The mortgage crisis began a decade ago, and yet additional industry regulations keep coming. The lending and servicing business sector have become more complicated to navigate. Enhancements in technology, increased demands from investors and borrowers, and the continuous introduction of new government regulations have resulted in a treadmill of change.
This continual change in the mortgage industry has created an elephant in the room: lack of time and resources. Regardless of the organization size, adding employees isn’t always in the budget. Even if it were, adding staff shouldn’t be the only option considered when there are software technology alternatives available to gain operational efficiencies to adapt to industry changes. So how do lenders and servicers successfully capitalize on available technology to achieve these goals?
One way to succeed is by leveraging software equipped with application programming interfaces (APIs). An API is a software-to-software interface that allows applications to talk to each other without any user knowledge or intervention. API’s can be internal and used primarily within a company or organization, or external and made available to anyone interested in developing an interface or connection to their product or service. API’s also vary in design regarding functionality. An API may be designed to query data or update a database, initiate a process, or add functionality to a software application. Sometimes it is easier to use an API than develop new functionality from scratch. There are many possible uses for an API; however, in the mortgage industry, using it to keep up with business demands is a definite benefit.
An API that connects scheduling software to servicing software is one example of using an API to initiate a process. An API allows the scheduling and automation of programs, reports, and interfaces so servicing staff aren’t tasked with running the jobs after hours and weekends. In addition to saving time, the API reduces the potential for human error. Consumers are also likely to reap the reward of this type of API since the end result can be quicker access to statements and loan information.
An API can be used to query data and/or update a database when you process a mortgage loan application and order a credit report or credit score from a credit reporting agency. The software application in which the order is initiated is most likely a loan origination system (LOS). The LOS uses an API to send your credit request with the required information to the credit reporting agency application. Then the credit reporting agency application returns the credit report and/or score, allowing the data to be imported into the LOS’ database.
Behind the scenes, many applications are working together using APIs that are seamlessly integrated so the user doesn’t notice when software functions are handed from one application to another.
Leveraging APIs enables mortgage lenders and servicers to use multiple solutions to achieve the specific functionality desired and build a centralized database. APIs also allow users to work with their preferred vendors since the API technology enables the two applications to meet up and run seamlessly.
Efficiency and Automation Capabilities
APIs save time and reduce errors by allowing for the automation of many recurring, previously-manual tasks such as data entry or program execution; execution of programs and reports at a set date and time, with results transmitted to an investor or agency; and transmission of shared data between loan origination software and third-party vendors. To determine loan eligibility, lenders used to manually pull information, such as borrower credit scores and liabilities. Through an API, lenders can integrate their online portal or loan origination system (LOS) with credit agencies to determine loan eligibility almost instantaneously.
Enhanced Data Quality and Integrity
APIs can provide additional automation of specific programs. By sharing information between platforms, such as loan origination and servicing software, an API eliminates the need for manual data migration. Because there is less need for human intervention, data consistency and accuracy significantly increase, easing the data management process.
Furthermore, the API dictates how data is shared, ensuring full compatibility, whereas separate systems may result in incompatible data. APIs can even allow real time access to specific data within another system, even if that data is not actually stored in the other system.
If the loan origination software, borrower’s and loan originator’s online portals use internal API’s, originators can easily assist borrowers with their loan applications. Furthermore, application data can be automatically imported into the separate platforms, eliminating the need to manually re-enter this data. This same scenario provides for efficient updates to the borrower regarding their application status without having to contact the individual.
Navigating the Compliance Maze
Compliance remains one of the largest challenges for today’s mortgage industry. APIs enable lenders and servicers to meet increased requirements in the face of changing regulations. Whether changes involve adjustments to existing data formats or the reporting of new data, utilizing APIs to execute programs and transmit data or capture additional required data can result in more airtight compliance processes. LOS and servicing system integration enables the servicer to access and cite origination history, allowing you to easily research this borrower information later. This ability is crucial whether you service the loans yourself or outsource them to a third party.
Thanks to the added automation functionality, the borrower enjoys a better lending experience. APIs manage tasks that would have ultimately been a cost passed on to the customer.
Customers will also benefit from a more transparent lending and servicing experience. By using a web application that’s integrated with the LOS, the lender can provide borrowers with timely initial disclosures and status updates. On the servicing side, borrowers will also have immediate access to their loan data and statements and can conveniently make online payments 24/7.
APIs provide significant benefits both internally and externally for today’s lenders, servicers, and borrowers. The key is to leverage technology changes by choosing systems that work together seamlessly. The result is a more efficient and enhanced process for lenders, servicers and their customers.
About The Author
Susan Graham is president and chief operating officer of Financial Industry Computer Systems, Inc. (FICS), a mortgage technology specialist that provides cost-effective, in-house mortgage loan origination, residential mortgage servicing and commercial mortgage servicing technology to mortgage lenders, mid-sized banks and credit unions. As president and COO, she is responsible for the overall management of the company’s day-to-day operations, strategic planning, customer relations and product development.