July 2016 - Lessons Learned

TheMReport — News and strategies for the evolving mortgage marketplace.

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20 | TH E M R EP O RT FEATURE Throughout the mortgage market's twists and turns, IDS has proven a track record of growth and sustain- ability. Over 30 years, IDS has met compliance demands head on and been at the forefront of technological advancements. DOC PREP YOU CAN DEPEND UPON. That heavy burden is a common gripe across the mortgage industry. Implemented in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or, simply, Dodd-Frank, con- centrated hundreds of pages on new mortgage- lending rules. This led to a demonstrable increase in compliance cost and work hours. In a study published in 2015, the business-friendly American Action Forum estimated that lending and servicing companies across the spectrum encountered $24 billion in actual cost and 61 million paperwork burden hours, with the mortgage industry lifting a heavy share. But not all the costs originate with fed- eral regulations imposed under Dodd-Frank. According to our sources, it's also inefficiency in a long-outdated paperwork process to which many companies are still accustomed. Kyle Kamrooz, a veteran in the mortgage industry and COO of the California-based software subscription company cloudvirga, said lending is costlier today because of the uncertainty on the parts of some to embrace new tech. "The whole industry is built on a loan-centric origination model," Kamrooz says. "[Legacy] technology tends to perpetuate a very paper- intensive environment, where people—rather than technology—drives the workflow. "That's the world we live in today," he adds. "Because of the regulatory environment, it just exacerbates LOS inefficiencies and stringent requirements." Combine this with a millennial generation that's come of age, and it seems more impera - tive than ever that mortgage lenders catch up with trends in technology that could help them reduce their overhead, improve the ex- perience for first-time homebuyers, and secure more word-of-mouth referrals in the process. The homebuyers themselves seem to de- mand it. The National Association of Realtors released a Home Buyer and Seller Generational Trends Report in 2015 that showed that 94 percent of the homebuyers born after 1980— millennials—start with an online search for their home purchases. Half of those wind up with the home they found on the Internet. Their ascension into the ranks of homebuy- ers and owners might help explain the popu- larity of such online real-estate companies as Zillow. Other cutting-edge software programs include Simple Nexus and Mortgage Coach, recently featured in USA Today as one of the five top real-estate apps that buyers need. The Road to eMortgages S till, software is one thing. It's a widely accepted element of eLending. What if mortgage loans themselves were offered, un- derwritten, and approved—all online? It depends on whom you ask about eMortgages and, specifically, how much of the execution is online. Mortgage lenders like Equifax lay claim to services along the lines of an all-digital mort - gage, particularly when it comes to accessing borrower credit scores, income and asset veri- fication, and information about the properties. On its website, Fannie Mae describes an eMortgage as one that entails electronic prom- issory notes, SMARTDoc Format, and other execution processes. The GSE exhorts lenders to consider eMortgages for their automation delivery, paperless trail, and reduced impact on the environment. But this is all old news. The other, more radical notion—the all-digital mortgage—is reportedly on offer with a few lenders. And its mainstream adoption isn't so far-fetched. In the same January survey, Xerox revealed that more than half of their respondents antici - pate they'll be closing mortgage loans entirely online in the next four years or so. According to Anderson, eMortgages could very likely become mainstream—sooner rather than later—particularly as lenders find them - selves between a government-imposed rock and a hard place. Compliance measures like TRID will galvanize migration to electronic and virtual platforms, he says. With the Federal Housing Finance Agency set to compel electronic deliv - ery of the Uniform Closing Dataset next year, What if mortgage loans themselves were offered, underwritten, and approved—all online?

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