Pension Funding Index August 2020
In July, the funded status of the 100 largest corporate defined benefit pension plans decreased by $68 billion as measured by the Milliman 100 Pension Funding Index.
In this age of instant gratification, we expect answers to our questions—even the difficult ones—instantly. What could be better than a bot that can answer just about anything you ask it, including a complex task such as getting a mortgage? Obtaining a mortgage involves understanding the amount you can borrow as well as the value of the property for which you need the mortgage (the collateral). A mortgage lender or real estate agent can assist in the prequalification process. However, the process of obtaining a mortgage even in this digital age remains complex.
A recent survey by FREEandCLEAR1 asked existing mortgage holders about their experiences obtaining a mortgage. Surprisingly, only 9% of the respondents found their mortgage lenders via online searches. The majority of the respondents had an existing bank relationship or a referral from a real estate agent. However, this doesn’t mean that potential mortgage borrowers do not rely on the internet for information regarding the mortgage process. In this article, we evaluate various digital and artificial intelligence (AI) platforms that can be used to obtain information about getting a mortgage.
Amazon, with its Echo voice assistant “Alexa” devices, offers a “Mortgage Helper” chatbot2 created by Starbutter, a tech startup that builds AI and text voice agents that can be used for banking, insurance, and personal finance information. Chatbots can be designed and built by companies for assistance such as Alexa and Google Home just as apps are built for cell phones and distributed through “app stores.”
Per the Amazon.com website, Mortgage Helper helps you “figure out home loans and mortgages quickly and avoid traps, bad companies and fees.” Mortgage Helper is also available on Google Assistant,3 which launched on Google Pixel smartphones and Google Home as an expansion of Google’s existing “OK Google” voice controls.4
With its mortgage banking professional expertise, Mortgage Helper seems like the mortgage process panacea of all times. According to the description, Mortgage Helper is a financial expert that bases its recommendations on research from Consumer Reports, Federal Deposit Insurance Corp. (FDIC) rankings, and Consumer Financial Protection Bureau (CFPB) reports. Once you enable the Mortgage Helper, it can give you feedback on the size of the house, your monthly payment, the best place to get a mortgage, and other information.
Putting this to the test, we asked the Mortgage Helper bot a series of questions via Alexa. We wanted to know if someone who is not a financial expert could obtain enough information to help understand the mortgage application process. Being mindful that financial information should be kept secure, we did not dive deep into the process of providing income or credit score information. In light of this, our questions were: Explain the mortgage application process. What is the highest sales price of a home that I can purchase? Where can I get a mortgage? What are today’s mortgage rates?
Overall, it appears the information was similar to what individuals would obtain if they typed questions into a search engine. But that may be the point, because the chatbot allows you to retrieve information without having to type out your questions. Mortgage Helper informed me about the approximate 30-year fixed rate and some ideas about where to apply for a mortgage based on the bots’ expert reviews of various rankings, including those from Consumer Reports, the FDIC, the CFPB, and the Better Business Bureau (BBB). However, Mortgage Helper got confused and repeated several mortgage lenders for reverse mortgages, which was not requested.
We could not retrieve specific information on how large a loan we could be approved for and at what rate, as, correctly, interest rates are based on several factors, including credit score, property location, down payment, etc. Mortgage Helper said it needed to get back to us on that. Just as in an in-person application process for a financial loan, all information would need to be gathered, verified, and integrated into the underwriting process.
Alexa is a digital assistant backed by cloud-based AI systems accessible in your home via your internet connection. The system has a speaker with a microphone that is always on. If you are wondering if this device is always listening to your conversations, it probably is. The “wake” words to turn on the device enable a light that indicates the audio is streaming to the cloud. This information is stored and allows the device to continue learning to respond to your inquiries. There are ways to delete or turn off the device, including muting it, but they may impede its performance. Mortgage applicants and basically anyone who uses these devices should be careful when providing information and be well versed in its privacy policies.5
In addition to privacy concerns, companies that produce chatbots like Mortgage Helper may have a host of legal issues, including compliance with industry regulations and standards.6 For example, if a chatbot is giving advice, the information fed to it must be current. Collecting personal data from users requires strict privacy safeguards for the data. And strangely enough, conversations with chatbots must employ appropriate measures to prevent the chatbot’s comments from being abusive or harassing. Users of chatbots may want to ensure that parental controls are set. Google Assistant employs voice recognition technology to assist with appropriate inquiries as well.
