Wolters Kluwer Compliance Expert: The Upside to Digital Lending in a Down Market

With the real estate market being affected by higher interest rates and low inventory, digital lending has fallen on the list of priorities for lenders. But in fact, now may be the perfect time for lenders to start their journey of fully digitizing.

So argues Kevin Wilzbach, Director, Technology Product Management, in a press release from Wolters Kluwer Compliance Solutions, encapsulating his insights on lending trends and what lenders should be focusing on regarding digital lending from a recently published article, “Rethinking digital lending in a down market: Focus on what you need and then start where you can.”

“What we’re seeing in the marketplace is that early adopters of digital lending are for the most part staying committed to eClosings and eNote creation,” writes Wilzbach. “In fact, in a recent survey of mortgage banks, nearly a third of the respondents said that the sharp decline in overall originations increased [their] organization’s progress in implementing digital initiatives.”

In an economy marked by high interest rates and the expense of fully digitizing, he acknowledges a downturn in digital lending on many lender priority lists. But despite lenders’ increased emphasis on cost control, finding new sources of volume, and protecting top talent, those priorities don’t mean that digital lending has stalled entirely.

“Multiple industry surveys, including one commissioned by Wolters Kluwer that was conducted among independent mortgage banks in March 2023, found that lenders of all sizes recognize the benefits of being more digital,” says Wilzbach. “Participants in the survey cited improved operational efficiency, more modern customer experience, and a reduction in loan defects in closing documents due to signing and notarization issues as the top reasons that digital lending is the future.”

Wilzbach adds that it doesn’t have to be all or nothing. Digitization can be a “journey.” There are discrete phases of digital lending that are far less expensive than big-ticket investments (like a loan origination system) and that can be implemented relatively quickly.

“A lender’s entire digital lending strategy doesn’t have to be fully in place to get started.A launch can occur with the completion of an incremental deliverable.Success can come in large part from ‘chunking’ various parts of the process into smaller, more digestible parts. Hybrid, for example, versus full digital or IPEN (in-person electronic notarizations) versus RON (Remote Online Notarization),” he concludes.