Simplifying the Digital Mortgage Payment Process

Loan Origination

This piece originally appeared in the June 2024 edition of MortgagePoint magazine, online now.

Mortgage delinquency rates in early 2024 are trending upward as a result of economic pressure bouncing back from unusually low levels of the past year. The trend of increasing mortgage delinquencies for all loan types can be traced back to the emergence from the pandemic economy in 2022. This trend is likely to persist as credit card spending and home buying continue to return to normal levels.

So, how can lenders ensure the timely repayment of mortgage loans? While guaranteeing full repayment of mortgages on time is primarily in the hands of borrowers themselves, lenders can optimize collections with digital technology by making loan repayments easier, more convenient, and fully traceable. Enhancing payment processes with modern technology can ease the remittance experience for consumers and enables greater speed, efficiency, and control of collections for lenders.

Borrower Expectations Are Evolving

For decades, borrowers could only pay their mortgage payments with paper checks, bank transfers, or by physically depositing payments at a lender’s location.

However, consumer preferences are evolving. They have become accustomed to the digital payment options offered in their transactions with eCommerce retailers, in-app purchases, utility providers, as well as other regular bills, and online purchases.

For consumers, the idea of making a mortgage payment via mailed checks feels outdated, slow, and offers no way of proving the check is in the mail until it is postmarked and delivered to the lender. A generational divide is on the horizon.

If they have not already, lenders soon may find that many first-time home buyers do not have bank checking accounts, and do not understand the need for one, as all of their payments are made digitally. To remain competitive, mortgage lenders and servicers must adapt to and accommodate this new generation of borrowers who do not comply with the standard paper check payment processes that the mortgage industry has depended on for decades.

The payment landscape is also evolving to meet the demands of borrowers. With the rise of debit card acceptance, online payment portals, ACH transfers, and interactive voice response (IVR) payments, lenders can now accept payments through a range of methods. This flexibility provides borrowers with greater financial control, enabling them to align budgeting strategies with their preferred payment methods and avoid penalties due to the instant nature of digital payments. As consumers have already become accustomed to the convenience provided by digital payment technology from online purchases and bill payments, lenders who cannot provide the same level of flexibility risk losing potential borrowers to competing lenders.

Lender-Borrower Relationships Are Evolving Too

Aside from the benefits to consumers, digital payment options and technologies create new avenues of communication between lenders and borrowers.

Much of the communications consumers experience in their personal lives is instant. Whether communicating socially, submitting a customer complaint, or sending a direct message to a coworker, the exchange of information is instantaneous, and the messaging platform often confirms the successful sending and receipt.

Digital mortgage payment options provide the same instantaneous, verified sending of payments as modern communication platforms do for messages. Borrowers know whether the payment was successful right away, and they can receive automated digital confirmation of receipt from their lender in a matter of seconds or minutes. This instantaneous transaction verification serves a dual purpose of improving payment traceability and security.

First, it removes the risk of lost checks in the mail or delayed postmarks for checks mailed after business hours that could lead to a late payment penalty. Additionally, it increases trust between the lender and borrower, as both parties receive confirmation of payment at the same time.

Digital Payments Evolve Lender Operations

The process of moving money is a critical touchpoint between lenders and borrowers, especially when transferring large sums of money for mortgage transactions. Meeting customer satisfaction demands, enabling operational efficiency, as well as increasing security and cash flow, are all critical to the competitive positioning of today’s mortgage lenders—which will be essential to success as borrowers become more selective and economic pressures continue to impact collections operations.

Self-service payment technologies, which integrate directly with existing lender systems, eliminate the tedium and risk of manual collections and accounting operations. Online payment portals allow borrowers to access account information and payment histories at any time, effectively expanding the business hours during which payments can be accepted and reducing the manual activity required to accept and track payments. Text payments and IVR are other self-service payment options that provide the same advantages of online portals, with the added benefit of enabling borrowers to submit payments wherever they are without needing to access a web browser.

Modern payment processing options, which can be easily facilitated through self-service payment modalities, enable lenders to accept payments via debit card, ACH transfers and even digital wallets. Every borrower has a debit card, which does not need to be replenished in the same way paper checks do, and is automatically replaced by the borrower’s financial institution when it expires. ACH transfers can be automated to prevent late payment penalties. Digital wallets enhance the accessibility of debit card payments by enabling borrowers to use cards stored in their digital wallets to make payments on the go, instantly, without even needing to take their debit card out of their physical wallet. These payment processing options provide borrowers with the opportunity to submit payments when and where it is most convenient, as well as through the payment method that best aligns with their budget and assets.

On the lender’s side, adopting digital technologies to enable payment convenience directly contributes to more efficient collections. Complex processes contribute to past due payment penalties for borrowers, and mailed paper checks can be delayed or completely lost by mail services. Paper and spreadsheet accounting workflows are prone to human error and can be difficult to trace without intense organization protocols. Automating accounting, by instantly tracking key payment details including time, method and amount, significantly reduces the burden of manual labor, eliminates the risk of inaccuracies and speeds the funding of payments.

Surviving & Thriving by Evolving Payment Methods

This piece originally appeared in the June 2024 edition of MortgagePoint magazine, online now.

The goal of modernization through adoption of digital payment methods leads lenders and financial institutions to a destination that promises smoother collection and accounting processes, as well as better relationships and communication with borrowers. However, the journey to modernization, and the speed at which it occurs, is paramount to a successful outcome. In addition to the benefits provided to lenders, borrowers can take advantage of a host of new options by using digital payment technology. Financial institutions that do not modernize payment technology to meet the pace of evolving customer expectations will inevitably find their customers selecting competing lenders for mortgage loans.

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Jeff Osheka

Jeff Osheka, SVP, Mortgage Vertical Leader at REPAY, has been in the financial services industry for more than three decades, beginning his career in the mortgage servicing industry with Ryan Financial Services and NVR Mortgage. His 15 years of experience in mortgage originations, servicing, and secondary marketing have provided him with a unique understanding of all facets of the industry. He has devoted his career working with technology firms to innovate and expand the efficiencies of the industry. His work with organizations such as Ellie Mae, Ultraprise, ZC Sterling, Decade Systems, Lydian Data Services, ISGN, Sagent, and SitusAMC has provided him insight, knowledge, and experience of the challenges of both originators, servicers, and the overall capital market. He has been a speaker at various regional and national mortgage related conferences, and is a muti-published author.
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