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How Generative AI is Changing the Mortgage Servicing Industry

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AI in the Mortgage Industry

The mortgage industry is experiencing significant transformation fueled by advancements in artificial intelligence (AI) technologies, especially with the evolution towards generative AI applications in mortgage servicing. With the industry in the US facing a tough economic and competitive market landscape, demand for advanced AI solutions that help increase efficiency and lower costs has intensified.

Within this landscape, the mortgage servicing sector stands out as an ideal candidate for leveraging AI to drive automation, digital engagement, and enhanced self-service capabilities. In this blog, we delve into the importance of mortgage loan servicing—an ongoing process throughout the duration of a loan—and how Conversational and Generative AI offers the potential to reimagine how mortgage servicing providers will market, sell, engage, and operate in the future as they serve their communities of prospective and existing borrowers.

Anyone who has gone through the process of applying for a mortgage can relate to the fact that a mortgage application and the ongoing management and maintenance of the loan involves multi-step and often complex processes, riddled with regulatory requirements, paperwork, and complicated language. In this blog, I want to focus on the loan servicing aspect of a mortgage as it involves an ongoing process over the duration of a loan.

Why Artificial Intelligence in the Mortgage Servicing Industry Makes Sense

Let’s look at some of the defining features of servicing a loan that make a strong argument for using conversational AI and Generative AI solutions for  providers in upping the game on borrower engagement, automation of back office processes, and risk management. You can find some some helpful AI definitions here that help explain the different AI terms and definitions.

Engaging with Borrowers through out the Lifecycle of their Mortgage Loan

In the case of a home mortgage loan the period of the loan can be as long as 30 years. So a borrower usually has a much lengthier relationship with the mortgage service provider than the loan originator.  Managing borrower’s loan accounts, including payment plans, loan modifications, loan transfers, refinancing, forbearance, escrow, tax, delinquency, consumer queries, and the ultimate loan payoff over the duration of a loan is a complex process that often requires many manual and document-heavy tasks.

Advanced AI Assistants that are powered by conversational and generative AI are instrumental in enhancing borrower experience and making interactions more seamless and efficient. 

Read more about How Generative AI Elevates the Borrower Experience in Mortgage Servicing

Compliance and Risk Management

Additionally, the mortgage servicing industry is subject to strict compliance and regulatory guidelines in each US state where they service their clients’ mortgage loans. In order to protect the integrity of the industry and to safeguard consumers, providers need to manage risk and avoid any security and compliance breaches. Large Language Models (LLMs) are changing the way transactional and conversational data is processed and analyzed, offering new opportunities for risk and compliance management for mortgage providers and servicers.

Explore more about How LLM-enabled Solutions Help Manage Risk and Compliance for Mortgage Companies.

Documentation Heavy

For anyone that has applied for a mortgage or gone through a loan modification it is also clear that loan servicing requires a lot of documentation and forms to be completed and submitted. This adds to both the complexity and manual-intensive nature of the industry. Managing and analyzing multiple documents, such as loan applications, legal paperwork, regulatory documentation, and customer documents can be challenging and tedious.

By understanding the context and content of documents, LLMs can identify relevant information, such as financial information, terms of a loan, and compliance with regulatory requirements, streamlining the review and approval processes. LLMs also excel at summarization of complex documents, customer conversations, and other knowledge sources. This helps inform more timely and better decision making and also can provide quick and actionable insights to customer service agents when dealing with a customer issue.

Complex Borrower Interactions

Service providers need to have close relationships with borrowers in order to answer their queries, reach out when payments are overdue, gather documentation, and intercept problems in a timely manner.  Borrowers interact with their mortgage servicing provider via mail, phone, email, live chat, and/or messaging channels to have their concerns addressed or documents submitted.  

With such defining characteristics, mortgage servicing has benefited greatly with the adoption of digital and automation technologies. Now with an extra boost from advancements in conversational and generative AI a new realm of opportunities has emerged to increase automation across the borrower lifecycle and the back office processes that support it. In these competitive times, where mortgage interest rates have more than doubled from their historic low 3 years ago, AI is a game changer.

