With the Indian mortgage industry valued at over ₹25 lakh crore, it is undergoing a technological transformation that is changing how financial institutions work with home loans. The real estate market continues to grow and digital adoption is increasing, banks and non-banking financial companies (NBFCs) are utilizing demographic AI (Artificial Intelligence) and automation to improve their mortgage servicing models, providing first time accuracy and speed to borrowers across India.
The Indian mortgage servicing process has always had some element of manual processes that took time and was error-prone. Conventional mortgage servicing processes, from programme a loan to processing a payment to providing customer service, were burdened with the conventional manual mortgage servicing process, which took time and caused inconsistency and borrower frustrations. The changes being implemented by AI enabled systems are changing how mortgage services are being provided. Machine learning algorithms can continually analyze borrower information and assess the demographic of the borrower and can actualize lenders decisions with utmost confidence and in days not weeks and in some cases just hours. Timeouts of the service centre are also being minimized by use of automatic follow-ups, AI voice, chat, and video technology.
One of the greatest advances on the fintech landscape, is a bank’s ability to approve loans. AI platforms are now able to analyze loads of data to evaluate creditworthiness – they have full access to income statements, bank statements, job history, social media activity, and alternative data like utility bill payments. AI system can analyze all of these things in seconds, and even the notes around the analysis and resulting decision can be written up quickly. This new investment and service benefits not only the lenders but also the potential BORROWER. In India, with credit being scored in such a way that it does not capture the full range of what a borrower may be financially capable of, it is indispensable in terms of speed and accuracy of risk assessment when making a loan approval.
Payment processing is also profiting from automation and can be expected to be supercharged, moving forward. The old way of processing mortgage payments meant that servicers would match payments that had been received to a specific loan account, and most of the time this was a manual process. The problem with doing manual checks to identify where payments were arriving is that, too often errors occurred in matching payments and servicing records were outdated. Now servicers can find a system that processes payments instantaneously and carries out the updating of borrower records seamlessly. This makes it possible to gain even better borrowing and repaying outcomes for the borrower. The borrower sees the benefit of real-time updates to their accounts, plus a service that is absolutely transparent, in terms of payments and interest calculations, and, how the payments to their loan are being applied (reduced lag time in payment processing).
Customer service in the mortgage industry has significantly changed by using AI-based chatbots and virtual assistants that can work 24/7 and are able to handle routine questions easily. These systems are able to give borrowers immediate access to their own accounts, payment cycles, and answers to commonly asked questions in multiple Indian languages. For more complex situations, intelligent routing systems send customers to the most suited human agents, which can shorten resolution times and augment levels of satisfaction, or the feelings of feeling satisfied.
Risk management and compliance monitoring capabilities advance further with their integration of AI. Automated systems can continue to monitor loan portfolios for delinquency and related early warning signs and enable action to be taken earlier. For example, predictive models can show patterns in payment habits, economic indicators, borrower communication, etc, to alert future defaults even before they happen. A huge capability for lenders, it allows workers to provide early assistance to borrowers in need, which can possibly prevent short sales or foreclosures, and maintain strong and healthy loan portfolios.
Historically, one of the most labor-intensive functions of mortgage servicing was document processing. Optical Character Recognition (OCR) and natural language processing are enabling the dematerialization of this process through the ability to automatically identify and extract relevant information from any type of document, verify its legitimacy, update the borrower’s records, etc., without human involvement. This automation has not only resulted in the decreased processing time for borrowers, but has also reduced the risk related to data entry errors, which may have implications for loan servicing accuracy.
The evolution of mortgage servicing in India with AI and automation, grafting an increasingly efficient, accurate, and understanding service experience, will dramatically improve the experience and satisfaction levels of borrowers. As these technological developments continue and develop, borrowers will be able to expect further reduced processing times, superior service personalization, and enhanced transparency throughout the mortgage process, and in turn contribute to homeownership being more available and manageable for the millions of Indians.
Authored by : Shashi Bhushan, Chairman of the Board, Stellar Innovations
