The share of lenders outfitted with the automation needed to close loans electronically surged last year, but mortgage companies didn't necessarily use it, according to a new report by the Stratmor Group.
Although the percentage of housing finance firms with the technology needed to e-close jumped to 43% in 2020 from 18% in 2019, only 12% of them had an adoption rate of 75% or more,
“One could assume that digital closings are building up like a giant ocean wave. But according to our 2020 data, closing lags most of the technologies we are tracking,” said Garth Graham, senior partner at the Stratmor Group, and author of the report.
There’s a 54% adoption rate among individual users of e-closing technologies but only 30% at the company level. That results in a net adoption rate of just 16%, according to Stratmor.
Mortgage lenders found a shortage to IT expertise to be one key hurdle.
“Lenders are getting used to working harder to attract loan officers and processors because everyone else in the industry is also looking for them. Finding qualified IT staff is even more of a challenge because everyone in every industry is also looking for them,” Graham noted in the report.
IT development was the No. 1 roadblock to broad digital mortgage implementation by lenders in 2020, up from No. 7 in 2019. And difficulty coordinating the technology installation with the training needed to use it was another barrier cited by 82% of lenders.
Also, while internal willingness to use the technology has improved, some wariness persists.
“When new tools can perform in seconds jobs that loan officers previously spent hours or days working out, some begin to question their role in the process or they mistrust the outcome,” said Graham.
Lenders need to be competitive in recruiting, take time to better coordinate workflows and reassure their employees of their value to address these concerns. To address the last point, lenders can point to customer service metrics that show individual guidance remains valued, the Stratmor report suggests.
“We have plenty of data to show that borrowers want to have a person guide them through the loan origination process,” said Graham. "They just don’t want to wait around for them.”
