The Generative AI Mortgage Metamorphosis for Tomorrow

As the ongoing debate surrounding the value of generative AI unfolds across various industries, there's an undeniable momentum as leaders boldly invest in this transformative technology.

A recent survey by Gartner showed that nearly 68% of executives at top organizations believe that the benefits of generative AI far outweigh the current risk proposition.

With the dice rolling in its favor, sectors like banking and finance are leaping into the race to examine ways to embed generative AI technology in their operations.

Amongst the multitude of financial functions, it becomes increasingly evident that mortgage processing stands out as a prime candidate poised to reap substantial benefits from the adoption of generative AI.

Let’s delve into four compelling ways in which generative AI has the potential to revolutionize the landscape of mortgage processing.

Risk Evaluation

The most crucial step that banks and financial institutions take for mortgage activity is to assess the creditworthiness of the applicant. Using information from credit bureaus is the golden standard followed by them.

However, often the scores and credit data are assessed by employees who may be influenced by conscious or unconscious bias or other factors and may wrongly approve or reject mortgage applications.

The incapacity to compare and analyze large volumes of credit data, insights on the property, and other factors play a major role in such bad decisions. This is an area where generative AI can make a transformational change.

Lenders can build a credit scoring system powered by generative AI and trained on credit data and risk behavior insights. This can then be used to automatically evaluate mortgage applications and classify applicants based on their ability to meet repayment obligations.

This efficient underwriting ensures that banks can provide the right customers with the right loan limits at the right interest rates for the right repayment tenure.

Fraud Detection

As part of the risk evaluation process, generative AI systems can also be trained to identify fraudulent practices that a potential applicant leveraged to produce loan requirements before the lender—for example, a forged signature or a fake document about the property or fake certificates of permission from respective land authorities or government bodies permitting construction, etc.

It is difficult and time-consuming for employees to manually inspect and identify the credibility of all documents submitted. Any errors that aren't captured in their evaluation may lead to trouble in the future.

Generative AI systems can, however, help lenders easily evaluate loan documents and credentials at scale within a matter of seconds. They can be trained to verify authenticity by matching documents against recognized standards laid down by the respective authorities.

AI systems can undertake multiple parallel analyses of documents to easily identify any suspicious pattern of tampering with records, text, or images.

Improved Customer Experience

The initial engagement that applicants have with lenders is often a time-consuming and stressful affair for both the applicant and staff. Learning the requirements of the applicant, picking out appropriate loan programs, personalizing them based on credit assessment, finalizing the list of requirements for loan approvals, etc., are all very complex tasks.

With generative AI, nearly all of these processes, including loan application and customer onboarding, can be automated and offered to customers virtually in the comfort of their homes or from anywhere.

Lenders can create a generative AI-powered virtual assistant to help customers with their needs. The virtual assistant can ask questions to clearly grab the right requirements from customers and leverage the risk assessment and fraud detection capabilities mentioned above to assess the applicant. It can then offer a customized selection of loan programs to the applicant, with a list of required documents or credentials needed for each.

The entire process of customer onboarding can be automated and made into a pleasant and hassle-free experience for loan applicants. It can be a rewarding experience for customers as they experience personalized loan servicing, expedited loan processing, and hassle-free interactions from the comfort of their homes.

Continuous Relationship Monetization

Once a customer has been onboarded into a lender’s loan books, generative AI systems can be used to periodically interact with them to nurture the relationship for better ROI.

For example, the system can send occasional emails notifying the borrower about new offers for a top-up loan, sell a pre-approved credit-card program with zero documents, offer attractive rates on other loan categories, and so on.

Besides, the generative AI system can also send important notifications to customers, such as reminding them of EMI dates, any changes in loan terms, or any other important information.

The generative AI system can be a continuous engagement channel that helps lenders derive more business opportunities and nurture lasting relationships with their mortgage customers.

Loan Servicing

Generative AI is a valuable asset during the loan servicing phase. It monitors borrowers' financial situations, tracks payments, and offers personalized financial advice.

By analyzing transaction data and market trends, AI can provide borrowers with valuable insights, such as refinancing opportunities or debt consolidation options, helping them make informed decisions.

Additionally, AI helps automate routine loan servicing tasks, such as generating payment schedules and conducting regulatory compliance checks. This not only reduces operational costs but also ensures borrowers receive accurate and timely information about their loans, contributing to overall efficiency and customer satisfaction.

Delinquency Management

When borrowers face financial difficulties, generative AI proves invaluable in delinquency management. It identifies early signs of delinquency by analyzing borrower behavior and financial data, enabling lenders to proactively reach out with tailored repayment plans or assistance programs. Predictive analytics also help lenders allocate resources effectively to mitigate losses.

Furthermore, AI assists in automating communication with delinquent borrowers through chatbots and automated messaging systems. These tools send reminders, negotiate payment plans, and provide resources to help borrowers regain financial stability. This proactive approach not only increases the chances of loan recovery but also maintains a positive borrower-lender relationship.

Marketing and Lead Generation

In the competitive mortgage landscape, generative AI is a powerful tool for marketing and lead generation. AI algorithms analyze extensive datasets to identify potential leads based on various criteria, like creditworthiness and life events. This ensures highly targeted marketing efforts with a higher conversion rate.

Additionally, generative AI can create personalized marketing content, such as emails, advertisements, and virtual home tours, tailored to individual preferences and needs. AI also tracks customer interactions in real time, providing valuable insights for adjusting marketing strategies.

The Bottom Line

The potential of generative AI to transform the mortgage processing landscape is immense. Banks, financial institutions and other lenders need to be aware of the right roadmap to implement or adopt a powerful AI system into their operations.

This process requires a more strategic and holistic approach to training the AI system, making it ready to adapt and sell custom offerings, perform tailor-made processing, and much more.

Having the right data intelligence and engineering ability is critical to empowering such a powerful initiative within the banking ecosystem. This is why lenders need to have a reliable technology partner like Xoriant to drive their ambitious generative AI initiatives forward. Get in touch with us to learn more.

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