TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1274675
36 | M R EP O RT FEATURE been exposed as well, with risks appearing across the spectrum of FICO scores, loan-to-value ratios, and liquidity. Complicating matters further, lenders continue to experience a steady demand in refinance busi- ness driven by low rates while simultaneously fielding massive volume in forbearance requests. And they haven't gotten a lot of help. Many offshore vendors that lenders relied on for production help have had to shut down their operations, requiring lenders to bring back operations in-house. That's led to overworked staff, as many loan processors and under- writers are being asked to take care of tasks that they feel are beneath them. These challenges have only been made worse by everyone having to work from home for months and dealing with all the distractions that come with this shift. Most organizations can get by working remotely for short periods of time, and they prepare for these scenarios. They have disaster recovery and business continuity plans that are designed to handle the typical, 24-hour emergency created by a natural disaster. But no lender was ready for a four-month (and likely longer) pandemic and the impacts it would have on their processes and staffing. Nor were they ready for the risks, which included data security issues as employees began to access their company's systems over unsecured networks. A contributing factor to all of these challenges has been the recent sea change in borrower behaviors. As tech-savvy millen- nials have taken command of the housing market, some lenders have struggled at implementing origination technologies that pro- vide these younger consumers the fast, simple, and convenient bor- rowing experience they expect. Even those lenders who have made proactive moves toward digital mortgages have taken a step backwards in the current en- vironment due to other priorities and interruptions. It's no secret that every lender wants to accelerate mortgage production, but speed is usually the enemy of accuracy and quality. This is especially true now, when lenders are trying to fast-forward loans that are in progress and wrap them up before guidelines change and they have to rework the loan. Indeed, lenders have been receiving notifications of loan guideline changes and shifting credit boxes, as well as making changes to their own guidelines, to adjust to the current envi- ronment. The impact is felt by borrowers who are told one thing and then a few days later told something different regarding their eligibility for a loan. Trying to keep your customers satisfied in such a chaotic environment can feel like an exercise in futility. But there are ways to do better. New Standards in Origination Technology W hile the challenges of today's market may feel abrupt, they have been building for some time. For years, and to their own detriment, lenders have been overly reliant on manual processes as well as Post-it notes, checklists, and labor arbitrage. Most have also known for some time that automation is the only way out of this quagmire. But they have been reluctant to leave behind their legacy technologies and paper-based documentation. It's not that most lenders don't want new technology. Many lenders have whiteboards in their conference rooms that are filled with strategies, diagrams, and workflows. Yet these visions of transformation are slow to come to fruition. The hard truth is that they no longer have a choice. As much as they would love to rewind the clock, there is no going back to all the same practices and proce- dures lenders had in January. The world has changed, and if you're not changing your business along with it, your exposure is un- known. Even if you're drowning in volume, there must a point at which you stop and sharpen the ax instead of continually chopping with an increasingly dull blade. Fortunately, all of the challenges tied to the current pandemic, as well as those that existed before, can be solved by more effectively leveraging existing technology and investing in new technologies to create a digital labor force. By leveraging digital labor, lenders can automate the time-consuming, tedious tasks that are currently being performed by humans. As an example, they can create more frequent, automated pre-close checks of their swelling pipelines to catch systemic issues before they turn into major problems and use new reporting tools to mine post-close reviews for process and productivity improve- ment opportunities. Another very useful example of leveraging digital labor can be found in the origination process when borrowers are submit- ting the documents they need to qualify for a loan. New digital technology allows lenders to import PDF documents from the borrower and automatically clas- sify and extract data in seconds. Such technology can bring speed, accuracy, and nimbleness to the lending process, which will not only lower processing costs and benefit profit margins but also help lenders compete more suc- cessfully for business because of more predictable time to close. If there is ever a time for lenders to embrace digital labor, it is now. There really is no other choice.