Forget “old fashioned” intelligence, “artificial intelligence” (AI) is all the rage. AI is in the press, it’s driving companies’ stock valuations, and it’s impacting human employment. For lenders and vendors in residential lending, every conference has one or more sessions on how it might help net revenue, how to incorporate it, and what it even means. STRATMOR is often asked these questions, so we thought it wise to present a primer on how companies in our industry should view AI and present a framework to think about incorporating it into the workflow.
AI itself has been around for decades. It is not some new technology that sprang forth from IBM or Bell Labs last year, but instead has been increasing in scope, adaptability, and prominence in recent years. One definition states that AI is “the capability of computational systems to perform tasks typically associated with human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making…that develops and studies methods and software that enable machines to perceive their environment and use learning and intelligence to take actions that maximize their chances of achieving defined goals.” MISMO®, the real estate finance industry’s standards organization, recently published its Artificial Intelligence (AI) Glossary to foster a shared language and mutual understanding among all mortgage stakeholders.
Proponents tell us that a million conversations make up “AI.” Yes, it’s been around a long time, but it is in the early stages of development, they say. Lenders, however, are very concerned about regulation and responsibility. No lender wants to run afoul of the regulators, especially as states step into this creating a patchwork of rules. Servicers and lenders do their utmost to take care when dealing with consumers and should keep in mind that state regulators are also dealing with limited resources to handle new technology and developments as they “step up their game” to be mini-CFPBs as the regulatory landscape has changed.
AI is everywhere right now. If your toaster doesn’t have it yet, give it a week. But in mortgage, it’s worth staying grounded. The real opportunity isn’t chasing shiny “AI for AI’s sake” tools from companies that just learned what a 1003 is. It’s using AI to make the platforms we already depend on smarter and more efficient. Most lenders will feel the impact through the tools they already know and trust, not from some brand-new miracle app. The smart play is to ask your existing partners how they’re using AI to make your job easier and drive real business results. The hype will pass, but the people who understand both mortgage and technology will be the ones quietly winning.
Things are changing fast. A STRATMOR survey from earlier this year showed that 38% of lenders are using some form of artificial intelligence and/or machine learning. This is up from 15% in 2023. Most (63%) use a third-party vendor, and 17% use AI that is built into their LOS. Meanwhile, the STRATMOR survey showed that cost and accuracy are always important, and mortgage companies see a lending future backed by artificial intelligence. But there may be as many questions as answers to what the path might look like. For example, what tasks or functions does the IT department implement first?
Senior management is probably looking at operations functions such as opening and ordering services, disclosures, product questions and eligibility, processing, underwriting, quality control (pre- and post-closing), reviewing appraisals, investor delivery and purchase, or compliance and quality control. Capital markets teams look at price and delivery assistance that AI might provide.
Over in the sales and marketing divisions, how might AI help the consumer-facing “chat bot?” Cold calling and dialing out functions might benefit, or taking applications, data mining for refi candidates and opportunities, or in applying the Customer Relationship Management (CRM) software to borrowers.
STRATMOR’s survey work showed that the areas in which AI was being used by lenders included document classification and indexing (63%), document reading (54%), intranet communication and information (29%), underwriting decisions (21%), and automating customer interactions, identifying opportunities with current customers, and targeting potential customers.
Certainly, AI prices have been dropping, and what a company would have spent $10,000 on a year ago can be had for less than $1,000 now. It is very important that lenders choose wisely in determining which vendor to work with. Does your counterparty have a strategic plan? Is it well capitalized and by whom? Your data can’t be fragmented, and it is important to have your data sets in order. Garbage in, garbage out.
Compliance teams at lenders and servicers are also watching regulatory moves at the state (not so much federal) level. Some states have voted in laws pertaining to AI, and it appears that a “regulatory wave” is mounting at the state level. Keeping track of them all is a full-time job. Lenders are faced with LOs wanting to use AI for their personal business, which can be a real problem for compliance departments. Every lender should have an AI policy. Consumers should be able to opt out of communicating with a computer… should your LOA (loan officer assistant) be licensed?
STRATMOR is seeing lenders trying to demystify AI’s role in mortgage lending and incorporate forward-looking insights into their planning. Small and large lenders are leveraging AI not just to streamline operations, but to create modern, customer-centric experiences using AI-powered tools to simplify applications, provide personalized guidance, and build borrower trust and loyalty. Lenders are looking at accelerating underwriting and document review to harness advanced data extraction to reduce time spent on income verification, statement analysis, and compliance tasks. Lenders implementing AI-driven workflows hope it allows lenders and servicers to grow loan volumes and expand portfolios without increasing staff or branches.
Artificial Intelligence has reshaped mortgage servicing with the power to predict borrower behavior, flag risks, and personalize engagement. But here’s the truth: AI alone can’t deliver outcomes. True AI needs to be in the workflow, not adjacent to it. The insights produced often stall without a way to operationalize them. That’s where workflow comes in and independent mortgage bankers are facing a pivotal moment. In the lead article of STRATMOR’s recent Insights Report, “Raising the Stakes: Competing with Giants in the Age of AI and Consolidation,” Garth Graham and David Hrobon explore how technology and market consolidation are reshaping competition, and what IMBs can do to win. Should you stay independent, partner strategically, or consider M&A? The article breaks down the tradeoffs, opportunities, and leadership strategies needed to thrive in today’s high-stakes market. Artificial intelligence has its limitations… but ignore it at your own risk.
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