AI Is About To Change the Mortgage Process Big Time

Since OpenAI launched ChatGPT in November 2022, AI technology has fundamentally changed many aspects of work and life – at breakneck speed.

Your mortgage approval process could be next.

One of the country's largest mortgage lenders launched a groundbreaking AI platform, revealing its existence on April 9, 2024. It could set the tone for lenders nationwide, ushering in a faster, less painful process for mortgage applicants.

Rocket Mortgage Launches ‘Rocket Logic’ AI Platform

Rocket Mortgage, the largest U.S. mortgage lender in 2023, recently announced its patented AI platform “Rocket Logic.”

The company stated in its press release that the system extracts and processes data points from W-2s, bank statements, and other borrower documents.

The results are impressive:

• It saved underwriters 5,000 hours of manual work in February 2024

• It reduced the number of times employees touch a file by 25%

• Closing timeframes improved by 25% compared to 2022

• Rocket now closes loans 2.5 times faster than the industry average

While operation efficiencies are great for mortgage companies, how will this tech help homebuyers?

What Mortgage AI Systems Could Mean for Homebuyers

Homebuyers are most interested in how this tech can reduce pain and increase closing speed.

Rocket’s press release mentions that “homebuyers spend less time answering questions and confirming details for mortgage bankers.”

Rocket is vague here – likely because they don’t want to reveal its inner workings to competitors. But we can speculate about the borrower's experience:

You apply online. You are self-employed so you upload two years of tax returns, bank statements, and other documents. The system analyzes your income and determines your available funds. It notices that you’re missing a tax return schedule and one page of a bank statement. It automatically sends you a notification to supply the missing paperwork. When you do, it inputs final income and asset numbers into your application. The underwriter reviews for accuracy, and you’re approved.

Rocket’s press release hints at some of these capabilities saying, “Rocket Logic scans and identifies the files to ensure clients are providing the correct documentation…the system’s computer vision models extract pertinent information and processes the documents instantly.”

Soon, endless email and text chains about documents and explanations could become a thing of the past. AI could soon (if not already) do most of the manual processing and document requests, resulting in a faster, less frustrating process for the buyer.

How Fast Can I Close an AI-Assisted Mortgage?

Speed of closing is one of the major benefits touted by Rocket. But how fast will AI-assisted loans close?

We can only speculate. Rocket offers one anecdotal example of a Florida homebuyer who says, “It was less than 11 days from when I started conversations with Rocket Mortgage to when I received the keys.”

That’s lightning-fast compared to most closings, but easily performed by many mortgage companies in rush situations.

The difference, though, could be that fast closings could become the norm instead of a product of brute force by the backend mortgage processing staff under dire circumstances – which is how it generally happens today.

Could a mortgage closing be so fast that it soon competes with a cash offer?

Not exactly. Lending law limits how fast you can close a mortgage – something even AI can’t overcome. A mortgage can’t close until the seventh business day after the lender sends your initial Loan Estimate (LE). Additionally, if loan terms change, you have a three-day waiting period to review the change. Lastly, you must receive your final Closing Disclosure (CD) three days before funding.

These waiting periods can be combined, but the seven-business-day rule means there’s no way to close and fund a mortgage faster than about nine calendar days.

Will Other Lenders Follow?

Rocket is the first company to reveal AI capabilities of this scale, but it won’t be the last.

Other lenders will follow, noting Rocket’s massive efficiency gains. AI means fewer employees, faster closings, and more satisfied customers. And at a time when lenders are losing over $1,000 for every loan they originate, efficiency equals survival.

However, AI might be a luxury for large companies.

Cost is one barrier. Most lenders don’t have the cash right now to invest in what could be a very expensive proposition. AI engineers can’t be cheap these days.

Beyond the expense, a company needs data. A lot of it. Rocket reports it tapped into “10 petabytes of proprietary data” – likely meaning customer data. Ten petabytes is enough to fill 78,125 base model iPhone 15s, in case you were wondering.

Rocket also taught AI models using 50 million phone call transcripts.

Few companies will have this amount of data – or know how to use it.

But more companies may already be using AI than the average consumer realizes. A 2023 study by Fannie Mae revealed that 30% of mortgage lenders have deployed some type of AI or machine learning in their business, for purposes such as to “read tax returns” and “[automate] some of the processing (data input) and underwriting functions,” as one mid-sized lender that participated in the survey reported. Another 41% of lenders are looking into AI solutions.

Companies that want to compete will have to adapt to continue to meet borrower expectations.

Rocket hints that it will offer AI capabilities to mortgage broker partners. So you might soon see dramatic efficiency improvements by visiting a local mortgage broker.

One thing is clear: the mortgage process will look very different in two years.

Will AI-Assisted Mortgage Applications Soon Be the Norm?

A lengthy mortgage approval process could soon be history. And it couldn’t come at a better time: competition for homes is fierce, and quick closings can help.

A faster, cheaper, and less painful process for homebuyers is a welcome prospect.

See if you can be approved to buy a home here.