Las Vegas is home and host to all kinds of glitz and glamour. For those who participate in the mortgage industry – including lenders, FinTechs, service providers, consultants, venture capitalists, and private equity investors – the Digital Mortgage 2019 Conference provided its own type of spectacular.
Artificial Intelligence and other cognitive solutions were hands down the most impactful across the board, and various demonstrations made it clear that digital solutions are maturing far beyond the basics.
So, what were the key takeaways from the conference?
During this podcast, Daryl Grant and Teresa Blake, both managing directors in KPMG’s Financial Services Solutions group, sat down to discuss:
Hello everyone and welcome to another episode of Advice Worth Keeping. I'm Joe DeProspero, thank you for joining us. Today, I'm joined by Teresa Blake and Daryl Grant to discuss some significant takeaways from their time at the Digital Mortgage 2019 Conference as well some survey results. Teresa, Daryl, if you could just say a few words about what you do, starting with you, Teresa.
Teresa Blake: Hi, this is Teresa Blake. Very excited to be with you. I'm a managing director at KPMG. I help our clients implement solutions across people, process and technology to really improve the customer experience while removing cost and complexity. The technology options today are wide and deep and I help our clients find the right technology solution for the problem they're trying to solve.
Daryl Grant: Hi, and I'm Daryl Grant. I'm a managing director within KPMGs financial services solutions group and my job is to partner with both retail and commercial lending organizations in designing and delivering business performance improvement initiatives that really look to take advantage of new digital capabilities.
Joe DeProspero: Great, thank you both. So Teresa, you had mentioned first, technology. What were the most potentially impactful technology solutions you saw at Digital Mortgage 2019?
Teresa Blake: By far the best and the most impactful was the AI solutions across the board. Whether you were looking at Black Knight's AIVA solution or AI Foundry options or even Capsilon’s technology solutions. They have come a long way in really delivering automation but also AI in a way that reduces the amount of work that an underwriter has to do. I really feel like they've matured to a place that lenders can embrace and leverage not only the solution, but I'm actually even more excited about the more advanced use-cases that we saw in their roadmaps and in their pipelines.
Daryl Grant: I think Teresa is really spot on there. I'd say that the number of new technology players and solutions within the digital mortgage space was actually a bit surprising to me. The volume just continues to grow and relatively new entrants, like some of the POS providers are almost viewed as industry veterans at this point. That's just how new some of the players are that we're seeing. That said, when I think about the most potential impact, I saw really two interesting dynamics. Both centering around, a theme and a trend that at KPMG we refer to as re-bundling, which essentially means pulling the plethora of new client and associate facing digital capabilities back together into a more cohesive delivery platform.
That's one dynamic we saw, where newer entrants like a Fin Locker, which as the name suggests is basically a digital container that allows consumers to manage third party access to any of their financial information. And then the second dynamic I saw was larger technology incumbents like Black Knight as Teresa mentioned, and CoreLogic who are both continuously taking best of breed capabilities from the FinTech world and integrating those new capabilities into their core platform.
Joe DeProspero: So I know that Daryl, that KPMG sponsored a live survey exploring the mortgage industries AI enabled future. Can you share some of the more surprising AI survey results?
Daryl Grant: So, let me first start with what we learned that sort of met my expectations. First, nearly 40% of respondents viewed the adoption of AI capabilities into their business models as a strategic growth imperative. And I say that this result was well aligned with the direct experience Teresa and I've had working with our clients to date on AI led initiatives. The majority of the efforts we've been shaping with our clients are centered around the use of AI that drive higher originations volume and higher recapturing. So again, growth has been really a prime objective.
Now in terms of what surprised me the most to say that the responses we received to our question about how long will it take before the mortgage industry feels significant impacts of AI, was a surprise to me. I expected the vast majority of the responses to be between, now, really, and two years. Surprisingly, we had slightly over 50% of respondents indicate that the impacts will be felt in three or more years from now. And to me that signals perhaps a bit of a skepticism as to what the true impacts will be in the near term. But again, I'd say from my vantage point, the signs seem really clear that we'll see AI playing a role in the very near future.
Teresa Blake: I think the other piece that surprised me the most is that when we looked at where AI would have an impact, everyone said underwriting, but I have to tell you, I see the impact of AI spread across the spectrum. Whether that's customer acquisition on the front end or servicing on the back end. I feel like there's no place in the whole process that isn't right for AI to completely revolutionize how we do that work.
Joe DeProspero: And Teresa, what are your predictions on the next generation of AI use cases for mortgage?
Teresa Blake: Love that question. My first thought is in underwriting, we've tackled income calculation with AI. I truly believe the more complex underwriting scenarios might be around counter offers. When an appraisal comes in low and the underwriter has to restructure the deal with the loan officer, why can't our AI tools actually anticipate that, understand it and come up with solutions that are going to really work for the borrower. I feel like we can completely change the dynamic and make it so much easier for that borrower. I also believe AI is a great potential for appraisals as well. I feel like we send a lot of appraisers out. They measure and inspect the property and come up with a value. Again, why can't AI do that in a way that's very powerful, that reduces the cycle time and complexity of waiting for an appraisal only to find out that you don't get the value to support the transaction?
Daryl Grant: In our survey we asked participants where they believe AI would have the greatest impact within the mortgage values and the predominant response by far with underwriting as Teresa mentioned. So that's probably a safe prediction. However, I'd say, based on my recent client conversations on this topic, the two use cases that keeps surfacing are, AI as part of a default early warning signals strategy. Leveraging AI to really get out in front of what many view as, downturn in the credit cycles. So that's one area we're having lots of conversations around. And then the other is, conversational AI capabilities that handle servicing customer inquiries and complaints.
Joe DeProspero: So, final question – as we think about the upcoming MBA (Mortgage Bankers Association) conference, what are your thoughts on the state of the industry?
Teresa Blake: Oh yes. There's a lot going on actually in our industry feel as though when I ask executives how they feel about the state of their business, besides being overjoyed about the refinance volume, everyone is asking about the capacity playbook at the moment. They're all asking about recession proofing strategies. So what can I do today in anticipation of a downturn in the economy? The default rates are at an all-time low, employment's at an all-time high.
Everyone is really comfortable about the business as to where it stands at this moment in time. But I think folks are really starting to put up the looking glass and saying, "what else do I need to be doing to make sure that I'm ready for that downturn? Are my processes robust enough to survive some increases in early stage defaults and then what do I continue to do about innovation?" Digital mortgage helped us really improve the customer experience. We're starting to do and see more eClosings and eNotes, but what else should I be doing to anticipate what the borrower wants and to be more proactive in that financial journey with the customer. I really see that as the next big challenge, but I'm excited about technology innovations. I think there's choices out there for lenders to, peruse and to select, but ultimately that really take out significant costs. And I think that's a challenge that this industry is up to solving, reduce cost and improve that customer experience all at the same time.
Daryl Grant: I think Teresa hit on really the key trends here that we're seeing. I'll just add just a couple of things. First, I'm seeing really a consolidation of power and influence, if you will with many of the non-banks in this space. They've been growing and continue to grow both on the origination and servicing side. And I think that's a trend that we'll continue to see. They're making a lot of investments to try to, consolidate some of the advantages that they have. But I think as they get larger, they'll also see them start to deal with some of the regulatory challenges that the banks have dealt with for some time now. The other thing that I'm seeing are large banks working really hard to capitalize on some of their inherent advantages – leveraging data and the depth of their existing client relationships.
Joe DeProspero: Great! Teresa, Daryl, I want to thank you so much for joining us today and for sharing your insights and perspectives and thank you the listener for joining us on this edition of Advice Worth Keeping.