MReport November 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | M R EP O RT FEATURE incompatible with what is being used by the title agent or closer. There is no link between systems save the traditional means (phone, insecure email, fax). According to one industry blog, when various new produc- tion technologies aren't integrated, team members will likely opt for their preferred (outdated) system. "In an ideal world, your mortgage origination process will run like a well-oiled machine. When the world is less ideal, such as the introduction of frustrating inef- ficiencies between your systems, the default human behavior is to go to what you know and can use. Team members will silently stick to old, or alternative, methods (that were being phased out or replaced for a reason) that grant them the easiest access to the information needed." [Source: "3 Problems Caused When Mortgage Software Systems Don't Talk to Each Other"] Designed to encourage better collaboration on the "back end" of the mortgage, the early days of TRID only exacerbated the issues most had been aware of for years. While there has been some improvement, there is still a technological tug of war taking place between the lenders, closing agents, title companies, and other parties, leading to delays, redun- dancy, and even error. Industry efforts to inject more uniformity into the process, such as MISMO or the Uniform Closing Dataset (UCD), while admirable, have not yet had a major effect on the issue. Although applying for a mortgage has never been easier, the consumer continues to wait for weeks until she receives her keys, and mortgage lenders continue to absorb unnecessary costs in the settlement phase. Are We on the Right Track? O ne of the objectives of the Consumer Financial Protection Bureau (CFPB) when it implemented TRID was to make it easier for the consumer to "loan shop." However, three years later there's little hard evidence to suggest that has happened. In fact, an article in The Washington Post presented multiple major lenders who saw little, if any, change in the amount of "loan shopping" being done by borrowers. Joe Adamatis, VP and Residential Lending Manager for Insignia Bank in Sarasota, Florida, said the following on the issue: "Buyers do not have the ime to shop due to the pressures of meeting commitment and closing dates. Most lenders are priced the same, and it comes down to which lender the Realtor referred them to." [Source: The Washington Post, "Home buyers don't seem to be using new tool to shop for mortgages." Kenneth Harney, January 13, 2016.] Unfortunately, the consumer is the one forced to bear much of the cost when inefficiencies and production costs remain high. Combined with the increasing frustration of younger generations at the lack of convenience or ease- of-use in the closing process, these market forces are combining with market compression to pressure lenders to improve and streamline the back-end processes. The good news in all of this is that lenders may be doing just that. Another recent Fannie Mae report suggests that lend- ers are starting to investigate better ways to move the transac- tion through closing. In another analysis of Fannie Mae's Q1 2019 Mortgage Lender Sentiment Survey (MLSS), Fannie Mae VP Prabhakar Bhogaraju noted that "Mortgage lenders view Application Programming Interfaces (APIs) and Optical Character Recognition (OCR) as the top two technologies with the greatest potential to help improve or streamline processes. Ease of technology integration was the most important criterion cited by lenders when deciding to adopt a third-party API." [Source: Fannie Mae, Perspectives, "Mortgage Lenders Look to Leverage New Technologies to Gain Competitive Advantages" (4/22/2019) Prabhakar Bhogaraju, VP, Digital Products] Matt Patterson, EVP Business Development with Draper & Kramer Mortgage Corp., sees change underway as well. "The focus of technology use within the mortgage industry is to start by increasing consumer access to a designated platform. Then to enhance the consumer experience with speed and ef- ficiency, all while saving cost to produce. Over the past few years, I have seen the industry invest- ing in point of sale technology to increase speed of onboarding a potential borrower. This includes e-signature, upfront income verifi- cation, and asset verification. This is furthered in the operational stage of the loan with processing advantages by tax return calcula- tion products, property inspection waivers, and asset updating tools. The undercurrent soon to emerge in the marketplace will be the use of artificial intelligence to handle items in just seconds such as rapid tax return calculations done in under a minute, the matching of loan criteria applied for with investor specific guidelines, vali- dating quality control functions, appraisal review leading to an auto-building for many of the un- derwriting conditions that today are handled by labor intensive time of the mortgage workforce." It's quite possible that some of the challenge is a matter of leader- ship. While more lenders looking at better ways to automate the closing process, mortgage lenders will also need to exert leadership among their partners and vendors as well. There are still too few solutions addressing the clos- ing process that are truly global. Although many single-process technologies may claim to be "end- to-end" or global, too often these solutions are only useful for one of the parties in the transaction, while the others struggle to work around it. Accordingly, maybe it's time for more lenders to become more hands-on in the strategic de- velopment of process solutions that embrace all of the parties through- out the closing. The market is starting to demand it. "Capitalism is the driver for mortgage technology," Patterson said. "The opportunity for com- panies both inside and outside our industry can be seen as an opportunity to seize market share, origination momentum, and a piece the future profits that the American Dream provides. If our industry can produce with speed, efficiency, and not lose sight of the consumer, we will be in a strong place." As CEO of Lodestar Software Solutions, JIM PAOLINO manages the day-to-day operations as well as overseeing business development and the long-term strategic direction of LodeStar, which develops loan estimator, sales management, and closing portal technology. He has a decade of experience developing software solutions specifically for the mortgage and title insurance space. Paolino speaks frequently on technology trends as they relate to compliance, operational efficiency, and sales growth. He can be reached at The most apparent impact of TRID was closing delays, and while there were numerous causes for the bedlam, one common thread runs through the story: the struggle between lenders and vendors to collaborate and communicate.

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