We are in the midst of an extraordinary year that has seen a surprising turn in the mortgage industry. The fact that the COVID-19 pandemic has had unprecedented economic impacts doesn’t need to be overstated. In the case of mortgage refinancing especially, record low rates have led to extraordinarily high rates of refinancing. Black Knight reported that the second quarter of 2020 saw refinance lending rise more than 200% from the same time last year.
Mortgage professionals will agree that there is one overarching problem with the refinance process as it currently stands: it just takes too much time. It is a cumbersome process that requires constant surveillance. Further, in the midst of this refinancing boom, lenders and loan officers are swamped. As rates fall, loan officers are struggling to process the countless refinance applications that come their way. Borrowers want to take advantage of the rates and save their money as quickly as possible.
This is where automation comes in. Automating aspects of the mortgage and refinance processes will, among other benefits, greatly enhance the productivity of loan officers. Complex documents like W2s and bank statements can be unpackaged and processed within minutes. Multiple applications can be worked on simultaneously.
In the last housing bust, Fannie Mae and Freddie Mac caught some flack after their attempts to automate income documentation left loopholes that could be taken advantage of. This can, and has, created some lingering distrust for automation. However, algorithms have evolved since then. Their very nature is that they get stronger as time passes. They have an immense role to play now when housing is booming.
The Institute for Robotic Press Automation found that out of every 100 steps in loan processing, humans are likely to make 10 errors while carrying out even redundant work. Automating the refinancing process greatly eliminates the error rate. Automated processes also require little or no training and can rapidly produce work that is error-free.
Especially in the matter of appraisals, automated appraisals save costs for borrowers and ultimately speed up the mortgage process. Through the use of data analysis software, automated appraisals determine valuations in seconds. They are faster, save more money, and make for increased accuracy when compared to conventional appraisals. They are one step of the process that, if made more efficient, can greatly benefit the whole. Greater efficiency has never been more important than it is right now.
The economy is falling. We are in the midst of the deepest recession since the Great Depression. The one silver lining that has come of this is that mortgage rates are at their historic lows. Appraisals currently require people to come into your home – something which is very much not possible in a global pandemic. Automated appraisals solve this and give people back this silver lining so that they can take advantage of these low rates. Overall equity is the highest it’s ever been. There is little risk posed by automated valuation.