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A Google Search reveals that homebuyers' top considerations about a mortgage provider center around: 

1. Interest rate
2. Best time to buy a house
3. How big a downpayment
4. Fixed or variable rate
5. Reputation of the homebuilder

I found no mention of channel (branch v. online) as an evaluation criteria. 

Agreed that some people might get their answers to these questions by reading them online but there are others who might prefer to speak in person to the mortgage provider. This is purely a subjective thing. If a bank scored well on the big ticket criteria but insisted upon a branch visit for a mortgage, I'm not sure how many people would switch to another bank that did everything online (this is a hypothetical point since I don't know any such bank doing that today) since it's hardly 2-3 times in a lifetime that one buys a mortgage, if that.

The FTAdviser article quotes a couple of banks saying that lack of customer demand for paperless applications and regulations are two major drivers for face-to-face interactions in mortgage applications. Lest we think that only banks are making such statements, even PayPal demands paper version of all documents before it verifies an account, as I'd pointed this out in this response to another Finextra post a few months ago.

https://www.finextra.com/blogs/fullblog.aspx?blogid=5134

I think we can agree that 2008 - let alone Countrywide - is not exactly representative of the procedures adopted by banks for giving out mortgages in the USA. Stories abound of unsolicited calls from banks and mortgage brokers offering pre-approved mortgages to NINJA (No Income No Job or Asset) category of people. My personal favorite is the one in Michael Lewis's book "The Big Short" where he describes his shock at learning that his housemaid got a mortgage for some 300K USD with no downpayment and no application (whether online or at the branch!). 

If we fast forward to today, the fact is, BofA only does mortgage pre-qualification online. Ditto for Wells Fargo (its website clearly states "Most lenders will take your application by phone or in person.") and Citi. Pre-qualification to pre-approval to disbursement cycle is done partly  online and partly offline, and certainly not in realtime. 

Talking about Australia, in 2008, NAB had declared its plans to make its account opening process 100% online and realtime the following year. Today, three years later, its website says, "Not an existing NAB   customer? You'll need to visit your nearest NAB branch to complete the standard ID checks". Has NAB lost customers? Doubtful - it's particularly well-known for attracting the GenY crowd. 

For whatever reason - internal bank-related, regulatory or change in consumer preference - face-to-face interactions for account opening, mortgage and other relationship based products are back in vogue today (assuming that they'd ever gone out of fashion in the past).

A couple of more recent reports highlight the primacy of branches when it comes to opening new accounts and buying financial products:

1. While according equal importance to the branch and Internet, the World Retail Banking Report 2011 from Capgemini, UniCredit and Efma makes it clear that customers view the branch and internet as having different strengths. The internet excels in information gathering, transacting, and looking up account status, whereas the branch is the preferred channel for buying products and solving problems, indicating the value of having a human touch in certain situations. 
2. According to this TowerGroup report (registration required) sixty-one percent of all US consumers still prefer to open accounts in the branch. 

The complexion of branches has changed significantly over the last decade in tune with shift in consumer preference to online channels for account balance, statements, and other transactional activities. They'd probably undergo further change as credit cards and other transactional products can be increasingly sold online. However, when it comes to opening accounts and other relationship-based products, the aforementioned reports are clear that the majority still prefers the branch. Given the amount of documentation required, branch versus online is a moot point for products like mortgage. I haven't come across a single bank which can or does sell such products through any non-branch channel.  

If enough banks still stay invested in branches and, per contra, not enough of them have started investing in online identity and address verification systems, mobile and social media, it's probably because they have their feet planted firmly on the ground and their heads on their shoulders and cater to what their customers really want. It's certainly not because they have their heads buried in the sand.

In 1985, there were no Internet or mobile banking, so a customer probably had no choice but to visit a branch even to find out their account balances, which explains 25 branch visits / year. My comment about the primacy of branch pertained only to sale/purchase of financial products. Given that an average customer is unlikely to buy more than 2 or 3 financial products per year per bank, the 2.3 branch visits / year of the today are probably used exactly for that purpose, which sort of proves my point. Like I mentioned, only 8% of consumer goods are bought online even today, 15 years after eCommerce started. Since figures don't lie, this says something about the preference of 92% of people - hardly a dwindling demographic - to engage in face-to-face interactions while buying something or starting a relationship. I've nothing against banks leveraging mobile and social media as appropriate. But, if they forget that bulk of their sales happen, and will continue to happen for the forseeable future, in their branches, they do so at their own peril.

eCommerce has been around for over 15 years and supports exemplary usability compared to other industries. Despite that, only 8% of shopping happens online in the USA, according to recent figures for 2010. Eventually everything changes, the same is bound to happen in financial services and we're already seeing a major shift to Internet and mobile banking for account balances, mini statements and the like. However, given that financial products are more complex than books and DVDs and the fact that banking systems are still fraught with a lot of friction, I don't think Internet - let alone mobile - banking is anywhere close to supplanting the branch for sale of financial products. Personally, I'll be happy if banks let me research products online and buy them offline at a branch without forcing me to retrace my online steps offline, which is what happens today. 

Maybe I'm missing something, but most of these features and facilities are available with bank and third-party P2FM portals. The former will work for customers who have only one bank account whereas the latter is suitable for people with multiple bank accounts.

As to why it's so much more difficult to search through your bank transaction history (or a given website or even your PC's local hard disk), I've obsessed over this very same issue for quite long and have recently learned that it isn't bank-specific. Apparently, the problem is with search engines like Google that rank pages on a given website on the basis of backlinks to it from other websites. Google Custom Search and other site-specific search engines don't work too well when told to search for pages within a website. To quote from the classics page of TechCrunch, which uses Google CSE for site search, "TechCrunch has published thousands of blog posts ... But try discovering them. It’s nearly impossible."

Hopefully, we'll start seeing libel suits against Twitter soon!

TowerGroup recently pointed out that most mobile banking apps in the USA were build for iPhone and Android whereas most banking customers used Android and BlackBerry! Hopefully, banks in the UK have decided their choice of platform based on the installed base of different mobile operating systems among their customer base rather than in the general market.   

@Steve B: 

"...on-line shoppers are voting with their feet and migrating to other on-line payments that are perceived to be more secure".

In the USA, which is where FFIEC is applicable, I'm a bit curious to know more about such alternatives, their market shares and the basis of the "fear of it discouraging shopping on sites that use it".

Our experience echoes your views in a new approach taken not only by large, but even midsized, technology partners. Under this approach, tech companies build the new technology at no upfront cost and recover their investments by charging ongoing transaction fees to their customers. By doing so, the vendors take on most of the risks and effectively let customers enjoy cost reduction “on a tap”.

On the face of it, this approach might seem akin to the subscription model offered by SaaS and cloud-computing vendors. But, that’s not so: With SaaS, the vendor owns the application cloud and provisions it for use by multiple customers without too much customer-specific functionality for any given customer.  Whereas, in the new approach, the vendor builds a new, highly-customized application for each customer that is not only owned by the customer but is also difficult to extend to another customer for contractual, if not functional, reasons.