How far away is the paperless mortgage really?

MPA looks at what point the industry is at on the paperless mortgage path and what's holding it back.

How far away is the paperless mortgage really?

More data and end-to-end systems are pushing us ever closer to the paperless mortgage and point-of-sale approvals but predicting the future of technology is a risky business.

From the millennium bug to Google Glass, we’ve seen plenty of ‘game changers’ which were no such thing. Rather than take an impossibly broad view of the future, we asked our industry leaders to explain what brokers should expect over the next few years, starting with the paperless mortgage.

Glenn Lees, CEO of Connective, says the entirely paperless mortgage is “closer than ever … I think what’s driving it now is lenders understand what a competitive advantage it can be”. The barriers are simply “institutional inertia”, he says, with lenders’ risk and compliance teams “understandably nervous” about changing the application process. 

NextGen.Net sales director Tony Carn is less optimistic; he believes the paperless mortgage will take some time to come about due to the current focus on credit risk. However, he says the technology is there, and mortgages are already becoming increasingly electronic thanks to e-conveyancing platform PEXA and increasing use of electronic verification by lenders.

At AFG, CIO Jaime Vogel believes that “we will end up with a significant number of applications being digital end-to-end”. The process will be similar to the gradual take-up of ApplyOnline. “As lenders understand the benefits of that innovation it’ll progressively change and we’ll find the vast majority will be digital end-to-end,” Vogel says. “We feel the technology would be relatively easily implemented in the broker process.”

Verifying with video at HashChing 
Identifying borrowers, under the Know Your Customer (KYC) guidelines, has long been a time-consuming part of the application process. It was a particular problem for online marketplace HashChing, CEO Mandeep Sodhi recalls. “The broker was seeing ‘the consumer is in Cairns, but I’ve got this great deal and I’m in Sydney’.” For brokers there was an additional problem: having to visit a bank or Australia Post outlet to get identified was causing many customers to walk away from a deal.

HashChing’s virtual online identification (VOI) technology uses a video call to compare the borrower to a photo on their Australian passport or driver’s licence, giving the broker a percentage of how much they match. It also does a behind-the-scenes DBS check and tells the broker the borrower’s current location, and the video is stored for seven years in case of an enquiry from ASIC. The system is currently being trialled by 150 brokers, saving them eight hours on average, with a full rollout scheduled for 1 March.
There’s no legal barrier to video identification; the challenge is persuading lenders to accept it. While HashChing has an exclusive partnership with the South African developer of the software, E4, it is encouraging lenders to work with E4 to use VOI technology. Combined with online document collection, VOI can free brokers from the tyranny of distance, Sodhi believes. “With this technology the broker can be anywhere in Australia and the consumer can be anywhere in Australia … the geographic barrier is gone.”

Using data
In March 2016 Siobhan Hayden, then-CEO of the MFAA, predicted the next evolution in mortgage broking would be driven by data scraping. Data scraping is extracting data from documents, web pages and storage vaults, which can then be put to use in a number of ways: automatically filling in forms, reducing the need to ask borrowers for documentation, and more informed decisions by lenders.

Data is already changing the mortgage application process. Electronic mortgages through Bank Australia and conditional approvals via the CommBank Property app are available to customers of these banks, as the banks already have the relevant data. Data scraping across institutions is in its early stages, warns AFG’s Vogel. “There’s certainly not enough data available to make a complete and proper assessment, but we’re trying to make the best of the data which is available to use.”

Other professions are further ahead in data scraping. Next.Gen.Net’s Carn points out that accountants can already access information on their clients held by the ATO; giving brokers the same access would be a “very simple technology solution, but there [needs to be] a risk appetite to allow that to happen”.

At Rubik Group a current project is looking at using wealth management to provide solutions for property investors. “One of the top unmet needs is around investment property,” head of product Emily Chen says. “It’s almost personal financial management: how do I budget? How do I know when I’m ready to buy that next property?”

Already some banks offer digital ‘dashboards’ that show customers the funds available in their current, savings and super accounts. Chen suggests that property could be added to this mix, bringing in external data on property values on fixed loan terms, creating “a total wealth view for the customer”. 

What’s holding back data scraping – and by consequence paperless mortgages – is concerns around security. Computer hacking has become international news, and 71% of Australians are concerned about having their information stolen, according to Veda’s 2016 Cybercrime and Fraud Report, with older Australians more concerned.

“A lot of brokers are not aware of how much is invested in secure data processing,” argues Carn. However, he warns that vulnerabilities remain: “We’re operating in a market that’s heavily regulated, and everyone’s aware of data security, yet we still see a lot of emailing of personal customer information, which I think is quite horrifying.”

Vogel believes younger borrowers are more accepting of their data being used. “If there is value for the customer and the opportunity to get a reduced interest rate then I’d certainly expect that a high percentage of customers would be willing to provide that information.” That is conditional, however, on those customers trusting that brokers can keep their data secure, which is why AFG is investing heavily in data security.