Whew! Can I just let out a long breath? Give everyone around me a high five and a fist bump? We’ve all just finished a long race! For the past year plus, lenders, settlement agents and mortgage and title technology vendors have expended a great deal of resources and effort in preparation for the CFPB’s Integrated Disclosures rule. And whether you’re feeling exhausted or elated — probably exhausted! — it’s good to at least be able to say we made it!
Now maybe I shouldn’t say we’ve finished this race. It’s probably more accurate to say that we’ve completed our training and preparation, and now we’re finally doing this for real. Just like there are different approaches to race training, there have been different approaches to preparing for TRID. Most everyone has tapped into technology in some form and to some degree in order comply with the new rule. For some, the use of new technology has been incremental, building on the systems and innovations they had already adopted. For others it’s been a major shift, representing a substantial change from their traditional mortgage practices and their supporting technologies. There are also some who have deferred technology changes as a result of TRID, preferring instead to wait until the dust settles, either because they just didn’t have the time and resources, or because they wanted to let the early adopters uncover the known unknowns. And make no mistake – there WILL be unknowns that pop up. TRID is too complex of a rule with far-reaching changes for every single nuance to have been predicted and foreseen in advance, even with 20 months – or make that 22 months! – of prep time.
Here’s the thing though: Now that the deadline is behind us, we’re in it now. The race is live and no matter what approach you took, everyone will eventually get to the TRID finish line. That’s the point where the new processes and technologies that have been deployed are working and all the kinks have been worked out. So what then? If you’ve taken the time to train for and complete a hard race, ideally you don’t want to just finish and then go back to eating junk food again! It’s time to build on that momentum and keep making healthy progress. There are new challenges just around the corner. The technology and innovation that enabled us to meet the TRID deadline created a great deal of industry momentum. The best thing we can all do now is to keep that momentum going to push the envelope of technology and innovation in order to meet the next wave of change in stride, instead of being caught flat-footed.
Here are five significant technology areas – plus one demographic trend – that follow naturally on the heels of TRID. Each one is influenced by other factors and will evolve at its own pace, but with the right concerted effort, any and all of these will be where the industry progresses next in terms of technology-based evolution.
The Uniform Closing Dataset (UCD)
The Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac recently announced that data for any loans they purchase must conform to the UCD standard. This standard, which is based on the MISMO 3.3 reference model, defines the structure and contents of the loan files uploaded to the GSEs. The requirement means all the data for loans they purchase needs to be MISMO 3.3 compliant. Some lenders made this transition as part of their TRID implementation; others will have to make the transition by the second quarter of 2017 if they don’t want to lose the GSEs as a secondary market for loans.
The CFPB has targeted eClosings as the next big step in their Know Before You Owe initiative. The eClosing Pilot project, organized by the CFPB and including eLynx and two of its customers among other vendor/lendor pairings, was designed to identify technology options and best practices related to an electronic closing. The CFPB announced their results in August and several vendor participants have identified some lessons learned from the pilot project. The CFPB’s endorsement of eClosings doesn’t mean all closings will need to be eClosings, but most lenders and technology vendors will eventually benefit by supporting eClosings.
One TRID-focused innovation was the direct integration between lenders and the title production systems used by their settlement service providers. As a result, it is now possible for many lenders and SSPs to exchange loan and fee data instantly and securely, eliminating the delays and compliance issues that come with having to enter loan and fee data manually. The underlying technology to do this is not trivial. It not only requires MIMSO-compliant data, but also a common cloud-based infrastructure or platform that can serve as a hub to interconnect all industry stakeholders. This can extend the benefits of real-time, secure collaboration demonstrated with TRID compliance to all business partners across the entire loan workflow.
Data Validated Mortgage
In addition to increased flexibility and efficiency, moving to a data-centric lending process will have an impact on loan quality and risk. The standardized data structure defined by MISMO will improve transparency in the loan data and ensures that everyone is basing decisions made during the loan process on the same data. It also makes it easier to verify and validate the data in the loan documents, for example comparing the data in the approved loan with the data in the closed loan. This will help lenders and the secondary market better assess loan quality and manage risk.
The all electronic mortgage has been on the mortgage industry’s radar for a decade or more. eMortgages have been technically possible but not widely used. One reason was that the technology innovation was outpacing the industry’s appetite to make changes, solving a problem that wasn’t painful enough to make the technology and process changes required. Now, many of the hurdles have been cleared as part of complying with TRID and other industry requirements. There are very real benefits to the eMortgage and with fewer hurdles lenders may decide the benefits outweigh the effort of getting to an eMortgage.
While not a technology, Millennials represent a significant technology challenge to the industry. According to the National Association of Realtors, today millennials represent 32 percent of all homebuyers. The Brookings Institute projects that within ten years, millennials will form 75 percent of the entire workforce. They are tomorrow’s mortgage customers and they are very different than the mortgage customers of today and yesterday. They grew up with mobile devices in their hands and have grown to rely on their smart phones and tablets as their primary communications channels. Most have never known a world without the Internet and have come to expect information to be delivered directly into their hands anytime and anywhere. They will likely shop for a home and a mortgage online and once they decide to buy, they will expect technology and efficiency to be integrated into every facet of the transaction.
Clearly, paper documents and office visits will no longer cut it with this generation and lenders will have to adapt. Fortunately, lenders who have met the five preceding post-TRID challenges will have laid the groundwork for extending a paperless loan process to mobile channels. Lenders who haven’t will be challenged to meet the expectations of the millennial generations.
These 6 technology areas are what lenders need to be incorporating into their strategies and actively working towards now, even as we currently progress through the implementation period for TRID and sort out the issues that we uncover only through live production. Lenders who build on their momentum will continue to stay ahead of the curve. Even if you’re a lender that has temporarily deferred the use of technology for TRID, preferring instead to go with a manual approach for the time being, you can accelerate quickly and take advantage of the learnings gained through the first wave of deployments. The last thing we should do is give up the momentum that we’ve built as a result of TRID.
So let’s share some high fives and fist bumps. Enjoy a moment of celebration when integrated disclosures processes are operating smoothly and steadily. And then let’s keep on moving to the next thing. It feels good to finish one race, but even better when you can keep it going and knock out additional ones after that!
About The Author