The Evolution of the Digital Borrower Experience

By Dean McCall and Laura Mays

The COVID-19 pandemic has turbo-charged banks’ drive to embrace digital mortgage technology, and customers aren’t just along for the ride. Their attitudes toward technology use are evolving, too.

As the effects of the pandemic have reverberated across the U.S. economy since March, banks—by necessity—have shifted increasingly toward electronic delivery of a wide range of services, including mortgages. The same, of course, goes for borrowers. The shift toward digital mortgages coincides with an 11-year-high in purchase applications. The pandemic has not cooled the pent-up demand for purchase mortgages, and record-low long-term interest rates have fueled that demand while also triggering a surge in refinancing activity.

Amid this mortgage boom and the concurrent shift toward greater use of mortgage technology, bankers have been able to demonstrate clearly to borrowers digital lending doesn’t equal low-touch or diminished quality of service.

On the contrary, our analysis shows borrowers in the COVID-19 environment are more likely to lean on a loan officer during the application process, even in the vast majority of cases where applications were being completed electronically. Digital delivery works best when a loan officer can work hand-in-hand with a borrower, educating and guiding them through the process.

Our analysis of representative banks found before COVID-19 struck, about one in four borrowers came into the bank to sit down with a loan officer to initiate the digital application, while the rest got started at home. Not surprisingly, COVID-19 reduced that ratio to about one in seven, and for borrowers working with our client banks, there was no loss in service quality. In fact, loan delivery as measured by days from application to closing actually sped up by four days.

The picture emerging from our experience and observations is that borrowers are finding it easier to complete an application online than on paper—especially when a knowledgeable loan officer is available to copilot the application process digitally, guiding them through the steps.

In the wake of COVID-19, banks that were once agnostic about which delivery channels to use are now willing to push to digital processes, having seen improvement in efficiency, customer satisfaction and ease and speed of delivery. And, electronic delivery, including digital compliance documents, can greatly reduce the mountains of paper that once defined the mortgage experience.

A cutting-edge virtual experience helps to break down fear by simplifying what can be a very daunting process. A mortgage, after all, is the largest financial transaction most people undertake.

There’s a tendency to think older customers require more hand-holding, but interestingly, that is typically not the case. Most older borrowers have been through at least one mortgage application. Ironically, younger borrowers can require more attention to get them to stick with the loan application to completion. They are the most comfortable with technology but the least familiar with the mortgage process. The questions that pop up on an online mortgage application can feel excessive and intrusive to these customers, who tend to have high levels of discomfort surrendering private financial information. They are protective of their financial privacy and, without a clear understanding of the mortgage process, want to know why they are being asked for every jot of information.

A well-designed customer experience addresses this challenge through crisp, clear design showing exactly why information is being requested, without overloading the borrower with extraneous detail.

An intuitive and appealing customer-facing dashboard is a critical feature of any digital lending platform. Bankers and their customers have a clear preference for a streamlined product that makes it easy to register and sign in, showing borrowers where they are in the process every step of the way. Banks should not underestimate the role language plays at each stage in the application. Banks see the benefit of a dashboard using confident, friendly and reassuring language to help borrowers understand how their personal financial information will be used to build the loan file needed to reach a mortgage decision.

And, as customers are asked to upload information, they should find it as simple as possible to do so, ideally using a one-button design to click and send a document. Customers should be reassured the information they securely submit goes straight to their loan officer and their lending team.

With challenges to in-person interactions magnified by COVID-19, the ability to transact digital mortgage services has become even-more critical to success. But borrower behavior during COVID-19 has demonstrated that while borrowers want—and indeed require—a digital experience, they don’t want to surrender loan officer guidance and support. Banks adopting digital lending platforms should prioritize solutions that empower customers, giving them control of how much—or little—they want to interact with a loan officer.

Dean McCall is managing director and Laura Mays is manager, data insights, for Promontory MortgagePath, which is endorsed by ABA for residential mortgage loan fulfillment.