CEO of States Title, the family of companies using technology to make the residential real estate closing experience instant and affordable.
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Covid-19 created havoc in the mortgage lending sector — at least at first. Companies were ill equipped to enable remote work. Demand took a roller coaster ride, and rates plummeted while the securities market tightened. Smart lenders reacted to the crisis quickly with the needed fix — a more technology-enabled way to continue to do business. Electronic communication, secure document transmission and virtual signatures via remote online notarization (RON) are just a few examples of the digital switches turned on in the face of the pandemic’s lockdown. In nearly every case, the technology was implemented out of sheer necessity, and it overcame years of inertia that had stood in the way just several months prior.
Even though the coronavirus has not disappeared, many people are returning to the workplace. What will that mean for mortgage lenders? Will they return to the way things were done before Covid-19 or continue to accelerate their adoption of modern-day technology to more efficiently process transactions?
Smart lenders will not even think of going back. What began as an emergency response will become business as usual for companies that want to grab market share and ace the competition.
To put this in perspective, consider two possible scenarios: Doomsday and Boomsday. In the Doomsday scenario, we enter another crisis as the numbers of infections and deaths continue to rise. Unfortunately, if the current trends continue, we may be headed in this direction. This scenario will mean another lockdown or even hundreds of regional lockdowns, and lenders will need to lean heavily on the same technology they recently scrambled to implement for what they felt might be a “temporary” phase. In the Doomsday scenario, digital processes will be required not only for lenders to continue making and closing loans, but simply because it is the only way to ensure truly safe real estate closings.
In the Boomsday scenario, there is an unprecedented mortgage boom, the likes of which we’ve never seen. Interest rates, currently at the lowest point in recorded history, drop further. More Americans relax their record-high savings rates and put money into buying homes. Many more take advantage of better rates than they currently have to refinance en masse, and mortgage lending becomes perhaps the cornerstone of our economic recovery.
For mortgage originators in the Boomsday scenario, scalability becomes the critical success factor as transaction volume goes through the roof. Lenders that can handle this volume will be those that have not just retained the technology-enabled processes they rushed to put in place during the pandemic, but that also built on this foundation incrementally and iteratively over the second half of 2020. The companies that slide back into the old ways of handling transactions — those that assumed that their “proof of concept” technological processes implemented in the face of Covid-19 were just a temporary crisis response — won’t be able to take on the high demand and will likely fade away as they steadily lose market share to companies that have stayed the course and can take advantage of the boom. As every mortgage lender knows, the competition in this space is fierce, and the margins can be thin. And when you get caught on the wrong end of the demand curve, it’s lights out.
Doomsday or Boomsday, the good news is that the hard part is done — at least for those that have embraced technology over the last few months. At our company, for example, prior to the pandemic, only 12% of staff were equipped properly for remote work. By the end of March, we ramped up that capability so that 88% of staff not only had the proper equipment, but were actually working remotely with no loss in productivity. If we had talked about making that kind of shift in such a short time span under pre-pandemic circumstances, we might have said it wasn’t possible. In reality, it was not that hard.
The ability to work remotely isn’t the only result of that fast, digital shift. Consumers now have a taste of what is possible in our industry. “Instant” has become synonymous with convenience — and the rapidly improving customer experience for everything from virtual healthcare visits to online grocery delivery means that customers expect “instant” when closing a loan transaction, too.
Consumer expectations have leveled up across the board, and mortgage lending is no exception. If mortgage lenders want to know what it means for them to deliver the best instant, convenient and delightful experience in this kind of environment, consider the market-share gains that Instacart captured during the last several months ahead of much larger, more established competitors.
Historically, disruptive change has happened in many industries as technological abilities arrive on the scene. Buggy whip manufacturers and blacksmiths faced extinction when automobiles took over the roads. Printing companies stared at their fancy legacy printing systems when desktop publishing burst onto the scene. The internet shook the foundations of encyclopedia publishers. In those instances and more, companies had to change what they were doing or simply perish. The real estate and mortgage industries are at that crossroads right now as a result of Covid-19.
One day, hopefully in the not-too-distant future, the pandemic will be conquered and the coronavirus will be a nonconcern as it relates to day-to-day life. History will remember the disruption that led to challenges that were ultimately overcome. The hard part is already done. We realized that we could do it, and then we did it. Out of necessity, yes, but now that it’s done — and customers have adapted to the new way of doing business — we can move forward, whether it’s Doomsday or Boomsday.
For any mortgage lender that wants to stay in business and grow, there is no going back to the pre-pandemic days. Covid-19 is our industry’s disruption, the stimulus that has motivated a leap into technology where before we were just dipping our toes. Now that we’ve proven we can do business faster and more efficiently, it’s time to make the change permanent.
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