In contrast to Alexa Mortgage Helper, we performed a good old-fashioned Google search on “How to obtain a mortgage loan.” A series of advertisements for mortgage lenders appears first, and then a well-thought-out list of things to know before getting your first mortgage pops up from Bankrate.com. Clicking on Bankrate.com’s “10 tips to have an awesome mortgage in 2017”7 gave some further insight. This list was helpful in providing simple concepts that require follow-up. A concept such as borrowing what you can afford to repay makes a lot of sense. Using Alexa Mortgage Helper to explain the tasks that need to be accomplished would be helpful, especially if we use a reminder/notification for follow-up. Included in this list is a section on finding a lender you can trust. In contrast with Mortgage Helper’s suggestions, we had a look in the mortgage lender and rates section of Bankrate’s website. It provides a list of mortgage lenders and their rates in my market area, but how do we know we can be assured of their skills, expertise, and ethics? Obtaining information from the FDIC, the CFPB, Consumer Reports, and the BBB seems like a logical step. Mortgage Helper, on the other hand, builds that search into its response.
An end-to-end digital solution—automating all sources and interfaces in the mortgage process—is not yet in place and will require significant process improvements in the mortgage industry.8 However, many companies have moved more of their processes online and some companies now include document and asset retrieval technology built into the application process. Wells Fargo and U.S. Bank have worked deals with Blend Lab to offer an online application that pulls from tax returns and income and asset source verification.9 Quicken Mortgage also provides an online mortgage processing service portal called “Rocket Mortgage.” Rocket Mortgage reports two-thirds of clients use the service to purchase a home, and of those, 72% are first-time home buyers.10
While online applications are available for most mortgage lenders, there are several steps to the process that require documentation, verification, and automated underwriting of the applicant and the property. Quicken’s Rocket Mortgage allows an applicant to upload financial information and get a loan decision in minutes. According to its interface, Rocket Mortgage describes the process as “Push button. Get mortgage.”11 This technology may be appealing to the “Alexa generation" (recently dubbed “iGen”), who may prefer an electronic interface instead of a human one. The entire process, from locking in an interest rate to creating the e-sign application, can occur without speaking to a human being. Despite this capability, Quicken also offers a mortgage advisor at any time during the process. The end result of this process allows the applicant to use the approval to find a home.
We tried out the process by setting up an account and reviewing the information required to apply for a mortgage. The site laid out nine steps to see if the applicant was approved. We started by entering information about the location of the property. The property we chose was a condo, and the site needed more information and a chat with a home loan expert before proceeding. Changing to a single-family property, we entered the address and information about the property was pre-populated. The site also had search and share capability to bring in assets and income. Overall, the application process appeared to be straightforward and uncomplicated.
Some lenders have rebranded their operations to provide a more integrated and consumer-friendly approach to mortgage loans. Nationstar recently announced “Mr. CooperSM,” a rebranded platform for its mortgage servicing and originations operation.12 Nationstar expects the new brand to create a customer experience that includes improvements to technology and customer service. This platform allows existing customers and mortgage applicants the online capability to make payments, apply for new mortgages, and use a “digital home loan advisor” that can deliver custom insights on a customer’s loan, home, and neighborhood. Other services with Mr. Cooper include interaction with real estate agents and a rewards credit card. The Mr. Cooper website has a consumer-friendly interface that helps users through the buy or rent calculation, mortgage loan payment amount, and other useful information for mortgage applicants to make decisions.
Applying for a mortgage loan is a process that requires a lot of information to make an informed decision. Not only are the best mortgage rates important, but also the process of obtaining the mortgage should be as transparent as possible. Using web-based searches to find a lender in conjunction with existing banking and other relationships appears to be the best way forward. When you are done with your mortgage, chatbots like Alexa can also help you with banks, credit cards, insurance, and other financial products. Just check your settings when you are done asking questions.