The process of granting mortgage loans as seen by bankers and their customers

The mortgage lending process is considered to be one of the more complex credit processes offered to retail customers. Making decisions for such long-term liabilities for considerable amounts of money requires a thorough analysis of both customers and collaterals.

This is why it is so important to properly assess customer creditworthiness, which significantly reduces the risk of potential losses and, as a result, the percentage of ‘bad’ loans in the bank's portfolio. From the banker point of view, the process can be divided into the following stages:

  • Application submission, often preceded by a simulation of conditions
  • Application analysis and customer verification
  • Customer risk and credit rating (scoring)
  • Credit decision
  • Contract and fund disbursement

However, from the customer point of view, the individual stages are less important – for the customer, the most important factor is the so-called time-to-money, i.e. how long it takes from the moment the application is submitted to the moment the money is received.

For many customers trying to buy a new apartment, it is the shortest time to grant a loan, not the most attractive price that determines the choice of a specific offer. Too slow a process can also lead to the fact that the chance to buy a property at an attractive price will pass the customer by. A bank also loses out on the opportunity because a dissatisfied customer will probably not only decline another offer in the future, but also voice their anger online. A dissatisfied customer more often shares their experience with the bank than a satisfied one - as a result, a negative opinion about the bank may easily disseminate – and discourage potential customers.

Mortgage process - why does it take so long?

A long time of granting mortgage loans is therefore a pain not only for customers, but also for bankers themselves. So why are mortgage loans finalized after a few days, while more common cash loans are paid out even within a few minutes after the application is submitted? The most important reasons are:

  • The bank's extensive internal procedures with respect to mortgage loans, reflected in more complex, multi-stage processes. Such processes often involve a few or more people from different departments responsible for particular activities.
  • Handling the process based on hard copies - preparing and filling in all documents manually may take up the lion's share of the day of each bank employee. If everything is paper-based, the transfer of documentation between departments and individuals who need to approve each stage of the process protracts the time it takes to grant a mortgage.
  • The need to carry out a comprehensive risk assessment, which includes not only a formal verification of data and documents provided by the customer, but also a verification of customer credibility based on their qualitative and financial assessment (mainly based on calculated scoring). As part of these activities, the customer is often required to provide additional information and documents, which has an impact on the application processing time.
  • Property valuation - can take up to several weeks. However, this is a process that should not be neglected, because a proper valuation of the real estate being the loan collateral has a direct impact on the loan amount.

Comarch Loan Origination

Mortgage process automation

In order to accelerate mortgage loan service processes, and minimize the risk of losing customers and reputation, more and more banks decide to implement IT solutions that allow for improvement or full automation of certain activities performed by their employees to date. The implementation of such systems often goes hand in hand with simultaneous streamlining of internal banking procedures and optimization of business processes themselves. Thanks to this, it is possible not only to shorten the time of granting mortgage loans, but also to reduce human factor risk, better match the offer to customers and streamline the daily work of bank employees. In the long run, this may also result in an increase in the number of loans sold, without the need to hire additional employees, and a reduction in the risk for loans granted.

  • Automation may include actions at any stage of mortgage loan processing and granting - starting from the identification of customer needs, through loan simulation, application submission, to the decision and signing the agreement until the loan is paid out. The most important elements that may contribute to a faster process include: implementation of a system based on the process engine, which will not only allow to define the optimal workflow, but also to modify it at any time in response to the changing needs of a bank, customer preferences or legal changes.
  • Use of business rule engines that enable scoring or creditworthiness calculation, or automatic credit decision-making based on implemented algorithms processing data acquired within the process.
  • Integration of many different tools within one universal platform and user-friendly graphical interfaces allow to increase the satisfaction of process participants on the bank's side while maintaining the consistency of processed data on credit applications.
  • Customer verification in internal and external databases enables a comprehensive picture of the customer economic and financial standing to be obtained, and the risk of subsequent loan defaults to be reduced.
  • Reduction of paper documentation to minimum and using ready-made templates generated directly from the system significantly accelerate work, improve transparency of the process and allow for better cooperation at each stage of the process.

The automation of mortgage loan sales processes, apart from accelerating the time of servicing, also brings other benefits:

  • Support for credit processes in an IT solution allows for better monitoring and detection of bottlenecks that may be subject to further optimization. This reduces the risk of the process "getting stuck" at some stage, which causes frustration for the  customer.
  • Credit process auditability - this makes it very easy to track the entire process history, any changes or approvals made by individuals.
  • Reduce operational and credit risk - automation of the mortgage process reduces the risk of human error when granting a loan, e.g. calculating bad scoring or granting a loan in a situation where a negative decision should be made.
  • Work improvement between departments - a defined workflow allows for a clear task assignment to specific employees - with a specific deadline for their execution, tracking progress, easy approval of effects and simple change-making.

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