have nearly doubled since 2020).
This number is likely to triple over the next five years compared to its current levels, although it appears to have been flat over the past few years.
“Homebuyer interest in a fully digital mortgage process (where homebuyers can complete more or all of the steps online) is very high,” Fannie Mae noted.
It increased from 63% in 2021 to 90% by 2024.
When it comes to why borrowers are drawn to digital options, 75% said it “speeds up the process” and 71% said it “makes the process easier.”
Simply put, nobody likes getting a mortgage. It’s not fun. So making it easier and faster isn’t that hard.
I only used email to get my last mortgage.
Which brings me to my story, which I didn’t think to tell until I found the Fannie Mae study.
When I applied for a rate and term refinance in 2021 to get out of my 5/1 ARM loan and into a boring old 30-year fixed loan, I used a mortgage broker.
Honestly, he was an old colleague of mine. But that’s the kind of crazy person he is. I never called him once.
We didn’t talk on the phone at all during the procedure, and I’m not even sure I texted him to be honest.
Instead, we emailed back and forth to get the process done. It wasn’t because I was smarter or anything.
We didn’t have to talk or make a phone call. If I had a question (or he had a question), we’d email him.
In addition to being convenient for both parties, Everything is documented too.Everyone knows it’s a good idea to put things in writing, especially when it comes to a mortgage.
Plus, I can go back to a previous email if I forget what it said, or what it needs.
For me, it’s simply more efficient and there’s accountability. And since we’re all online anyway, emails are read quickly and responses come quickly too.
There is no error in making phone calls.
While this worked great for me, even though it was unintentional, I completely understand that some people like face-to-face interaction.
Some people at least want to make a phone call and hear the other person’s voice, or discuss things in more depth.
This is fine. You can continue doing this if that suits you, or like many others, take a hybrid approach.
Sometimes a phone call makes sense. It’s easier to explain something verbally, especially if you’re new to all things mortgage.
In the future, I wouldn’t be surprised if things go further, and you’re just communicating with a chatbot or something like that.
There is no doubt that this will be bittersweet if it leads to labor attrition and layoffs. There is still something special about the human touch, especially when it comes to emotional decisions like buying a home.
But I don’t think anyone would be upset if the refinancing process was cut down to days instead of weeks.
Prior to creating this site, I worked as an account manager for a wholesale mortgage lender in Los Angeles. My experience working in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) home buyers better navigate the home loan process. Follow me on Twitter for the latest news.
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