MReport November 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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Page 19 of 67

18 | M R EP O RT FEATURE I t has been less than four years since the mortgage industry felt the impact of the TILA-RESPA Integrated Disclosure (TRID) rule. The rocky implementation period for that rule is regarded by many as the impetus for a major increase in technology spending in the years that followed. We've also seen nu- merous lenders turn their attention to the rising cost of producing a mortgage and margin compression. That all seems lost at this moment as the falling mortgage rates have boosted demand in refinances. However, in spite of the "digital revolution," many of the chal- lenges illuminated by TRID still remain. The time it takes to close a home loan has not dropped significantly; it's still expensive to originate a mortgage loan. Many lenders continue to struggle with margin compression. Wasn't the e-mortgage revolution supposed to change this? Mortgage Costs Aren't Going Down W hile many mortgage lend- ers have taken leaps and bounds in their implementation of effective technology, much of this effort was focused on sales-related or consumer-facing systems such as online mortgage applications or LOS. Unfortunately, the "back end" of the transaction—settle- ment, appraisal, and closing—re- mains a mess. The most apparent impact of TRID was closing delays, and while there were nu- merous causes for the bedlam, one common thread runs through the story: the struggle between lend- ers and vendors to collaborate and communicate. This, of course, is where lenders turned to technol- ogy to improve their inefficiencies. Despite the improvement, lenders reported a net loss of $200 per mortgage loan as recently as Q 4 2018, according to the Quarterly Mortgage Bankers Performance Report issued in March 2019 by the Mortgage Bankers Association. The other obvious indicator of process efficiency—time to close— has remained steady as well. Ellie Mae's Origination Insight Report advised that this number blossomed to 51 days in 2015. As of February 2019, that number was still 47 days. The number has remained in the range of 42–48 days in 2018 and 2019. [Source: ValuePenguin by Lending Tree, "Mortgage Guide: What's the Average Time to Close on a House?"] If lenders and vendors made significant investments in technol- ogy in recent years, why aren't these two key metrics changing more substantially? One real possibility is that much of the technological invest- ment and adoption that took place between 2017–2018 focused on the most obvious consumer- facing points of the transaction. It's quite possible that the digital revolution largely encompassed systems focused on loan applica- tion and loan origination, where the consumer has the most direct interaction with a lender. A report from Fannie Mae in July 2019 offered some analysis of its mortgage lender sentiment survey. The report states that "mortgage lenders continue to cite 'consumer-facing technology' as the most important business priority to maintain competitive- ness." However, it went on to observe that "the importance of 'cost-cutting,' another com- monly cited business priority, fell (in 2019) after jumping in 2018, when rising interest rates and dropping volume forced many lenders to pare back to maintain profitability." [Source: Fannie Mae, Perspectives, "Technological Investment Necessary in Evolving Mortgage Landscape, Lenders Say" (Andrew Peters, VP, Single-Family Strategy & Insights)]. Part of the issue may arise from a long-running battle: the contin- ued difficulty of lenders and their partners to collaborate effectively in the "back end" of the transaction. It's not uncommon to see mortgage transactions where multiple incom- patible technologies are brought to the table by the various firms closing the loan. The result is any number of hacks or work-arounds to make the file move at all. This became all too apparent in the early days of TRID implemen- tation—the enactment of which demanded intricate and effective communication and collaboration between the various professionals involved in closing the mortgage process. Technology Is Not Helping Communication I t has also become apparent that the numerous professionals involved in closing the mort- gage—the appraiser, the title agent, the title underwriter, the closing agent, the loan officer, perhaps the real estate agent, or the mortgage broker—are still struggling not only to work together on the same file efficiently, but even to communicate. This will come as no surprise to most mortgage professionals, who have at some point or another ended up in voicemail purgatory, or found themselves searching frantically through a sea of emails. Why? Because all too often the loan officer is using a system The Dividends of the Digital Revolution? TRID helped kick off a technology boom in the mortgage industry. Yet today, margin compression and production costs remain high. Wasn't tech investment supposed to be the answer? By Jim Paolino

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