If you’ve attended any mortgage industry conferences in the recent past, you’ve probably heard the numerous promises made by technology vendors. At times, it seems as though anyone who can write a line of code has a product on the market that assures positive and thorough change to the way the industry operates.
The truth is, new technologies actually are changing the way business gets done in the mortgage industry, and some of the promises you might hear on the exhibit hall floor at a trade show are being delivered. Metaphorically speaking, however, you need to be able to cut through the wilderness of short-term fixes — which won’t provide a pathway to marketplace growth or success — to arrive at realistic, long-term tech solutions.
This is the perfect time to be delivering on promises to mortgage lenders. Every institution involved in home finance today is seeking better solutions that will allow them to be more competitive and profitable in the future.
Which claims can actually be delivered on? By carefully considering the answers to the following questions, lenders and the originators who work with them can properly evaluate the capabilities of the technology offerings in the marketplace.
Closing speed
Does the technology you are looking to implement help you close loans sooner? Time is money in any business and that’s especially true in the mortgage industry.
Each day that a loan sits waiting for the information required to move it to the closing table costs the lender money. Technology that includes efficiencies, automates more of the process and is generally easier for the processor to use delivers on this promise.
A more efficient loan origination system (LOS) will shorten the time to close as long as staff members are trained to use it and take full advantage of the functionality it brings to the task. These systems exist today and the developers who offer them can deliver on this promise.
Informed borrowers
Does the technology meet your borrower’s expectations? On the surface, this seems like a bit of a no-brainer. Why would a vendor bring a lending system to market that they didn’t believe would meet (or exceed) borrowers’ expectations? Remember, the expectation of today’s borrower is to have nothing less than an Amazon-like experience, which we all know is the ultimate goal for every purchase.
For a product as complex as a home loan, is this expectation achievable and is it what borrowers really want? Stratmor Group research has shown that the borrower experience improves dramatically when the borrower’s expectations are established at the start of the transaction. This can be accomplished with a simple checklist.
This suggests that what borrowers really want is more information. If the vendor brings a system that makes it easy to deliver status updates, it is much more likely that this promise can be kept. Borrowers want to stay informed throughout the process. Originators who are able to keep clients current on their loan status will earn higher customer-satisfaction ratings. Implementing the right technology can achieve this and help ensure the loan isn’t lost.
Engaged clients
Will the tech enable more borrower engagement? One mistake lenders and originators tend to make is to place technology between their staff and their borrowers.
Customer-satisfaction surveys from J.D. Power & Associates have shown that this approach doesn’t meet with client approval. True, borrowers want an easier process, and technology can deliver that, but not if it takes away their trusted adviser. If this happens, consumers will disengage.
When the borrower fails to engage with the lender’s technology, required documentation doesn’t get uploaded, the process slows down, and the lender loses time and money. As a result, the lender runs the risk of losing the loan entirely. Borrowers will engage with tech tools they find easy to use and understand, as long as it doesn’t stand between them and their trusted expert — the mortgage broker or loan officer.
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Cost aspect
Will the tech cut your costs? Implementing technology that helps cut costs is bound to get attention. In fact, this is the most common promise originators will hear a tech vendor make. Can it be delivered on? Actually, this may be the easiest promise to keep.
Although July 2019 survey data from the Mortgage Bankers Association revealed that technology accounts for only 4% of the cost to originate a home loan for nonbanks (and 10% for depository institutions), there are still plenty of ways that an efficient LOS can cut other costs. About half of the cost to close a loan is spent on people, so a more efficient lending platform can save money. Since most of the money spent on personnel is allocated to the sales department, better lead generation can save lenders even more money.
And there are other efficiencies that good loan processing automation can offer to further reduce the cost to close. A tight integration between the point of sale and the LOS speeds the loan from application to processing, eliminates rekeying errors, and saves both time and money for the quality-assurance department. Automated data verification shaves days off the process and integrated documentation means fewer errors at closing. Lenders and originators should learn about the many ways a new technology platform can save time and money before deciding on a new system.
Competitive balance
Does the tech help you win more business? This can only be delivered if all of the above questions are answered as well.
In a highly competitive environment, any misstep can put a lender at the mercy of competing institutions. On the other hand, if a lender employs technology that delivers on each of the capabilities discussed, they will have a distinct competitive edge in today’s marketplace.
Not every fintech can deliver a solution that successfully addresses each of these areas. In fact, the vast majority of these companies cannot. So, how can an originator be sure that they are getting the right answers from a potential new partner? The answers are in the technology offering itself.
Minimum expectations
Anyone who builds mortgage technology can make performance claims, but what kind of technology could possibly back all of them? Next-generation platforms have to go well beyond the bounds of what the industry has come to expect from traditional loan origination systems.
A traditional LOS is still required, however. In fact, it will form the heart of the new platform and deliver the following services:
- Automation of dynamic conditioning, required document identification and tasks
- Management of pipeline, tasks, conditions and alerts
- Automation of document stacking and delivery
- Automation of third-party provider product and service orders
- Regulatory-compliance automation
To truly help mortgage lenders and origin
ators deliver the experience borrowers want, the platform will have to be capable of driving the entire lending journey for both the borrower and the lender. This journey starts before the borrower even applies for a mortgage, which means it starts before the traditional loan origination system functionality can be brought to bear on the transaction.
Ideal platform
The borrower’s real journey could begin even before they realize they are in the market for a new home or financing. So, in addition to the LOS, the ideal platform has to include an integrated tool for customer-relationship management (CRM), automated delivery of lead follow-up and routing, as well as customizable email, text and print communications.
It also should feature Realtor management and automated status updates as well as automated portfolio refinance reviews. Once the borrower enters the purchase zone, the lender has a narrow window in which to win their business. Failure to move quickly here can cost the lender everything.
This means that the next-generation platform — the one that could fulfill each of the claims that lenders are hearing from vendors today — also needs to include integrated point-of-sale technology that will deliver an omnichannel consumer portal for shopping, online applications and communication. It also should have an integrated, easy-to-use consumer portal with copiloting. This system will need autonomous quick quotes, pricing, eligibility and applications with preapprovals, including with Fannie Mae’s Day 1 Certainty. The automated underwriting system integration needs to provide real-time loan decisions and statuses.
This point-of-sale system would allow consumers to quickly apply for a mortgage through the device of their choice. It would then give them the ability to communicate in real time, stay up to date on the status of their loan and receive gentle reminders when important tasks need to be completed.
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Today’s most effective loan origination technology is built around a powerful LOS that includes all of the functionality that modern lenders have come to expect. But it also includes a powerful CRM system and digital point-of-sale technology, making it a complete suite of tools that is capable of meeting all of a lender’s needs.
