By: Trevor J. Gauthier, "The Year of Online Lending," for Scotsman Guide
Back before online lending caught on, borrowers had to spend an anxious and opaque 60 days or more as their loan was poked, prodded and examined for even the slightest hint of a problem before learning — often at the last minute — whether they could actually move into their dream home. This process wasn’t much better for mortgage companies,
Fifteen years ago, technology was barely applied to, let alone integrated into, the mortgage process. The manual process required to originate a single loan was expensive, time-consuming and required a lot of natural resources and physical storage space. Industry veterans will not soon forget the boxes and boxes of mortgage files scattered everywhere.
By: Jim Rosen, "Pixelation Nation: E-Closing in the Mortgage Industry," for Progress in Lending
Digital photography was invented 43 years ago. Today, we have grown so accustomed to taking photos with digital cameras – including our cell phones – that we no longer think twice about this technology. Sure, most of us grew up taking rolls of film to the store to be developed, but would you really trade the immediacy we have today for film? For most of us, the answer is “no way.”
The all-digital mortgage is similar to digital photography. It has gone from being a novel concept – something for lenders to strive for – to being something we hear about all the time. The need for all-digital-everything in mortgages has been driven by a number of considerations, including consumer demand for more timely and efficient interactions, complex compliance requirements, and a need to expedite lending activities. Non-bank lenders add to this mix with non-traditional lending practices and different risk profiles, creating a hyper-competitive lending environment.
In light of all of these factors, tack-on solutions or limited technology that only supports digital disclosures is just no longer going to cut it. As we adapt to the needs of today’s borrowers, we believe that embracing the all-digital mortgage experience is the best option for lenders to ensure that they have a lending platform that will support their future activities. Just as camera film has become all but obsolete, so too will be paper-based mortgage processes. Here’s how you can ensure you are at the forefront of this part of our digital revolution.
As mentioned, digital disclosures have long been an accepted first step in the digital revolution. Electronic signatures on early and upfront disclosures carried low risk and were simply implemented, and the options and flavors of eSign are numerous. However, lenders are realizing – and consumers are demanding – that you can’t just offer digital disclosures and then revert to paper for closing to realize the benefits of the digital mortgage.
There are two reasons for this. First, because of increased regulations that require compliance checks and procedural validations, lenders today automatically face higher costs per loan. And while increased costs can be mitigated with procedure redesign and staff training, lenders can only retrain so much without having to rely on technology to go further. Second, many of today’s mortgage borrowers seek automated, efficient financial solutions that they can control at the time and place of their choosing. While digitizing disclosures is a great start, today’s borrowers demand more and will go where they can find that all-digital experience.
That brings us to eClosing. The digital camera revolution took nearly fifteen years after its invention before consumers had a viable product they could buy. Similarly, the industry “standard” over the past decade for eClosing required lenders and platforms to dig deep. Their options included:
- Investing in product or platform development or in a deep technology integration that had little to no general application to the process
- Engaging in relationship-building and process validation with MERS and with Fannie Mae
- Building, buying, or partnering with a solution that generates a complex technical version of the note, and acquiring an electronic vault in which to keep the records.
In the cold calculus of cost/benefit, lenders often could not make the conversion-to-payoff based on the large investment required. Costs to implement and maintain could not justify the potential or perceived benefits in consumer efficiency and/or backend reductions in cost, time, or processes. Faced with these tack-on approaches, many lenders waited for better options to come along.
Fortunately, just as digital cameras now are ubiquitous, all-encompassing digital mortgage solutions have proliferated, as well. Digital experts in the financial services industry have begun banding together to create fully-integrated solutions for lenders of all sizes. Lenders can now adopt the complex underlying technology for eNotes without the heavy investment in research, development, or infrastructure. With the availability of these solutions, consumers will begin demanding all-digital mortgages exclusively. Paper-based mortgage processes, while already on the way out, will hopefully become completely obsolete.
That brings us to the key question for lenders: Where are you on your digital mortgage journey? The movers and shakers in the industry are already providing borrowers with an all-digital mortgage origination experience. Taking the next step today can help meet borrower demand tomorrow.
By: Paul Wetzel, "Back to the Future of Lending," for CMBA News
The year was 1985. As the DeLorean flew its way into the year 2015, we got a “sneak peek” at what was to come 30 years into the future. With technology gaining momentum unlike anything previously seen with the rollout of personal computers, the internet and cell phones, the future was open to wild interpretation. In the film “Back to the Future”, they ran with this idea, and what we got was extraordinary. Flying cars, hover boards, and self-lacing shoes were all prominently featured in the film. While these concepts may not have come to fruition, many others did.
One example: conference TVs were added as another ambitious example of the potential future of technology. In this case, the film got it right. Not only is video conferencing technology a common aspect of our everyday lives, we can even take video calls from our cell phones.
What can be learned from this ironically timeless movie? Technology continues to accelerate at an increasingly fast pace. For over the past 30 years, the sky has been the limit for technology companies, and the future continues to look bright. For the mortgage industry, the acceleration in mortgage technology has really only taken shape over the past 15 to 20 years. What was once an industry run largely on paper has slowly transitioned into one run on cloud-based, rules-driven technologies.
Such an advancement has been nothing short of remarkable for the industry. An original focus on gaining greater productivity and ensuring compliance is now delivering very real benefits to borrowers. With such tech-savvy consumers, lenders realize they must continue to use ever-advancing technology to make borrowers’ lives easier; if they do not, the consumers will go elsewhere.
The industry has been buzzing over the Millennial generation for the past couple of years. There is no question that this market segment will ultimately dominate the industry, but many Millennials are not yet ready to buy homes. Lenders and vendors alike must stay vigilant as they prepare for this new wave in lending.
The question becomes: Where should lenders start in dealing with Millennials?
There are two simple answers to this complex question.
First, lenders must work towards creating internal processes that allow them to be as streamlined as possible. Tomorrow’s borrowers require speed and responsiveness. By educating staff, creating integrated connections with ancillary services to the core system, and creating rules-driven workflow, lenders can improve productivity. By taking a fresh look at this now that we are post TILA RESPA, lenders can see their cost-to-close decrease, their throughput increase, and overall business operations improve. Creating and/or revisiting stale metrics designed to track improvements over time will also help track performance and define real benchmarks for future enhancements.
Second, lenders must partner with technology providers that are both forward-looking and stable. Longevity in such a tumultuous industry shows which vendors have been able to keep pace with the times. While most vendors have slowed their focus on borrower-facing technologies in order to comply with regulations – most recently TILA RESPA – we are entering a time that will separate those vendors that are just surviving from those who are thriving. Refocusing development efforts on key initiatives that prepare lenders for the future generation of borrowers will shape the future of the mortgage industry. Take this time to reevaluate your current technology partners, ask for their roadmap, and ask yourself if they have taken your feedback into consideration over the years. A true vendor should ultimately be a partner, working in collaboration to help shape the future of the technology.
We are in a truly transformational era in the mortgage industry. Coming out of period of intense industry regulation and entering uncharted territory can leave the industry wondering what is to come. Fortunately for lenders, it is no secret where the next wave of borrowers is coming from. Finding the right technology to catapult lenders into the future is critical to success. Lenders should work to define business goals now, track to those goals, and ultimately work toward a leadership role in the next 10 years of mortgage lending.