FTT Financial Services Futures: AI, Fintech and the Future of Mortgages - The Shift That Credit Unions Can’t Ignore

By John Egan

Credit unions don’t dominate the mortgage market, but they do play a small but pivotal role in home loans and mortgage refinancing. Credit unions account for roughly one-third of mortgage lenders in the U.S., according to the American Credit Union Mortgage Association (ACUMA), a trade group for credit unions. However, they represent only 15% of mortgage volume and just 7% of the market for home-purchase loans. Navy Federal Credit Union is the lone credit union to appear in the ranking of the 25 biggest mortgage lenders in the U.S., according to Motley Fool Money.

Why Fintech Adoption Is No Longer Optional

No matter the size of a credit union or any other mortgage lender, participants in a panel discussion November 19 at the FTT Financial Services Futures conference in Austin, Texas, stressed the urgency of adopting fintech in the mortgage industry. (Finopotamus was an official media partner for this event.)

Steve Strick

“Technology is something that the mortgage business has always been lacking, and I think that it’s going to start ramping up and it’s going to ramp up quickly, not only on the origination side, but also on the servicing side,” said panelist Steve Strick, vice president of mortgage lender at New American Funding.

Strick was one of four panelists who spoke at a session titled, “Modern Mortgage Servicing: Tools, Tech & Transformation.”

Building a Modern Customer Experience

The mortgage industry “falls short when it comes to delivering a great user experience built on speed and security Strick said. “There might be certain parts of the experience that are great, and then it falls off the map,” Strick said. Consumers “want to trust the process,” he added, “and our industry in general has carried a black eye over … trust.”

As for speed, borrowers expect credit unions and other mortgage servicers to provide real-time answers to loan questions, Strick noted. For example, he said, a bot might be able to quickly address a borrower’s simple question about late fees. Or, he added, the bot might sift through a borrower’s information and connect that person with a human representative to handle a complex inquiry.

Brian Nihls

Dovetailing with Strick’s comments, panelist Brian Nihls, head of cloud for mortgage at SAP’s Fioneer fintech business, emphasized the need for mortgage servicers to use up-to-date omnichannel platforms to interact with borrowers — whether it be via email, phone calls, text messages or some other communication method.

“The modern platform will allow you to switch from a reactive environment — an irresponsive environment — to a predictive environment,” said Nihls, referring to communication with borrowers.

“The worst thing you can do is get a new platform and then configure it to look like your old process,” advised panelist Dan Thain, leader of the Americas consumer lending practice at professional services firm EY. “You're going to end up with no efficiency gain and a lot of friction in your process.”

Dan Thain

AI Can Help Lenders Become Proactive Rather Than Reactive

Panel moderator Steve Riley, CEO of the Homeowner Resource Center, which helps credit unions and banks improve their mortgage operations, echoed Nihls’ observation about mortgage servicers needing to be more proactive and less reactive. In “the quest” to be more proactive, artificial intelligence (AI) can help predict when a borrower plans to refinance a mortgage or when someone might experience a “life event” — such as a divorce, birth or bankruptcy — that affects their mortgage needs, Riley said. “There’s got to be some predictability, and it’s going to come with asking questions of data.”

Steve Riley

For credit unions and community banks, early detection of potential financial trouble is especially critical because of their deep local roots, according to Ryan. “If you can get ahead of somebody who’s got a problem with the mortgage,” he continued, “you can fix those things more easily than if you wait for them to miss a bunch of payments, and now you’re calling them, chasing them down, [threatening] foreclosure — all these really horribly negative things come into play.”

AI Tools Go Far Beyond Automation

Mortgage servicers are increasingly adding AI-powered tools that extend beyond basic automation, Riley said. Capabilities include feeding automation outputs into a system to “create new logic that adjusts itself,” Thain added. “AI can also develop customer service bots that make or take phone calls or that manage reconciliation of financial records.”

Strick noted that AI can aid a servicer’s compliance efforts — detecting or forecasting fraud, for example — and can scan documents to spot errors like a missing signature.

“The opportunities are enormous,” Nihls said of AI’s incorporation into mortgage operations, “but we have to start attacking. We have to start chipping away at the use cases and [then] deliver.”

Why Some Lenders Hesitate — and Why They Can’t Afford To

Many of Thain’s mortgage clients shy away from those opportunities due to concerns about the longevity of prospective AI vendors and the potential risk to their reputation if an AI venture underperforms, he shared.

Thain said most of his clients are “starting to test the waters a little bit” in the AI space. He suggests that mortgage servicers and originators dabble with proof-of-concept projects before fully committing to AI.

“There’s a greater risk for companies that are not going to start using AI, because they’re going to get swallowed up and passed by,” Riley warned. “They don't have to go all in right away. They’ve got to stay in tune with it.”

“Even if they’re not generating all of the efficiency that they necessarily want right away,” Thain said, “they’re creating that repeatable process that they can experiment with and see what’s working and what’s not working.”