The Benefits of Artificial Intelligence for Mortgage Companies and their Clients

Conversational AI has been the focus of recent technology adoption in the mortgage services industry so let’s explore why this has been such an attractive area of AI for the companies that provide these services to borrowers.

  • 1. Enhanced Engagement at Lower Cost

With the emergence of and accessibility to artificial intelligence (AI) technologies, the industry can take this a step further by using a conversational AI assistant, powered by generative AI, to automate borrower interactions with their mortgage servicer on different digital channels. By streamlining tasks and providing timely support, an advanced AI assistant can improve borrower satisfaction by offering a more convenient and efficient experience. 

AI assistants have the potential to significantly enhance the borrower’s experience by revolutionizing how they engage with their mortgage servicing provider across the lifecycle of their loan. They can can guide borrowers through the complexities of mortgage terms, payment plans, mortgage adjustments, financial hardship requests, and documentation requirements in a conversational and user-friendly manner. 

By securely accessing the borrower’s account details, an AI assistant can provide personalized assistance, answering account-related questions, clarifying complex terms, and offering tailored recommendations based on individual financial situations. Conversational AI assistants are key to automating customer support and query resolution processes by handling common inquiries, providing account information, and guiding borrowers through self-service options.

  • 2. Proactive Outreach

Conversational AI assistants can also be employed to offer a proactive approach to engaging with borrowers by providing timely alerts and notifications regarding overdue payments, upcoming deadlines, or other relevant financial matters. Through personalized messaging and automated reminders, these assistants can notify borrowers about impending payment due dates, potential late fees, and available payment options. 

An AI assistant can engage borrowers in interactive dialogues, allowing them to address payment issues promptly and explore alternative solutions, such as payment plans or loan modifications. This proactive outreach not only helps borrowers stay informed and financially responsible but also fosters a sense of trust and transparency between borrowers and mortgage servicing providers, ultimately enhancing the overall customer experience.

Additionally, an AI assistant can streamline the loan modification process by proactively gathering necessary documentation and facilitating communication between borrowers and loan servicers. Through automated prompts and guided conversations, AI assistants can collect required financial documents, verify eligibility criteria, and assist borrowers in completing modification applications seamlessly. 

By automating these administrative tasks and guiding borrowers through the process, conversational AI reduces friction and accelerates the loan modification process, leading to faster resolutions and improved customer satisfaction. 

  • 3. Automation of Back Office Processes

Generative AI technology offers significant automation opportunities for back-office processes in the mortgage servicing industry, streamlining operations, reducing manual efforts, and enhancing efficiency. 

For example, the gathering, processing and verification of mortgage-related documents, such as income statements, tax returns, and property appraisals can be automated. Using optical character recognition (OCR) and natural language understanding (NLU) capabilities, AI assistants can extract relevant information from documents, validate data accuracy, and update backend systems accordingly. This automation reduces the need for manual data entry, minimizes errors, and accelerates document processing times.

AI assistants and copilots can also automate payment processing and account management tasks, such as billing inquiries, payment scheduling, and account updates. Through natural language interfaces, borrowers can interact with AI assistants to make payments, request payment extensions, or update their account information. AI systems can handle these transactions autonomously, updating backend databases, sending confirmation messages, and resolving payment-related queries without human intervention.

Compliance monitoring and reporting tasks can also be automated via AI systems that can continuously monitor regulatory changes, assess loan portfolios for compliance risks, and flag anomalies or discrepancies for further investigation. This automation helps mortgage servicing providers maintain compliance with industry regulations, reduce compliance-related costs, and mitigate legal risks.

Conclusion

Conversational and Generative AI represent a transformative force in the mortgage industry, enhancing borrower engagement and back-office efficiency. As mortgage servicing providers embrace AI-driven solutions, they can deliver seamless experiences throughout the loan lifecycle, driving operational excellence and strengthening customer relationships in a rapidly evolving and competitive landscape.

Additional Reading on Generative AI in Mortgage Servicing

While we have touched on some high level aspects of the potential areas of impact of AI on the industry, we encourage you to explore more in-depth descriptions of how generative AI and LLM-based solutions can transform multiple aspects of mortgage servicing, from marketing and sales, to back office operations, agent assist and training, and risk and compliance management.

 

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