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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 30 April 2023 F E A T U R E then using a title agency or closing firm that merely partners with an attorney there may come with disadvantages impacting compli- ance or turn-time. Technology, especially now as the transac- tion becomes increasingly digital, is a key consideration when it comes to selecting the optimal third-party service provider. If a title agency's production system doesn't synch well with a lender's systems, the relationship is doomed from the start. Name brand isn't enough. Many settlement services firms may use commonly known production technology like Qualia, ResWare, or SoftPro, but they may also have custom integrations or build-outs that make the fit between their systems and the lender's technology more tenuous. Now more than ever, it's also imperative that a potential third-party service provider is "future proof," or at least possesses the ability to adapt and grow as a lender makes its process more and more digital. If a vendor is unable or unwilling to upgrade or invest to keep up with a growing mortgage lender, then the lender probably needs to rethink their arrangement. From a technology perspective, it's still not uncommon to come across settlement businesses that still have an inordinate amount of manual or hybrid processes. And while the owners of these businesses might swear that this amounts to a "higher touch" or closer customer service, there are many new, specialized technologies that can be used to maintain elite customer service with- out as much hand-keying or manual data entry. Today, the most successful mortgage lenders are likely to opt for service provid- ers who are as automated as they are—or, at least, seek to be. How Much Value Does the Provider Add? D uring market cycles like these, it's very important for lenders that the sum of their provider network exceeds that of its parts. What else do their partners bring to the transaction? Some lenders may be focused on very specific geographic markets where a local, "mom and pop" title agency with extensive experience and expertise might be the perfect fit. The regulatory landscape in those markets might make the agent's experience every bit as important as accuracy and time-to-close averages. Similarly, another lender seeking to grow its presence nationally, for example, might place a premium on throughput, efficiency, and turnaround time. Today, accuracy and time-to-close are merely the cost of entry for good third-party providers. Lenders, especially while running lean and relying on variable costs, are now seeking additional resources beyond the license to operate and the ability to provide key services in target markets. Lenders are also seeking other qualifiers like a deep understanding of the market; data and cybersecurity assurances; or other capabili- ties like the ability to deliver Remote Online Notary (RON) or digital closing services. To that end, the lenders who get the most out of their provider network tend to look for these characteristics. Does the potential partner rely heavily on partnerships (fourth-party providers) for many of its key functions? If so, does it have robust monitoring processes in place such as scorecard, vetting, compli- ance, and security requirements of those partners? Does the potential partner serve most or all the lender's core products? Some title businesses excel at servicing refinance loans but struggle in purchase markets, for example. How does a potential title partner manage closings in the so-called "attorney states?" Does that partner have regular ac- cess to updated expertise in those markets? Or does it rely on a single attorney or firm that primarily signs off on closings per- formed, by and large, by non-attorney staff ? The compliance and cost risks in such cases should be carefully considered. As cybercrime and wire fraud increas- ingly find their way into, and increasingly target, the real estate industry, it's important to recognize that the title agent or settlement services partner, with its access to closing funds and coveted Non-Public Information (NPI) is now a prime target of criminals and fraudsters. A third-party service provider that has anything less than a documented cybersecurity plan, access to cyber-defense expertise, and a multi-layered approach to protecting a lender's data (and funds) is too much of a liability for lenders seeking to remain successful. Most mortgage lending firms and banks don't spend a lot of time thinking about their vendor networks. They often settle for the big- gest name brand or a patchwork of providers cobbled together by personal relationships and/ or the simple fact that they serve a geographical market none of the lender's other partners can. But, in so doing, those lenders are often leaving money on the table and ignoring potential im- provements that could help them in their battle against margin compression. The home purchase transaction still owns an average days-to-close that stub- bornly hovers around 50 days (and up), and yet we point to compliance requirements as the explanation. The fact is that not all mortgage lenders are created the same, and they don't all have identical needs, plans, or requirements. The same is true for third- party service providers. Where lenders take the time to plot a well-thought-out strategy for selecting, utilizing, and managing that network, they tend to find increased efficien- cies and improved performance across the board. In market cycles such as this, that can make all the difference. Today, accuracy and time-to-close are merely the cost of entry for good third-party providers.

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