Reducing Origination Costs with AI & Mortgage Automation

Back in 2021, concerns around mortgage origination costs were on the rise. Unfortunately, they’ve continued to rise since then – and for good reason.

According to Freddie Mac’s 2024 Cost to Originate Study, average origination costs have increased by 35% – or a whopping $3,000 – over the last three years.

This has many worried lenders asking one very important question: How can I decrease mortgage origination costs and find success in the current market?

Embrace AI & Mortgage Automation Technology

Many mortgage professionals may not want to admit it, but digital maturity and cost reduction go hand-in-hand. In fact, Freddie Mac’s study reveals that mortgage leaders believe going digital can help them decrease costs by 40%.

As more and more advanced technologies – like artificial intelligence (AI) and automation software – become readily available, leveraging them to improve cost efficiency is becoming easier and easier.

Let’s dive into the ways AI and mortgage automation solutions decrease origination expenses:

Reduced Manual Tasks

Automation technology alone can streamline the loan origination process by completing tedious, monotonous tasks on behalf of employees. In doing so, it drastically increases staff productivity and reduces labor expenses.

These advantages are heightened when you throw mortgage artificial intelligence into the mix. While automation software can handle predefined tasks, AI has the ability to learn from new information and adapt as needed, making it more suitable for handling complex tasks that typically require more human intervention.

When mortgage companies leverage AI tools, they are able to give employees back valuable time for more critical tasks that cannot be completed by even the most advanced technology. Experts actually found that AI-powered solutions save employees over six billion hours, amounting to over $273 billion each year.

Enhanced Data Accuracy

Data processing is also a financial drain for mortgage lenders. In addition to requiring manual, time-consuming work, document processing often results in costly errors. Discrepancies between forms and duplicate files – to name a couple examples – can lead to noncompliance fees that only drive origination costs further up.

Fortunately, you can streamline data extraction, indexing, and analysis with the right solutions. The best ones leverage optical character recognition (OCR) software and artificial intelligence tools to improve data accuracy and, in turn, avoid expensive mistakes during the mortgage origination process.

Improved Compliance Processes

Like many other things, mortgage compliance costs were negatively impacted by the 2008 financial crisis. In fact, banks’ compliance expenses have increased by over 60% since the global event.

The crisis resulted in the Dodd-Frank Wall Street Reform and Consumer Protection Act (also referred to as the “Dodd-Frank Act”), which is directly related to the rise in compliance costs. Experts discovered that a $50 billion increase in compliance-related expenses occurred the year after the act was signed into law.

These costs include both labor expenses and noncompliance fees – both of which can be reduced with the right mortgage automation technology. With AI-driven automation tools handling portions of the origination process, your staff has more time to focus on compliance and risk management. This means that you can repurpose resources instead of hiring (and paying) more employees to get the work done.

You can also further improve cost efficiency by leveraging origination automation software and outsourced mortgage quality control (QC) services. By outsourcing QC audits, you can reduce overspending when volumes are low and ensure you have the resources required to meet compliance standards when volumes are high.

Implement an Effective Change Management Strategy

Now, it should be clear that mortgage automation technology is critical to reducing origination costs. But new tools won’t drive your expenses down on their own. You need to adopt new technologies along with an effective change management strategy to really find success. After all, if your employees don’t accept the new tools you’re adopting, there’s no way you’ll be able to use them to actually drive expenses down.

Here are some steps to take to build an effective change management plan:

Build a “Speak Up Culture”

A 2023 study found that 26% of leaders in the financial services sector have “tech anxiety” around AI tools. Many members of your team may also feel anxious about adopting and leveraging new AI and automation technologies.

It’s important to create an open, safe space for them to speak up about their worries. Listen and address their concerns, so they feel reassured that adopting new tools will make their work lives easier, not put them out of work or generate complications.

Clearly Explain the Reason for Change

Just as it’s important to listen to your employees, it’s important to talk to them. Fill them in on why your organization has decided to make drastic changes by implementing technology. Explain the benefits tools like mortgage origination automation will deliver, mentioning cost reduction but also advantages that are more relevant to them, such as manual task elimination.

Only 15% of employees always understand the rationale behind their organizations’ changes. Don’t let your team become part of this group.

Develop a Timeline for Implementation

Do you prefer to know when something is going to happen, so you can adequately prepare for it? Well, your team members likely do as well.

That’s why it’s important to put together a clear timeline for implementing new AI-driven mortgage automation technologies. Include specific tasks (don’t forget training!) with due dates and responsible parties. In addition to putting your employees at ease, developing a timeline will help you effectively track progress and stay on course.

Seek Assistance from a Trusted Mortgage Automation Partner

In addition to a change management plan, you need the right mortgage automation partner in order to decrease origination costs. The best partners make meeting your unique business goals a priority and understand the importance of reducing expenses in today’s climate. Here’s a checklist you can use to find the ideal solution provider:

• Industry experience: Look for a mortgage automation software provider with extensive experience working with mortgage companies. They should have a clear understanding of the market and how automation can be implemented to drive cost efficiency.
• Dedicated team: You should be able to tell if a prospective partner has a dedicated team early on in the sales process. It’s a good sign if your contacts are taking the time to really understand your unique needs and concerns – from timeline expectations to specific cost reduction goals to current origination process challenges. Be sure to inquire about their response time and training support as well.
• Advanced software: Technology quality is, of course, a major factor when selecting a mortgage automation partner. Ask prospective providers for system demonstrations. Don’t be afraid to bring in various members of your team to ask questions, so you can really gauge the level of expertise and software functionality.
• Business process outsourcing (BPO) services: While technology can most certainly help you reduce mortgage origination costs, humans are still a crucial element in the mortgage space. That said, it’s a bonus if your software provider is also a mortgage BPO provider who offers services like quality control auditing. This type of partner is a one-stop shop for all your cost-reducing needs.

At MetaSource, we take pride in offering all these key qualities. We help several lenders reduce mortgage origination costs, and we’d love to help you too.

With 64% of home lending professionals anticipating lowered costs to be an outcome of adopting AI, according to National Mortgage News’ parent company, Arizent, the time to leverage new technology is now.

Ready to get started? Contact us today to learn more about our mortgage origination automation solutions and outsourced services. You can also download our whitepaper on streamlining mortgage origination with automation.