BofA’s digital-mortgage flip shows incumbents a path for adapting

The news: Bank of America reported that the vast majority of its mortgage initiations were made digitally in 2021:

• It hit 81% via its Digital Mortgage Experience offering, launched in 2018.
• That’s up significantly from 45% in 2020.
• The bank said the product uses its digital platforms to help borrowers through the mortgage process.

More on this: BofA also reported surging volume for first-mortgage loans through its product, rising by 2.5 times in 2021 versus 2020, with its total funding at $53.7 billion.

The Digital Mortgage Experience enables prospective borrowers to:

• Seek a first mortgage or a home equity line of credit (HELOC); refinancing is included.
• Apply through BofA’s mobile app or online.
• Auto-populate significant portions of their applications.
• Get support from lending officers.
• Lock-in interest rates during the application process.

The banking giant also pointed to recent accolades its mortgage business received for its customer experience, such as:

• “Best Mortgage Lender Overall” from Bankrate, with speed for approvals and closings, plus convenience, among the criteria.
• “Best Big Bank Mortgage Lender” by Forbes Advisor, with criteria including ease of comparison shopping and speed to funding.

The bank cited its concurrent digital engagement growth, which it shared last week, as contributing to its latest mortgage milestone.

The big takeaway: Customers highly value the convenience of digital mortgages. A 2021 survey from ICE Mortgage Technology found that respondents who used online mortgage applications cited the advantages of having a simpler process, at 55%, and cutting the time it takes to close, at 53%.

BofA’s results show that incumbent banks that streamline a digital experience can make strides in the digital mortgage space and increase their competitiveness with savvy non-bank players like Rocket Companies. Banks can start by digitizing the manual parts of their mortgage arms. Weaknesses that need to be addressed, per Deloitte, include:

• Substandard origination experiences through complex digital-mortgage platforms and overly product-focused employees who can't assist with the larger customer journey.
• Digital transformation efforts that leave out mortgages due to uneven implementation across the bank or initiatives driven at the business-unit level.
• Uneven digitization within mortgage arms, prioritizing customer-facing processes over middle- and back-office work.