Canadians have the highest household debt of any G7 nation, with homeowners taking on more mortgage debt than any other 7 countries. This a staggering thought for Canadian mortgage lenders, considering that it outpaces the almost USD 12 trillion mortgage debt in the U.S.
With the possibility of increasing mortgage delinquencies and loan defaults, lenders need access to a suite of online payment solutions to better serve their clients and navigate these unstable times. Here we discuss the lending climate, the challenges lenders face, and how new mortgage payment solutions help lenders collect.
With a 5-year conventional mortgage lending rate sitting at 5.89% compared to 3.45% last year, it is safe to say that things are in flux. However, some Fintechs see mortgage payments as an opportunity. In fact, according to a report by Canada Mortgage and Housing Corporation (CMHC): Digitization now plays a significant role in the mortgage process, with Fintechs having "increased their footprint exponentially" in Canada during the past 10 years.
Several challenges exist for lenders and banks when collecting mortgage payments, including.
Delinquency rates for lenders can increase when borrowers struggle to make their mortgage payments on time. This can lead to significant losses for the lender and legal and administrative expenses.
Borrowers may dispute the amount of their monthly payments or the validity of late fees or other charges. This can lead to delays in payment and additional expenses for the lender.
Lenders may have trouble reaching borrowers who have moved or changed emails, or phone numbers, making it harder for them to collect payments.
Fixed payment loans with no flexibility may be problematic for borrowers to keep up with, leading to missed payments and higher delinquency rates for lenders.
Lenders must exercise due diligence when collecting mortgage payments, as criminals have been known to use stolen identities and other means to make unauthorized payments.
In the wake of the Covid-19 pandemic, the lending industry and mortgage professionals have come to rely on digital technology to meet client needs and conduct business efficiently.
Fintech solutions have transformed the way lenders collect and disburse funds. The mortgage payment process has completely changed, and for the better, fintech solutions such as online mortgage payments and automatic escrow deposits have streamlined this process, providing borrowers with greater transparency and flexibility while improving collection rates for lenders.
Mortgage lending solutions are beginning to integrate various payment methods and options, recognizing that it can significantly impact the experience customers have with their lenders.
Sending automatic payment reminders to borrowers through text messages, email, or push notifications is an efficient way to keep borrowers informed about upcoming payments while reducing the need for manual communication.
By analyzing borrower payment patterns and behaviour, lenders gain access to payment data insights. These insights can help better tailor payment plans to suit their borrowers' needs, optimize marketing strategies, improve customer retention, and develop effective customer acquisition programs.
Real-time payment tracking can help lenders improve cash flow management, reduce delinquencies and defaults, and better engage borrowers. By monitoring payment trends in real time, lenders can quickly identify borrowers who may be at risk of default and take the necessary steps to reduce that risk.
Today's consumers expect a wide range of digital payment options. The payment journey should be contactless, secure, and flexible. Offering payment solutions tailored to deliver automated payments, recurring payments or scheduled installments leads to increased borrower satisfaction and improved collection rates.
Here are five payment solutions that improvise the mortgage payment process:
Request Money is a convenient way for mortgage lenders to collect customer payments and exceed customer expectations with an enhanced service. With the Request Money functionality, there is no need for clients to worry about sending funds to the wrong party based on typing in the wrong email address or phone number.
Set up one-off or recurring requests for payment and use a service trusted by your consumers. Once accepted, lenders can receive funds owed in minutes.
VoPay's Interac e-Transfer for Business solution is a simple, convenient, and secure way to receive near real-time payments at scale directly from one bank account to another using only an email address.
Interac e-Transfer for Business delivers a convenient solution for missed payments; request a payment using ONLY an email address 24/7/365.
Contrary to popular belief, not all EFT Payments are created equal. Eliminate the inefficiencies encountered in traditional EFT payment solutions (a time-consuming, resource-intensive, error-prone process that takes 3-5 business days to clear) and pull mortgage payments directly from the client’s bank account with speed, transparency and traceability instead.
VoPay’s Standard EFT is T +3. Schedule recurring monthly payments and build custom payment flows to suit your business. No manual file processing is required.
Our most prominent solution used in the lending industry is our Intelligent EFT, known as (iQ11). This payment solution supports the full cycle of money, including same-day payment initiation, bank account verification and transaction monitoring.
With an added layer of data intelligence and Open Banking payment technology, lenders can securely validate bank account information and funds instantly and process them at a much lower transaction fee. This is one of the easiest ways to process one-off or recurring EFT payments, clearing as quickly as the same day.
With VoPay's iQ11, lenders benefit from reduced capital requirements, improved cash flow and risk intelligence. For example, VoPay's EFT return rates are typically sub 2% (compared to 15% for credit cards). Navigating NSFs and failed payments effectively mean time and energy can be spent on business growth and success, not chasing payments.
Many businesses rely on recurring payments to collect funds owed, and the lending industry is no exception. A recurring payment solution allows lenders to streamline the mortgage payment process, reducing the risk of late or missed payments.
With a mortgage payment recurring payments simply make sense. By setting a specific date every month when the mortgage payment comes out of an account — both sides are satisfied, and account reconciliation is significantly easier and less costly.
Recurring payment capabilities are accessible across all of VoPay’s payment rails.
Real-time payment technology has taken the world by storm. The U.S. Federal Reserve's FedNow system is expected to launch next year, and Canada's real-time rail project is already in the works.
The ability to transact in real-time instantly is considered a game changer for the lending industry; consumers will be able to pay their mortgages on time and may prefer immediate payments over scheduled ones.
Currently, our VoPay Instant is primarily for instant fund disbursement; however, watch this space because instant mortgage collection is closer than we think.
It’s time for the lending industry to lean into Fintech with integrated payment solutions.