TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1491913
30 | M R EP O RT FEATURE W ith home sales slowing and a possible U.S. re- cession creeping into view, many in the mortgage industry have grown nostalgic for the "good old days," even if the good old days were only last year. Back then, rates were near historic lows and Americans couldn't seem to refinance their mortgages fast enough. The problem with the good old days, however, is that they are rarely as good as we remember. In fact, there's an actual name for this phenomenon called "rosy retrospection," which refers to the cognitive bias that leads some people to think more positively about the past than the pres- ent. Indeed, lenders made a lot of money during the historic, multiyear refi boom that finally ground to a halt last year. But the reality is that most lenders had great difficulty keeping up with volume, precisely because refis are not as simple or as easy as anyone would like them to be. Starting today, our industry has a great opportunity to correct this picture. Even while refis have faded—perhaps for some time— eventually they will come back. And when they do, it's possible that borrowers will be able to go online, push a button, and refi- nance their mortgages in a matter of minutes, without any human involvement. Why Refis Should be Easy F or an industry that spends weeks to a month or more to fund a loan, the idea of boiling down any mortgage transaction into a single button click may sound far-fetched. Yet most people don't need to go into their bank branch to open a savings account, nor do they have to call their stockbroker to buy and sell invest- ments. They can do both of these things online by themselves. So, why can't refis be just as simple? Think about it—if you want to refinance your home with your current lender or servicer, your lender should already know almost everything they need to know about you and your property to approve your loan. Assuming you have more than enough equity, good credit, and meet all other required parame- ters, a standard mortgage refi- nance, in which the goal is simply to lower your monthly payment, should be relatively straightfor- ward. From a technological stand- point, all the tools lenders and investors need to make push-but- ton refis happen already exist in some form or another. However, these tools are not usually found in most legacy software products, which aren't easily integrated with each other. As a result, most lend- ers lack the proper systems to ac- commodate push-button refis and fully automate a loan refinance. That includes a pricing engine that can automatically identify and retrieve loan products as well as technology that "triages" loans and greenlights "easy" refi toward a fast-tracked underwrit- ing process. What Push-Button Refis Will Look Like B efore push-button refis become reality, lenders will need technology that can auto- matically place loans into different buckets based on their level of complexity. For example, a certain segment of refi applications can be automatically determined to be "easy" because there is plenty of room within all the qualifying factors for the loan to be ap- proved. Perhaps the borrower has relatively clean credit, easy-to-un- derstand income, and sufficient equity, so the appraisal is not an issue. These loans can be placed in a "green" bucket because it meets the criteria for a fast-tracked underwriting process—and hence a push-button refi opportunity. Push Button Refis: Fantasy or Future Reality? Lenders made a lot of money during the refi boom, but most lenders had difficulty keeping up, because refis are not as simple as we'd like. By Carlos Sa