How Can Property Technology Delight Mortgage Customers and Widen the Net for Lenders?

A Conversation With Praveen Chandramohan

In the ever-evolving landscape of the property market, recent years have been marked by volatility and unprecedented challenges. However, amidst this shifting environment, there is an opportunity for lenders to reassess their back-of-house operations and embrace the transformative potential of modern technology.

As the market cools, the stage is set for lenders to revolutionize their processes and cater to the demands of today’s discerning consumers. The key lies in embracing automation and digitization to streamline operations and create a seamless borrower experience.

In this episode of Core Conversations, host Maiclaire Bolton Smith sits down with Praveen Chandramohan, an executive in origination solutions at CoreLogic to discuss how automated underwriting, digital mortgage software and property technology intertwine to define the future of the mortgage market. From improved borrower experiences to cost optimization, this conversation unveils the transformative power of embracing property technology and mortgage software in the ever-evolving mortgage landscape.

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Praveen Chandramohan:

So you’re starting to see a whole host of automated underwriting, digital e-closing solutions, automated verifications. You’re starting to see all of these technologies start to converge, so it’s sort of an interesting time in the industry where you have the intent and technology converging. So I think it’s a good sign.

Erika Stanley:

Welcome back to part two of our miniseries about how advancements in mortgage technology have the potential to define the future of the industry. If you missed part one, I do recommend going back and catching up on last week’s episode. To recap, we welcomed Praveen Chandramohan, an executive in origination solutions at CoreLogic, to talk about how digitization and deep data records are essential to developing mortgage workflows that delight lenders and customers. Let’s jump into it.

Maiclaire Bolton Smith:

I want to touch on a few things. So you mentioned a few things about how all of these things that happen in the background, kind of behind the scenes when it comes to actually funding or underwriting a mortgage. So a couple things I thought of is it’s actually a very expensive process to get a mortgage, and from a homebuyer’s perspective, they think of what they have to pay in terms of down payment and closing costs. But from a lender’s perspective, the cost of what it is for them to invest in this is huge. So I want to talk a little bit about that and how the future of automation and technology on how that can help make it a less expensive process.

PC:

No, that’s a great question, and I think I’ve been calling it the industry’s conundrum. As you pointed out, the mortgage industry, we’ve historically leaned on people and process as a variable investment to deal with the cyclic nature. So the problem with that approach is that during peak cycles, when the volume is through the roof, like we saw in 2020 and closer to 2021, the industry’s too busy trying to meet the demand. They’re hiring a lot of the back office staff, they’re hiring more underwriters, loan officers, processors to meet the demand. And when there’s a downturn, like the one that we’re experiencing in 2023, they’re downsizing on investments needed to prevent that linear scaling up and down.

MBS:

Okay.

PC:

But what we’re also seeing is an interesting point in time because I call it the convergence of intent and technology.

MBS:

Okay.

PC:

So, for example, Fannie Mae recently, I think as late as last year towards Q4, did a survey for about 190- odd mortgage lenders and started to ask what are some of their top priorities. And what consistently came out, unlike the other years where the answers were more centered around I want to invest in consumer-facing technology and want to make it the best experience for the consumer, you started to see a shift to what we call business process optimization. And it’s a fancy way of saying I want to invest in my back office and underwriting and processing and closing tasks so I don’t have to necessarily hire as I scale up, loan officers and processors and underwriters, to meet the demand of where the mortgage market is.

MBS:

Right. Okay.

PC:

So that to me is promising in many ways because it shows that now while the intent has always been to drive that cost down, it shows that the time is now where that intent is really starting to come to the top. And combined with it is also the availability of technology. So you’re starting to see a whole host of automated underwriting, digital e-closing solutions, automated verifications.

MBS:

Yep.

PC:

You’re starting to see all of these technologies start to converge.

MBS:

Yeah.

PC:

So it’s sort of an interesting time in the industry where you have the intent and technology converging. So I think it’s a good sign.

ES:

Maiclaire dives into the subject of mortgage technology and the importance of moving from paper to pixels in Episode 64 and 65 with Sage Nichols.

MBS:

I think it’s a great sign too, and it’s interesting that you say that too, because this is all so fresh in my mind having just gone through this process. And I went through it twice because we actually went through the whole process and on close day, the sellers backed out of the deal. So all the paperwork had been signed and we thought we were closing on a house and, all of a sudden, we didn’t have a house. So we had to very quickly find another house.

