TheMReport — News and strategies for the evolving mortgage marketplace.
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TH E M R EP O RT | 79 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Poll: Real Estate Most- Revered Investment In the eyes of Americans, putting their money into a home is the best route to financial security. I n its Financial Secu- rity Index, conducted by Princeton Survey Research Associates International, Bankrate asked 1,002 adults via telephone—for money that wouldn't be touched for at least 10 years, what did they think was the best investment? Twenty-eight percent said real estate, while cash invest- ments came in a close second at 23 percent. Bringing up the rear was the stock market, at 17 percent; gold, at 15 percent; and bonds, at 4 percent. Six percent of those polled answered "other." Bankrate suggests that the reason real estate is the favorite is three- fold: rising home prices, perpetu- ally low interest rates, and tax incentives. Plus, there's the added bonus of having a place to call home, permanently. However, in terms of return on investment, real estate histori- cally doesn't have the highest yield. Bankrate cites a study by Professors at the London School of Business that showed average returns on housing were only 1.3 percent annually and notoriously difficult to sell even in a strong market. In comparison, stocks usually returned four times that amount. This doesn't seem to matter, although there is a slight genera- tional gap when it comes to the idea that real estate is the best investment. More Gen Xers and baby boomers believe real estate is a better investment than millenni- als do, but not by a large margin. Millennials are split in their vote—30 percent for cash invest- ment and 30 percent for real estate investment. One reason for this could be that real estate is less risky when compared to stocks, and because millennials have less wealth that their predecessors, they may be less willing to play with it and take risks. Real estate, in that sense, is a safe investment, especially when compared to other routes. LOCAL EDITION Questioning the LOS OFTEN CONSIDERED THE END-ALL, BE-ALL SOLUTION, LOAN ORIGINATION SYSTEMS AREN'T NECESSARILY WHAT THEY'RE CRACKED UP TO BE. By Brian Fitzpatrick PENNSLVANIA // Lenders often consider their loan origina- tion system (LOS) to be the "single source of truth" because it is the place all the loan file information is stored. They presume the LOS knows all, but is that really the case? Not too long ago, my wife and I refinanced our home. While we were reviewing some documents, I noticed my name was misspelled on one of them as "Bryan." Certainly that's not how I spelled it when filing out the application. The only way it got there was by somebody retyping it, and the only reason we saw it was because there was nothing in place to catch the error and correct it. In other words, the LOS couldn't tell the difference. There's little wonder that an LOS has trouble keeping everything straight. Lenders collect an incredible amount of information from the consumer—assets, income, credit information, bank account data, taxes—and then they collect even more information from third parties. It all goes into the loan file. When you're gathering information from so many sources, in so many different formats, and through so many different methods, it's not a matter of if the data starts to cross-contaminate but how bad the eventual contamination will become. There is one perception that digital mortgages will solve this problem. But this is a myth, too. In fact, it can create an even bigger mess. Many lenders are installing new "borrower portals" that make applying for a mortgage faster and easier, yet they are still using older technology on the back end. Some lenders are even taking all the information the borrower submits and retyping it into the LOS, which is another chance for information to be lost in translation. Every LOS vendor says their system does not let these issues happen. Having viewed loan files from every system out there, I can say with certainty that not one is immune from data problems or inconsistencies. Our industry will go a long way toward solving its data integrity issues if we stop talking about the LOS as the "single source of truth" and acknowledge that 100 percent accuracy is hard to come by in the mortgage world. However, it is best attained when lenders leverage technology capable of verifying and validating data that goes into the LOS throughout the process and electronically cross-validates data from multiple source documents and third-party systems and data sources. In this way, data contamination doesn't spread and borrowers can have trust in the process. The LOS cannot determine what is true on its own. If lenders care about data quality, they should leverage additional technology to create loan files free from fiction. As President and CEO of Pennsylvania-based LoanLogics, Inc., Brian Fitzpatrick oversees all operations of the company. He is a demonstrated leader with particular expertise in mortgage technology and business process outsourcing solutions. Fitzpatrick has raised industry-wide awareness of how technology plays a key role in the production and measurement of loan quality and performance.