Leveraging Automated Decisioning In An Uncertain Economy
What do companies do when they want to increase profits? Well – they probably either push their sales people to sell sell sell or they push to cut cut cut costs. As the mortgage industry faces difficulty in the future, the way that they are using technology comes into question. Mortgage companies are well aware that the main reason so much money is spent on the mortgage process is because it is so manual. Technologies such as automated decisioning and account origination have helped to cut internal costs. However, is it enough?
Subprime lenders have utilized technologies such as automated decisioning to really increase their speed and place themselves higher in the market. People want fast decisions. This not only cut costs for their business but it cut days off the turnaround times.
Basically loan approval works in a very specific way. There is a set of guidelines written up for a specific loan program. If the situation fits into the scenario then it would get approved. New technologies are helping to automate the decision-making process – the program can determine what does and does not fit into the box.
The mortgage industry has been under much scrutiny for practices that allowed many people to get loans when they really shouldn’t have. Approvals were running rampant and have created a huge problem for many people. The future of loan approvals will work toward using technologies to not only fit a situation into a box but also give that box a risk value or profile.
What might this mean for the housing market? The only thing for certain is that things will change. If companies can establish a true risk factor for the borrowers they can better determine who to give loans to and whom they deem an unacceptable risk. Hopefully this will be a benefit as well to people who should not be receiving mortgages and getting in over their heads.
Home prices keep falling, banks keep tightening their standards, and the obstacle for many is finding a bank willing to take a risk on them. This has really limited the amount of first time homebuyers that can enter the market, due to the fact that the number of loans being approved is so much lower. More than 100 mortgage companies have tightened the reigns or closed up shop since 2007. It has made it more and more imperative that those in the market are making sound business decisions. The future use of automated decisioning and account origination will be essential to the success of those who stay in the market for years to come.
We don’t know what the future for the housing market or the economy may hold. However, one thing remains sure: the important and essential use of technology to maintain a strong position with consumers. Technology will help skilled companies rise to the top even amidst all the uncertainty.