And because we did find a home quite quickly between that, it was a very interesting process to go through with the mortgage company because from their perspective they had been ready to fund our loan for 60 days because we had done a rate lock and it just kept getting extended because of a crazy situation. But what was very interesting to me is how quickly we could close with the second property. And it was because all the cumbersome process of everything had to go on in the background. They had done that already, and they basically just needed a new appraisal for the new home. And then they had to confirm we still had jobs and that things would be fine because they had done all that background work and validated it.

So it is a really cumbersome process, but I think in our situation, because we’d already gone through it, it ended up being quite quick the second time. But I got to see some of this automated stuff happen before my eyes. It was like log into this site and give us the information to prove where you work so they can validate it directly with your company. And it just was some interesting things that I got to see. So I kind of felt like I saw this kind of unfolding before my eyes, which was really interesting. Not the deal falling through was not interesting. That was not fun. But the actual seeing the process go was very interesting.

PC:

No, you make an interesting point. And part of what I call a true digital mortgage experience is to mimic your second homebuying experience that you just talked about to your first home-buying experience. So the way I look at it is it’s really important for us to align the excitement of buying the home and match that excitement to the process of getting a mortgage. If you don’t align that, you’re going to take what is going to be the most important transaction of a person’s life and convert that into a horrible experience. A mortgage process, if it needs to get exciting, it needs to keep the borrower at the center of the entire transaction.

MBS:

Really good point.

PC:

And which is where some of our thought leadership, at least at CoreLogic, our journey, I mentioned that “Shift Left” strategy. So what that really does is through solutions like AutomatIQ™ Borrower, Complete Collateral, the Roostify point of sale, we’re trying to bring that borrower and collateral verification as early as day one of the process.

MBS:

Yeah.

PC:

It may sound very simple, but it’s powerful because it accomplishes three key things. One, it delights the lender because it creates what we’re calling in the mortgage terminology, a decision-ready file.

MBS:

Okay. Yeah.

PC:

As close to as day one, day two, but much, much earlier in the process. It also delights the borrower because you are starting to hear things about whether your property is in good standing or whether you are in good standing much closer to day one of the application, rather than taking you through a nervous experience throughout the process. So that’s a borrower delight journey.

And then the end result of all of that is it drives that overall cost down because now you can now say that this is my fast lane, this is my medium lane, and this is my complex lane. And it automates a lot of the simple aspects of a mortgage, but also takes out what we call exception-based processing and brings out the complex and simplifies them to an extent where lenders have a much easier time dealing with the complex now. They can put their senior staff and say, “Hey, these are some of my complex ones. You go take care of these, whereas my systems or my junior staff will take care of the rest.”

MBS:

Yeah. Wow. No, super interesting. I can’t wait. Well, A, I hope not to get another mortgage for a long time because I’m finally in this house and happy, and I do not want to go through that again. But no, I’m really interested to see where the industry does go.

We’ve talked about a lot of really interesting things today. And something we’ve talked a lot about, again, with our economists, how during the refi boom, there was tons of people creating mortgages because interest rates were so low. And then as interest rates have gone higher, the numbers have gone down. But I guess if we think of maybe interest rates staying high and the number of people wanting a mortgage going down, are there ways that technology can widen that net and increase the way of getting more business? Even if people are thinking, “I don’t want to refi or I don’t want to buy a new home now,” is there a way of capturing more people through technology?

PC:

That’s a great question, especially and very, very relevant in 2023 where lenders are looking in all directions to gain new business. So from a lender’s perspective, they typically tend to ask two key questions. One is if I’ve already done business with a customer, let’s say five years ago, six years ago, and I have that customer in my record, or if I was the most recent loan originator of that customer, how do I retain and cross-sell and upsell to that existing customer? So that’s sort of the first question they ask because once you acquire a customer, it’s easier to keep them than to lose them and then go find them again.

MBS:

Yeah.

PC:

And then the second question is how do I sort of create net new business? How do I go acquire new customers that I’ve never seen before come through my process?

Data and technology have come a really long way. So I’ll give you example, at least I’m very close to in CoreLogic. So we’ve invested in something called Precision Marketing where we’ve combined the traditional sources of lead generation with innovative consumer behavior-based technologies to accurately determine customers who are in a shopping pattern.

