Mortgage Industry: How the Next Five Years are Looking for US Mortgage Industry and What can Businesses do to Prepare for it

By August 26, 2020 September 1st, 2020

The effects of digitalization and changing business landscape have touched every area of life, and all eyes have been fixed on the mortgage industry of the US to see how it adapts to the changing conditions. US Mortgage Industry has been a large cooperative network. It is a major financial sector in the US.

The Current State of the Mortgage Industry

With changing customer expectations and tech-savvy millennials, forming the largest share of the new dimension of the mortgage industry, it is clear that the tech trends have started dominating the industry. Based on studies, North American banks are expected to spend 50% of their total information technology (IT) budget on digital technology in 2022. The major technological advancements include primarily the adoption of “cloud” and Software-as-a-Service (SaaS), blockchain, intelligent process automation (IPA), artificial intelligence (AI), and machine learning (ML).  Due to the advent of data automation in the sector, lenders are working with a large amount of data and this has led to the processes and decisions becoming more data-driven.

What to Expect Towards the End of 2020?

COVID 19 has resulted in an increase in the overall share of loans in forbearance and a decline in mortgage rates. Besides the financial implications, there has been a major drift in the work culture. ‘Work from Home’ culture has shifted the work towards being digitalized. This trend is expected to continue for the entire 2020 at least.

This paradigm shift in the culture will make data security the most important and relevant than ever. It will lead to other pervasive challenges like data management, resource availability, and affordability. Most of the lenders will drift towards the cloud, offshoring/outsourcing, with automation being the topmost priority. The fusion of AI/ML and natural language processing will help in accelerating this shift in a more efficient manner.

Future of the Mortgage Industry in the Next 5 Years

Simplifying mortgage process, making mortgage cost-effective, quicker turnaround time, and ease of processing mortgages will be the key areas of focus. Technology will play a significant part in changing dynamics to facilitate these transformations.

Some of the key go-to technology adoptions include the following:

  • AI/ML-enabled chatbot mortgage adviser for enhancing customer satisfaction by providing insight based financial product recommendations
  • Robotic Process Automation (RPA) for increased productivity, higher customer satisfaction, and accuracy by automating the resolution of errors and exceptions during loan origination. Other critical functions like processing, quality control, and servicing will also become the areas to be automated
  • Blockchain for validating information from third-party vendors and having them in one place via the distributed ledger. It will solve the challenges of transparency and time-consumption by enabling digital tracking with the help of a digital ID. Distributed ledgers and smart contracts will help in the reduction of costs
  • Application Programming Interfaces for workflow automation, data consistency and accuracy, and compliance by openly sharing information and setting up reports’ generation process accurately
  • Cloud technologies for scaling solutions and implementing security by adopting practices such as backing up data and updating of solutions

Large, Medium and Small Size Players Should Prepare Themselves

Anticipating the wave of technological disruptions, businesses should prepare themselves to work with new and innovative ideas. In this drive for change, different players would be responding in different ways. Big players would be investing more in enterprise technology platforms after a proper cost-benefit analysis. Whereas, medium and small size players would be investing more in digitizing their core processes and less in digital.

Large Players

They are finding ways to create a cognitive computing environment by optimally combining next-gen technologies and using customer intelligence analytics to understand borrower perceptions and increase customer satisfaction.

Some of the emerging trends that will be observed going forward:

  • Blockchain can be used by them with manifold benefits such as:
    • Asset tracking (tracking of physical assets like automobiles through loan processes), Automated claims
    • Know your Client (KYC) for managing records securely, payment/settlement, provenance for showing the full history and ownership of the asset
    • Streamlining the process of financing trades, improvisation in the process of buying and selling assets, data tracking, and control functions for smart spaces or IoT solutions
  • They can enhance the immersive experience using AR, VR, MR, multichannel human-machine interface (HMI), and sensing technology

Medium and Small Size Players

They are more focused on enhancing the customer experience with working on their core processes. They would seek the cooperation of their core banking vendors for bringing out the advancements.

Some of the emerging trends that will be observed going forward:

  • They will be investing in building compliance competency into product development processes and low-down-payment options, the down payment assistance programs, and an increase in loan limits for the new homebuyers
  • They will also focus on redefining and redesigning jobs to strengthen the higher-order work by upskilling their internal talent pool
  • Since cloud computing is offered to mortgage lenders on an alternative cost model, and they provide easy deployment, these players can adopt this technology. This will help them automate the process and ensure privacy

Besides size, the mortgage players can be well classified based on tech maturity as well. The below matrix explains the adoption of different technologies by different players.




As we can see, the emergence of new technologies combined with the changing market scenarios is putting a strain on the US mortgage industry to adapt to the changes to sustain in the next 5 years. The major technological changes in the US mortgage industry will be the application of AI/ML, Robotic Process Automation (RPA), Blockchain, Application Programming Interfaces (API), Cloud technologies for automating the processes, and enhancing customer experience. The need of the hour is also to be well prepared for the unforeseen circumstances. Different size of businesses is going to handle these changes in different ways. Large size players would be more focused on investing in adopting new technologies, whereas medium and small size players would be investing more in their core processes.