For Credit Unions, the Future of Loan Servicing Lies in Generative AI

In a relatively short period of time, artificial intelligence has become one of the most powerful technologies in the mortgage industry. From harnessing vast datasets to enhance decision-making, pinpointing at-risk loans and identifying patterns to discern borrower behavior, AI has proven to be an invaluable tool for streamlining loan processes and improving customer experiences.

For credit unions that service their own loans, integrating AI within operational workflows can significantly boost efficiency and effectiveness. Such integrations have also proven vital for streamlining and improving borrower interactions, which is typically a major cost area for credit unions.

Today, the emergence of generative AI has brought an entirely new dimension to these capabilities. And assuming it’s used in the right way, generative AI brings particular value to mortgage servicing operations. Yet, like the rest of the financial services industry, many credit unions are still getting their heads around how generative AI actually works, let alone how to leverage it to their advantage.

The Magic of Generative AI

Between higher interest rates, evolving regulations and a small but steady rise in mortgage delinquencies, servicing costs have been steadily increasing for credit unions and other financial institutions. However, generative AI can help institutions reverse this scenario by automating and enhancing several key aspects of servicing loans.

Unlike traditional AI technologies, which primarily analyze existing information to make predictions or decisions, generative AI focuses on creating new content from scratch, including text, images or computer code. Underneath the surface, generative AI applies advanced algorithms to trigger outputs that can mimic human-like creativity and reasoning, only without direct human input.

Generative AI operates on models that are trained on large amounts of data to understand and replicate complex patterns and structures. With these models, generative AI can draft documents, create transcripts of all conversations and preserve them for the record, or even simulate customer service interactions in ways that are contextually relevant and highly personalized.

Basically, generative AI performs tasks that go beyond simple automation and were previously thought to be exclusive to humans. And already, generative AI is transforming how many financial organizations operate – including when it comes to account management and borrower interactions, processes that typically comprise the bulk of their servicing costs.

Enhancing the Member Experience

Generative AI has far-reaching benefits, particularly when it comes to a credit union’s ability to deliver exceptional and rapid member experiences. While every credit union prides itself on personalized service, most credit unions are not open 24 hours a day. When a credit union’s staff goes home for the evening, its generative AI technology continues to work around the clock.

For example, by utilizing natural language processing (NLP) technology, credit unions can deploy AI-powered chatbots that provide members with instant, 24/7 access to assistance. These chatbots are capable of understanding and processing human language, which allows them to handle inquiries and guide members through relatively complex processes like applying for a loan or requesting assistance with ease and accuracy. Your trusted technology partner can assist with setting this up and help with the framework for responses to requests that are relevant and reliable.

When combined with best-of-breed automated workflow technology, generative AI’s capabilities truly soar. For instance, mortgage borrowers who are experiencing financial difficulty are often hesitant to reach out to their servicer for assistance. When generative AI-driven chats are integrated with workflow and workout underwriting automation that provides 24/7 self-serve access from any device, credit union members can get automated approvals for proven workout solutions. Generative AI can even streamline the process of gathering information and documents by learning what to ask for based on the nature of the conversation or requests from the member.

And while no technology can replace the human touch or a human’s problem solving capabilities generative AI is getting pretty close. Thanks to ongoing breakthroughs in NLP and intelligent document processing (IDP), generative AI technology has grown by leaps and bounds over the past two years. It has been increasingly difficult to tell when we are having an online conversation with a real person or not. And sometimes, a conversation with AI is more efficient.

Enhancing Efficiency and Reducing Errors

For instance, one of the biggest complaints consumers have with financial services companies is having to repeat information or provide the same document more than once. But since generative AI tools are informed by historical data, this problem can be eliminated. In fact, the service a member receives may even be faster and more effective with generative AI, as they waste less time and receive immediate responses to their questions.

When integrated with a credit union’s SaaS-based automated servicing technology, generative AI can give a credit union’s staff real-time access to conversations taking place between their chatbot and members. So, when a member services representative eventually gets involved, the member doesn’t have to go through the painful exercise of re-explaining their request or their current financial situation. Additionally, generative AI helps automate routine tasks such as verifying documents and extracting data from them, then using this information to facilitate decisions and provide responses to members that are tailored to the individual member’s unique needs.

Because generative AI chatbots are automatically informed by historical data and gathering information from the borrower digitally, there’s very little chance for human error. This also helps ensure the member can be matched with the right loss mitigation workout and solution to a financial challenge – quickly and effortlessly.

Generative AI also helps credit unions keep pace with evolving regulatory requirements and investor guidelines by ensuring credit unions are only asking members the questions they are allowed to, which helps mitigate risks and avoid costly penalties associated with non-compliance. Moreover, generative AI technologies can be continually trained on new models involving state and federal regulations and investor and agency guidelines, which puts credit unions in a constant state of preparedness.

Credit unions are certainly nowhere near the day when AI and generative AI technologies will replace their human staff. Especially because they are so new, generative AI’s decision-making and content-creating capabilities still require human oversight. Yet credit unions that ignore the potential impact generative AI could have on their mortgage servicing operations do so at their own peril.

As former German chancellor Helmut Schmidt once said, “The biggest room in the world is the room for improvement.” By integrating generative AI into their operations, even the most highly rated credit unions could enhance their ability to provide personalized, timely, and effective service to members. In other words, the question isn’t why use generative AI, but rather, why not?

Jane Mason is CEO and Founder of CLARIFIRE, a workflow automation application provider based in Clearwater, Fla.