So what this does is from a lender’s perspective, if I have a relationship with a customer, I’m the first to know that my customer is potentially interested in buying a home or looking at a refi opportunity or has a financial need where I can go and help them and say, “Look, you have equity in your home,” or, “If you’re looking for a new home, I can help you with that.” Technology’s come a long way in being able to identify that for the customer.

MBS:

Okay.

PC:

Now, what that does is from a lender perspective, it delights the lender. I’m going to use the word “delight” again. It delights the lender because it allows them to be there for their customer first when they need them the most. From a customer perspective, it delights them because it saves them the hassle of going and figuring out what my options are because somebody who is really knowledgeable, knows their situation, comes and talks to them and gives them exactly what they need, hopefully preventing them from even thinking about another solution because they’ve got something that would work for them.

What we’re also doing, to answer that second question in terms of how do I grow my net new base, CoreLogic through its data and insights, we pretty much have access to all of the mortgage transactions that have happened in the U.S. And we know everything about different property that is there for about 90%, 95%+ of the U.S. market.

So using all of this data and insights, we’ve created what we call portfolio intelligence and market intelligence solutions. And that’ll help lenders strategize on what markets to penetrate, which products to offer and how do they differentiate themselves from the competition. So those are all things that are available to lenders and we’re talking about now.

ES:

Before we finish this episode, let’s take a break and talk about what’s happening in the world of natural disasters this season. CoreLogic’s Hazard HQ Command Central continues to report on natural catastrophes and extreme weather events across the world. When hurricane season started in June, the storms rolled in with two forming at the same time. Bret and Cindy appeared deep in the Caribbean this June, which is so unusual that it’s only happened once before, and that was in 1968 when Brenda and Candy formed together. With that event earlier in June, the Atlantic hurricane season has already had three named tropical storms as of July 7th. To find out more about the hurricane risk this season, download the 2023 Hurricane Risk Report from the show notes. Meanwhile, the continental US has seen several hailstorms that have caused significant damage due to record-size hail and tornadoes. And that’s the Natural Disaster Digest.

MBS:

One thing I just want to touch on a little bit more too, because we did talk a little bit about how technology could help widen the net, and do you have any experience or any thoughts on how technology will help with that?

PC:

Yeah, in fact, I would want to bring this to two personal experiences that I think would help answer that question. The first was a really close friend of mine who was an entrepreneur and was running a very successful startup business and like everyone was so excited to experience the homeownership journey and narrowed down his dream house.

He was 100% sure he would qualify and can afford the payment of the house, had the cash flows to support it. However, he went to a lender and he was surprised and shocked to hear that several of the mortgage lenders, they didn’t even want to underwrite or approve his loan.

MBS:

Wow.

PC:

Guess the reason? Because he was self-employed. Lenders don’t like self-employed borrowers. So that’s sort of one example that comes to my mind.

The second was actually a young man, a son of my colleague. Like many youngsters, they lived in the Venmo and Cash App world. So they don’t have a good credit history, but they have the appropriate income and cash flows and they can definitely afford and qualify for a mortgage. In both these instances, you’re starting to see technology advances in terms of helping that.

So as an example, we’ve invested in sophisticated income calculation and analysis tools within our automatic borrower solution. And what it helps is it helps zone in on those complex self-employed borrowers, allowing the lenders to underwrite with certainty. So that’s one example of a technology advancement.

MBS:

Yep.

PC:

The second, the industry’s also leaning towards exploring more cash flow-based underwriting as opposed to a credit history-based underwriting where your bank statements could be used as an effective source to verify and qualify for mortgages.

MBS:

Oh, interesting.

PC:

I thought these were two interesting examples that I could point out where technology is really starting to play a part in widening that net and without necessarily compromising the risk of a mortgage performance or a non-performance, if you know what I mean.

MBS:

Yeah. That is really interesting right there. And I think potentially could be the topic of another podcast. I’ve always thought too is how important is your credit really when you’re applying for a mortgage and everything else? So now you just brought up a whole new subject that basing it on cash flow versus credit is a completely different ballgame. So stay tuned. That could be something that we can dive into another time. So Praveen, this has been so interesting. Thank you so much for joining me today on Core Conversations: A CoreLogic Podcast.

PC:

Right. Thank you. It was a pleasure having you here.

MBS:

And thank you for listening. I hope you’ve enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life: Producer, Jessi Devenyns; editor and sound engineer, Romie Aromin; our facts guru, Erica Stanley; and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.

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