July 2016 - Lessons Learned

TheMReport — News and strategies for the evolving mortgage marketplace.

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18 | TH E M R EP O RT FEATURE Is the eMortgage Inevitable? eLending is becoming all the rage in the mortgage business. Some wonder whether it'll ultimately replace the loan officer—and whether it ever could. By Ryan Schuette S ome way into the Super Bowl in February this year, a Quicken Loans commercial aired that touted the company's new Rocket Mortgage app. The minute-long ad, worth millions of dollars for that tiny bit of airtime, featured Americans at performances, in workshops, and in their kitchens, each of them busy with a phone app—and securing a home loan. "What if we did for mortgages," asked a female voiceover, "what the internet did for buying music, and plane tickets, and shoes?" The commercial advertised the app as a tool that could help everyone get a mortgage, and ended with a statement in bold, white font: "Push Button. Get Mortgage." Cue the Internet's Outrage O n Twitter, that perennial venting space, critics blasted Quicken Loans for slipping into the same recklessness that helped cause the Great Recession and made "subprime" a household name. A Time story about the brouhaha documented tweets by several users, including Chris B. Brown, author of "Smart Foot - ball," who wrote, "Bold move by Rocket Mortgage titling its Super Bowl ad: 'Hey the 2008 finan- cial crisis wasn't so bad, right? Right?'" Even the Consumer Financial Protection Bureau weighed in with a hard-nosed #knowbeforeyouowe reminder. To be fair, the app doesn't fast- track homebuyers to a new home within days or minutes; as the Time story states, it enables inter - ested consumers to see if they're qualified and helps them secure a rate. All of the old rules still apply: income needs verifying, a borrow - er needs to be able to repay the loan, and face-to-face interaction is needed at some point. Still, the incident is emblematic of broader public apprehensiveness to any appearance of a fast-and- loose mortgage lender—and the industry's own awkward rela - tionship with technology, both in what it can do and how it might be marketed. According to sources, that might help explain the industry's ongoing dependency on outdated legacy systems that keep regulatory compliance costly and entrench hurdles for first-time homebuyers. With millennials now constituting the largest bloc of mortgage borrowers in the last few years, according to Fannie Mae, a lender's reluctance to embrace sexy new software or digitalize its pa- per trail could cost them the next generation of homebuyers. For these reasons, some want the industry to look a little more favor - ably on eLending, that trendy, albeit amorphous catchall that includes everything from eMortgages to backend compliance software. "To not have the right tech - nology implemented for both borrower and lender to rely on is suicide," says Tim Anderson, eServices director for DocMagic, Inc. "From [the TILA-RESPA Integrated Disclosure rule] to numerous other compliance regulations, security and privacy purposes, the technology abso - lutely has to be there." Old-School Mortgages in a Digital Nation M ost mortgage lenders are not in the dark about the vital importance of eLending software and strategies, as the numbers suggest. In January this year, Xerox released a survey that found roughly four-fifths of mortgage professionals are accelerating the drive to eDelivery technology, a 15-percent increase from 2015. The same survey found that a whopping 92 percent of the same respondents expect increases in their use of that technology as a consequence of the TILA-RESPA Integrated Disclosures rule. That kind of progress may be timely, then, because compliance is becoming anything but less expen - sive. In its first-quarter Mortgage Lender Sentiment Survey this year, Fannie Mae found that 65 percent of respondents expected net profit decreases as a result of government regulatory compliance. Just a peg lower, the same lenders said they could expect fewer profits because of staffing and personnel costs— many of which are often pinned on a crushing amount of compli - ance burdens. Beto Juarez III, CEO of Austin- based Nest Mortgage, shared his experience with these compliance costs in states like Texas and California. "From the borrower perspec - tive, regulatory requirements have increased, providing a heavy burden on lenders to keep information safe," Juarez says. "On the lender side, regulatory requirements have also increased, ensuring that practices such as 'no document' home loans are never again able to be issued."

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