Bots Help Meet Mortgage Demand

Last December, as Chief Information Officer Raj Bandaru watched Gesa Credit Union’s home mortgage loan volume continue to grow, he reached out to a business automation company for help with making Gesa’s loan-processing operations more efficient.

For years, Bandaru and fellow executives at the $4 billion, Richland, Wash.-based credit union struggled to hire enough people to keep up with the repetitive and mundane tasks required to process mortgage loans. But, Bandaru said, little did he know in December that his desire to streamline Gesa’s loan processing was about to morph from a noteworthy goal into an immediate, vital need.

In March, the COVID-19 pandemic put a stranglehold on the U.S. economy and the Federal Reserve, in a bid to save it, cut the nation’s short-term interest rate by 1.5%. It was an immense cut that had never been made before in such a short time frame. What came next, according to Bandaru, was Gesa getting flooded with three times its normal amount of mortgage loan applications as sheltered-at-home Americans realized that the historically low interest rate offered them the rare chance to buy a house economically or refinance an existing mortgage loan on the cheap.

Luckily for Gesa, Bandaru said, the Fremont, Calif.-based automation company Digital Align, which the 700-employee credit union had hired in December, had already started using bots – autonomous internet-based programs that interact with computer systems and users – to radically streamline Gesa’s loan processing. Bandaru jumped into action with Digital Align’s CEO, Rajesh Patil, to ramp up and speed up Digital Align’s loan-processing transformation plans for Gesa’s home mortgage arm. The results that followed, Bandaru said, have been this: In the last three months, Gesa, while handling its largest mortgage-application load ever, doubled its loan funding from $25 million to more than $50 million; saw its revenue share grow rapidly; hired no new staff; and watched its existing processing staff work safely from home amid the coronavirus as they interacted with and controlled personally-named bots along the way.

It’s been nothing short of staggering, according to Bandaru, who noted that “our entire senior executive team was shocked and amazed” and is clamoring to roll out bots in their own divisions. In addition, he called it a business change and strategy that can be transferable to many other credit unions across the country.

It’s also an example of business automation that Tracy Ashfield, president of the American Credit Union Mortgage Association, said is already happening at many credit unions, which, like Gesa, have seen their mortgage-lending demand spike massively in the wake of the Fed’s historic interest rate cut. The methods of automating loan processing tasks, which are manifold and time-consuming, may vary, she said. But the credit union mortgage loan and refinancing industry, which her trade association watches on a daily basis, has reacted well after being pushed into action by the dual forces of the pandemic and rate cut.

Credit union mortgage lending departments have automated tasks in different ways and using different means, Ashfield told CU Times. Just one example, she said, is how some credit unions have pivoted to remote signings and notaries, and taken other recent steps to forgo the typical end of the loan-approval process that had “often culminated with a group of people sitting around a table.”

Continuing to offer an overview of what’s led the vital home ­mortgage portion of the credit union industry to adopt technology that some have long argued credit unions have been slow to adopt, Ashfield noted that “credit unions and lenders are now living in an environment with historically low interest rates and an unprecedented level of demand.”

“And this is complicated by the fact that many of the credit unions have a very significant portion, if not all, of their employees working remotely [due to the pandemic],” she said, adding that has brought challenges, including some mortgage information only being physically available back at the office.

“Mortgages has for many years been a paper-intensive industry,” Ashfield said. “Prior to the pandemic, consistent progress was being made in converting to digital, but we were not as far along as we could have been.”

“The pandemic demanded, frankly, that we pivot as an industry very quickly,” she added, noting that in recent months credit unions have reacted very well.

“Gesa, they’re a great example,” Ashfield said. “They didn’t back away from the challenge. They embraced it. They have worked hard, and have developed new solutions.”

Still, Ashfield, whose trade association holds a series of events during non-pandemic years with about 100 credit union ­executives, also pointed out that “the story with Gesa highlights one creative approach by using Digital Align [and bots], but many credit unions have found creative and innovative ways” to meet the high mortgage loan and refinancing demands while working remotely.

“There’s no question that across the credit union system it’s been strained; however, credit unions have been innovative to meet member demand, even in light of the high-level activity,” she said.

Back at Gesa, Bandaru pointed out that its mortgage arm typically would be one of the toughest divisions to automate. But, he said, Gesa “started with the difficult one and now we are going to simpler ones,” and the credit union’s commercial lending division is the next one slated for automation.

Bandaru, who recently decided to join Digital Align’s advisory board, also noted that the bots – which on the computer screen appear as if they’re invisible fast-typing humans pushing through tasks like filling in forms – work 24 hours a day, seven days a week, “don’t complain and don’t call in sick.”

Moreover, contended Patil, who appeared in a separate box on the screen next to Bandaru during a Zoom interview with CU Times, the use of bots allows Gesa to “eliminate its employees doing the repetitive [loan processing] tasks and move up the value chain.”

Patil said the bots, which are commanded and given personal names by employees working remotely at home, have taken over 60% of all processing tasks that are completed from end to end on a mortgage, from credit checks to security checks to form submissions. And they don’t make mistakes, he said, thereby eliminating the need to go back over work that’s already been done.

In the end, Patil – who estimated 70% or 80% of credit unions, especially smaller ones, don’t yet use bots – said they will help Gesa and other credit unions bring more in business.

And that, according to Sarah Cooke, principal of Cooke Consulting Solutions and spokeswoman for Gesa and Digital Align, means that potential increase in business and revenue will be reinvested by Gesa, which as a credit union is a not-for-profit, into services and offerings to members. She further pointed out that as not-for-profits, credit unions’ earnings are restricted to coming from interest charged on loans, so doubling mortgage income is one of the only ways to increase income aside from charging fees to members.

When asked about the possible human toll of using bots – which Patil noted don’t replace humans in making loan approval decisions – to take over employees’ loan processing work, Bandaru said, “Yes, it will present opportunities in the future, when it’s perfected, the technology, [to replace employees].” But, he said, he wouldn’t make a dramatic cutback at once, and added credit unions are more socially conscious than most private banks.

“When you say it’s going to replace humans, it’s a bad term,” Bandaru said. “I am able to do more [work] with the same number of people [using the bots], so I’m a lot more efficient with these bots, and you can eliminate people from doing the repetitive, mundane tasks.” As bot use in the mortgage loan arm of Gesa has helped cut back on the need for overtime pay, Bandaru said, “It’s a no-brainer. We are all in the business of making money or saving money, so when you have the technology to do it, why would you not?”