Every disruptive technology – and the regulatory framework that surrounds it – impacts entire industries with unexpected consequences. Two recent trends in the mortgage industry are combining to create a perfect storm of unintended consequences for mortgage originators. The combination of the growth of electronic mortgage disclosures along with the standardization of pricing engines and underwriting rules due to today’s aggressive regulatory environment have some thinking that mortgage originators will soon be an endangered species.
A lending company could be forgiven for thinking, “If everything is preset and just a range of numbers, why do you need a loan officer on an agency loan?” You just need one or two NMLS licensed people to set the rates displayed on a borrower’s online account or to quote a borrower if they insist on talking with a person about rates. Then add less expensive loan processors and customer support staff to do the document follow-up and collection.
Millennials Want Answers, and They Want Them Now
As the oldest Millennials are approaching their 30s, there is the opportunity to build a huge customer base with the largest living generation. But when they want to buy a home and apply for a loan, what will they want? Automation.
Millennials will want to sign on to websites (or via their phone) at 1:30 in the morning after a day at work and hanging out with friends. Then they will search for their loan, upload everything financial from their Quicken, Money or Personal Financial Management app and demand an immediate answer before they give up and go on to another website and apply.
Recent published studies indicate that over 60% of online shoppers expect an answer to their question within one hour. With DU and LP free, and a credit score available 24/7, even lenders can meet this demand. Technology now exists that offers prequalification flood checks without the certification for a fraction of the flood certification price. Run these checks immediately after you get the 6 mandated pieces of data required for TRID and for 90% of your loans, you can have a rate, flood fees (or not), the title, transfer taxes, property taxes confirmed, and estimated appraisal fees based on property size and location within two minutes.
Who needs a loan officer for this group of people representing the vast majority of borrowers in the future? Lenders looking to cut costs, or trying to start a new business, can save a lot of money by only employing a couple of loan officers and relying on customer service and processors to manage most of the cut-and-dried loans.
Where will the loan officer go?
The upside for brokers is that the lower cost of doing business electronically cuts both ways. Good loan officers should or will consider opening their own businesses, relying on cloud-based technology, low overhead and personal connections to compete. Certainly new or existing vendors will jump at the opportunity to serve new customers for their software.
In addition, most community banks and credit unions will probably maintain an origination staff to handle the non-standard loans because that type of service is how they can differentiate today competing with big banks. Loan officers will always be needed for outside-of-the-box loans and borrowers who prefer to not to embrace the technology.
Will all of these technological changes dynamically alter the mortgage industry most of us have spent decades in? Certainly. There may be areas of the industry that experience the pain of change more acutely, but change also brings opportunities. Smart loan officers should keep an eye on developments and think about how they fit in a more digital and more regulated world. Don’t be afraid of technology, but don’t be caught asleep at the wheel as the nature of our business changes.
About The Author