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PERSONAL FINANCE

Tech takes paperwork out of home mortgages

Russ Wiles
The Arizona Republic
Many consumers like to use tablets to apply for complex products such as home mortgages. That could accelerate as lenders develop better applications and as Millennials get on board.

Doug Johnson serves as the chief financial officer of two hospitals in the Wisconsin-Minnesota border area but doesn’t consider himself to be especially tech-savvy.

Nevertheless, he was able to complete the entire mortgage-application process for an Arizona vacation home that he and his wife wanted to buy, entirely online. That included shopping for interest rates and terms, inputting personal information and uploading the required supporting documents, including copies of income-tax returns, pay stubs, bank statements and more.

“It went without a hitch,” said Johnson, 47, who admits he was initially concerned about online security. “If you have access to the Internet and a cheap scanner, that’s all you need.”

Johnson did the mortgage-application process through Guaranteed Rate, a national residential mortgage lender based in Chicago. The company’s software guides applicants through the loan-shopping exercise and lets them input personal data, see their credit scores, upload key documents through a private and secure system and receive online approval. Applicants going through the company’s all-digital route currently can qualify for a $250 credit on closing costs.

Guaranteed Rate claims it has the first all-digital mortgage, but many competitors also are going in the same direction, letting customers apply for mortgages, process much of the paperwork and do related tasks day or night, using a desktop computer, tablet or smartphone.

No longer such a slog

Applying for a mortgage and supplying supporting documents — traditionally one of the most time-consuming, paperwork-intensive and frustrating financial exercises around — increasingly is being automated. That means applicants will find the process easier, faster and, possibly, less expensive than before.

Americans already have embraced online interactions for other financial products and services. They pay bills online, check credit card transactions, buy and sell stocks, adjust 401(k) balances and pull up their credit reports. The vast majority of taxpayers file their tax returns online.

Five years from now, digital applications and document submission for home loans might be just as prevalent, though it isn’t quite there yet.

“It’s not as widespread as you might think,” said Rick Hill, vice president of industry technology for the Mortgage Bankers Association. Many people still prefer to meet face to face with a loan officer, especially first-time home buyers.

Paperwork has been a fact of life for home buyers, but maybe not forever.

Jaime Kinman, in the Scottsdale, Ariz., office of Guaranteed Rate, was assigned to assist Johnson, though they haven’t met in person. Loan customers “always will have the option to have that human contact, to come into the office,” she said.

Kinman said she still tries to meet everyone she does business with, and phone and e-mail contacts also are available. “But over time, I expect fewer people will come into the office,” she said.

At any rate, digital applications can move the process along faster. In the case of Guaranteed Rate, for example, the company’s online application will notify users if they filled out something incorrectly or are missing an item. Pay stubs, tax returns and other key material still must be verified, but applicants receive online notice when they receive preliminary loan approval.

Consumers have many choices when it comes to conducting their financial business, ranging from bank branch visits and phone contact to interaction through desktop computers, smartphones and tablets. According to a 2015 study by Javelin Strategy & Research in San Francisco, customers tend to prefer branch visits when they have specific questions or place high value on security or confidentiality. But computers, especially smartphones and tablets, are making headway.

Smartphones are a preferred choice when people apply for or manage fairly simple products like savings and checking accounts, credit cards and certificates of deposits, according to Javelin. But tablets are favorites for more complex items including mortgages, auto loans and retirement accounts. Tablets are favorites for complex accounts in part because wealthier people are more likely to own tablets and have those types of accounts, Javelin said.

Mark Schwanhausser, director of omnichannel financial services at Javelin, notes that some mortgage applicants already can or soon will be able to send copies of mortgage documents like pay stubs to a lender simply by snapping photos on their smartphones or tablets. He expects more mortgages to be handled through mobile devices as lenders get better at designing digital applications.

“It won’t be a long time before more people are doing it online and using their mobile devices,” Schwanhausser said.

Closing goes digital, too

Even the mortgage-closing process, the final step before homeowners become contractually obligated to their loans, can be improved through technology, according to a report out last week by the federal Consumer Financial Protection Bureau, based on survey results from 1,200 consumers who signed off for their loans in this manner.

People who did electronic mortgage or eClosings said they understood their loans better and felt more empowered about the process compared with others who relied entirely on paper forms. Electronic closings let applicants review forms and documents on home computers or other devices, with embedded links to help them understand terms. Applicants also can sign documents digitally.

The trend points to more home buyers and loan-refinance applicants using computers and digital devices to apply for, monitor and close on home loans, with few if any personal meetings and less paperwork getting sent through the mail or fax machines. This trend will be hastened as more Millennials start buying homes in larger numbers.

“There’s a huge preference among a lot of people to use whatever device they have handy,” said Hill. “The consumer really wants to use technology.”

Reach Wiles at russ.wiles@arizonarepublic.com.

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