TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/239959
Feature Fleeing from Fees Lenders can bypass the burden of managing fines and other charges throughout the lifecycle of a loan. By Tim Armbruster, Chief Technology Officer, ClosingCorp I t is a behind-the-scenes process much of the time, but it monopolizes a great amount of lenders' time and energy: managing fees. While it has become paramount to ensure that rates provided to consumers through good faith estimates (GFE) remain consistent throughout the entire loan lifecycle, lenders should not be concentrating on fee management. Therefore, it is time for a change. Lenders also know their traditional methods are not producing accurate rates, but the assumed headache and initial expense that comes with making a big change or technology investment drives them to consider non-compliance and associated fines a cost of doing business. However, the regulatory landscape has made these costs too high to continue to sweep under the rug, even for the larger lenders. Despite their lingering hesitancy, lenders would be the first to admit that a change in fee management is needed for their businesses. Attention currently placed on fees from the initial stage of origination through closing is taking resources away from their core business and customer service objectives. As regulatory requirements continue to grow, lenders should introduce this change by incorporating technology designed to handle fees at every step of the process. The industry as a whole has been slower to adopt new technology, which is no secret. However, with a smaller number of lenders now in the marketplace and pressure on those remaining to conserve resources and run lean operations, technology for efficiency and, ultimately, cost savings is crucial. Customer satisfaction and compliance concerns dictate that producing and communicating correct fees throughout the loan process are no longer optional. According to a PricewaterhouseCoopers presentation during a recent mortgage technology conference, 27 percent of borrowers who have bad experiences during the mortgage process claim it was due to fees, terms, or ownership costs. This certainly correlates with our internal research, which found that lenders that do not implement effective fee technology pay an average of more than $72 per loan file to cure Real Estate Settlement Procedures Act (RESPA) tolerance violations at the closing table. Fees play a critical role in mortgage origination. They are used throughout the process, touched by several parties, but too often are still generated and stored in disparate, disconnected systems. For instance, a lender will use one system to generate the initial fees and another to submit orders to service providers. Implementing a centralized fee system as a single system of record throughout the mortgage process will go a long way to cure both compliance and customer satisfaction headaches. Along with delivering accurate rates to consumers, lenders are now required to create audit trails of all steps and activities—giving fees a critical role as it relates to regulatory compliance. With penalties issued for incorrect or incomplete records, this can no longer be a manual process. Once the borrower has filled out a loan application, a GFE must be provided within three days. Following an initial disclosure, if there is a change in circumstance that affects fees and requires a re-disclosure, a lender needs an automated system to ensure every detail is maintained and tracked for compliance purposes. Mistakes on the GFE can lead to extremely costly RESPA fee cures at the closing table, and the Consumer Financial Protection Bureau's (CFPB) recently finalized loan estimate disclosure does not change that fact. In certain cases, for example with affiliated service provider relationships, the regulations are getting tougher. Implementing a centralized fee management system, or selecting a third-party fee management provider who provides guaranteed compliant fees, will greatly reduce this burden for lenders. Moving Through the Process O nce initial fees are presented and a borrower indicates the intent to proceed, lenders should be able to use the same system to trigger the actual placement of orders to various third-parties, such as title and closing service providers. Lenders still using separate systems create a disconnect among the parties involved. Very few lenders have made the leap to fully connect their ordering systems and their fee systems, creating problems across the board. By ordering services through The M Report | 25