COVID -19 & the Mortgage Lenders

Interview with Arindom Basu, CEO at Digilytics AI

What does COVID-19 mean for mortgage lenders?

The UK mortgage market, similar to other markets around the world, has gone into partial lockdown, amid the coronavirus crisis. Lenders, intermediaries and other market participants are responding by protecting their colleagues, their customers and their finances in that order.

With property demand experiencing a dramatic shift over the last couple of months, a number of lenders are grappling with survival & customer retention and have either stopped or significantly reduced fresh lending.

By the first week of April, a third of the mortgage products in the market had disappeared creating a vacuum. It is becoming increasingly clear that recovery strategies post the crisis will have to be very targeted and accelerated.

In this crisis, as with every other crisis in the past, those who can secure survival and take the opportunity to execute rapid targeted recovery strategies will benefit from above average growth of revenue and market share.

What’s your take on the impact of this massive pandemic on the mortgage industry?

This crisis, like the previous Financial crisis, will have a long-lasting impact on the mortgage industry. Mortgage rates nearly halved after the Financial crisis, which significantly benefited the borrower and forced lenders towards operational efficiency. Given the direction laid out by central banks around the world, this pandemic could cause a further drop in rates. As a result, there will be increased competition and focus on efficiency as demonstrated by a few lenders still functioning with slashed rates or revised LTVs.

Like previous crises, this too presents opportunities. We expect technology to play an ever-increasing role as an enabler in the Mortgage industry. Especially AI technology which, among others, has the capability of identifying new and more granular customer segments, and drive significant efficiencies across operations.

For example, products that significantly improves origination productivity and throughput and in-turn drastically reduces operational cost, will take the lead. Additionally, our AI-enabled segmentation techniques create an opportunity to generate differentiated products for customers, which can fill the vacuum generated during the crisis.

What are some of the major operational changes that the mortgage industry might witness in the coming times?

Response strategies to the crisis have consistently included work from home (WFH) and other remote working activities. Transitioning from an office setup to home office setup can be challenging especially for the mortgage industry as there's a lot of paper handling, management by eyesight, and a lot of human interaction while working.

The Mortgage industry, in the coming times, will see a pragmatic shift in the work culture. More organizations will switch to new operational models and ways of working to streamline their operations in this moment of crisis. Lenders and intermediaries will switch to AI-enabled technologies which intelligently does away with paper and manual processing and allows remote-located staff to collaborate seamlessly across home and other locations.

Lending and broking operations will become leaner and more efficient not only in servicing existing customers, but also in dealing with new customers and other industry participants such as conveyancers, valuers and agencies.

What role can technology play, after the crisis is over?

Technology continues to play a significant role today and even after the crisis is over. Technology, especially AI technology, will be a leading contributor to how the mortgage industry will operate after the crisis is over. With significant rate cuts, and the vacuum created in the market as a result of the crisis, AI technology will drive agility and efficiency. We believe that mortgage players, who embrace AI technology will recover quicker and generate faster revenue and market share growth compared to their peers.

AI technology could be leveraged to staying organized and collaborate with remotely located colleagues during the lockdown period and during early recovery stages. Its simplified access, intelligent data processing and collaborative technologies would enable multiple members to work parallelly.

Leveraging AI to intelligently process scans of paper documents could significantly reduce dependence on paper and manual validations. Further, being able to classify cases into different processing queues and maintaining a real-time status for remote-located internal staff and external partners, would significantly streamline operations.

Lastly, the explainability of AI, with reports would significantly improve compliance and QA activity.

The advancements in AI technology are making the crisis more bearable and are enabling businesses to keep working with access to key services (communication, payments, credit, collaboration, etc.) while enabling social distancing and helping to fight COVID-19. We expect AI technology to experience another boost during and after the crisis.

Read the complete interview with AI Journal