Mortgages and AI in the Digital Age
Generative AI (GenAI) models analyze existing data to identify patterns and structures, using the patterns to generate new content. The models can produce a variety of outputs from a single input request. In the mortgage industry, there is plenty of data across the loan lifecycle, from crediting and marketing to servicing and back office functions.
How has the fast-growing technology of AI and other intelligent tools affected the mortgage and real estate industry? How meaningfully can an intelligent computer aid in such a personal process?
“According to the Fannie Mae Mortgage Lender Sentiment Survey released in October 2023, only 7% of mortgage lenders are currently using GenAI; 71% are either just beginning to explore this technology or are not considering it at all. The complexity of the technology, evolving regulations, concerns over data privacy and intellectual property issues have made adoption a challenge.”[1]
Many of the concerns about GenAI come with the perceived obstacles of adoption, rather than the potential of the technology itslef. The Mortgage Bankers Association has published a report revealing proposed regulations surrounding the industry, including an emphasis for Congress to target its legislation towards GenAI.
Some use cases across the value chain of the mortgage lending process include:
Origination: Personalized loan offerings, automatic credit assessment
Servicing: Early intervention and default prevention, virtual loan assistant
Default: Payment allocation optimization, personalized collection communications
Cross functional: Document automation, customer complaints
What does this mean?
GenAI can customize loans, leveraging customer data to design products tailored to individual needs, which in turn enhances customer satisfaction. It can adjust loan origination rates by analyzing existing customer metadata. Based on a customer’s personal and financial situation, GenAI can offer data-based insights that would allow the lender to adjust the loan terms, potentially decreasing the chances of default. Through greater automation of the entire loan sanctioning process, operational costs can be reduced and efficiency improved.
Technology can be a big part of the lending process, but there is still value in the human touch at the end of the day. If this is one the single biggest transactions you will make, certainly as a first-time homebuyer, you will want to talk to someone throughout that process.
1: How pursuing GenAI can transform mortgage lending (EY Insights)
2: AI in the Mortgage Industry (Mortgage Bankers Association)