Commercial And Multifamily Delinquencies Stay Low

Commercial and multifamily mortgage delinquencies remained low in the third quarter of 2019, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Delinquency Report.


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“Loans financing commercial and multifamily properties continue to perform very well,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Delinquency rates are at or near record lows for nearly every capital source, with the rate for commercial mortgages held by banks at its lowest since the inception of the series 25 years ago. Solid property fundamentals, strong property values and low interest rates are all helping to keep delinquencies down.”


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MBA’s quarterly analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.


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Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the third quarter were as follows:

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.45 percent, a decrease of 0.01 percentage points from the second quarter;
  • Life company portfolios (60 or more days delinquent): 0.03 percent, a decrease of 0.01 from the second quarter;
  • Fannie Mae (60 or more days delinquent): 0.06 percent, an increase of 0.01 percentage points from the second quarter;
  • Freddie Mac (60 or more days delinquent): 0.04 percent, an increase of 0.01 from the second quarter; and
  • CMBS (30 or more days delinquent or in REO): 2.29 percent, a decrease of 0.17 percentage points from the second quarter.

MBA’s analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another.


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Construction and development loans are generally not included in the numbers presented here, but are included in many regulatory definitions of ‘commercial real estate’ despite the fact they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers, or other income-producing properties. The FDIC delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties.

Study: Credit Availability Increases

Mortgage credit availability increased in October according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool. 


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The MCAI rose by 0.9 percent to 185.1 in October. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI increased 2.4 percent, while the Government MCAI decreased by 0.9 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 3.1 percent, and the Conforming MCAI rose by 1.3 percent. 


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“Mortgage credit availability expanded in October, driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Credit supply for government mortgages continued to lag, declining for the sixth straight month. Meanwhile, the jumbo credit index increased 3 percent to another survey-high, as that segment of the market stays resilient despite signs of a slowing economy.” 

CONVENTIONAL, GOVERNMENT, CONFORMING, AND JUMBO MCAI COMPONENT INDICES

The MCAI rose by 0.9 percent to 185.1 in October. The Conventional MCAI increased 2.4 percent, while the Government MCAI decreased by 0.9 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 3.1 percent, and the Conforming MCAI rose by 1.3 percent. 


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The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits, while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits.


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The Conforming and Jumbo indices have the same “base levels” as the Total MCAI (March 2012=100), while the Conventional and Government indices have adjusted “base levels” in March 2012. MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the “base period”) relative to the Total=100 benchmark.                                                       

EXPANDED HISTORICAL SERIES

The Total MCAI has an expanded historical series that gives perspective on credit availability going back approximately 10-years (expanded historical series does not include Conventional, Government, Conforming, or Jumbo MCAI). The expanded historical series covers 2004 through 2010, and was created to provide historical context to the current series by showing how credit availability has changed over the last 10 years – including the housing crisis and ensuing recession.  Data prior to March 31, 2011, was generated using less frequent and less complete data measured at 6-month intervals and interpolated in the months between for charting purposes. Methodology on the expanded historical series from 2004 to 2010 has not been updated.

Down Payment Assistance Programs Don’t Affect Loan Performance

A report released by the Harvard Joint Center for Housing Studies found that down payment assistance programs had little impact on loan performance. The center’s  Working Paper, “A Cautionary Tale of How the Presence and Type of Down Payment Assistance Affects the Performance of Affordable Mortgage Loans,” found, among other things, that the performance of home loans was not significantly impacted when down payment assistance was used.


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According to the study’s authors, “Our multivariate analysis indicates that the receipt of DPA (down payment assistance) is not significantly associated with default risk. In particular, while grant assistance from a government or community organization is marginally significant as a predictor of default risk in one of our model specifications, this effect disappears altogether when racial controls are incorporated in the model. Thus, the receipt of DPA appears to be unrelated to default risk.”


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According to the study’s authors, “Our multivariate analysis indicates that the receipt of DPA (down payment assistance) is not significantly associated with default risk. In particular, while grant assistance from a government or community organization is marginally significant as a predictor of default risk in one of our model specifications, this effect disappears altogether when racial controls are incorporated in the model. Thus, the receipt of DPA appears to be unrelated to default risk.”


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A recent white paper published by CBC Mortgage Agency, found that more than 90 percent of down payment assistance recipients would not have been able to purchase a home without down payment assistance. More than half of buyers helped by CBC Mortgage Agency are racial or ethnic minorities.


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“Down payment assistance programs have come under attack lately, with some arguing that all down payment assistance is bad,” stated Ferguson. “This view is likely the result of pre-crisis down payment assistance programs in which property sellers were allowed to pay the buyer’s down payment and raised the price of the property in order to cover the cost. Those seller-paid programs have been shut out of the market for years and are no longer an issue. Today’s programs must be economically viable without the help of a home seller. In recent years, loan performance on transactions in which the borrower received down payment assistance has been far better compared to loans under the former seller-paid programs.”

“Many individuals are unaware that they can achieve homeownership even though they are unable to save for a down payment,” Ferguson added. “This includes many who diligently make large student loan payments each month which leave them with little money to save towards a down payment for a home. Down payment assistance is the solution for these individuals.”

Companies Team Up To Launch Digital Home Equity Line Of Credit Platform

Prosper, a leading online marketplace lending platform connecting borrowers and investors, together with the U.S. subsidiary of Madrid-based BBVA, announced their collaboration in providing a Home Equity Line of Credit (HELOC) available through Prosper’s website.


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Prosper and BBVA USA have worked closely together to build an end-to-end HELOC solution that allows customers to complete an online application in minutes and receive an instant pre-qualification. The digital platform saves customers weeks compared to the traditional application process and offers HELOC consumers access to competitive rates and no origination fees.


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BBVA USA is Prosper’s exclusive bank partner in the bank’s main footprint states of Alabama, Texas, New Mexico, Colorado and Arizona, and also worked side-by-side with Prosper, lending equity product knowledge and expertise as the digital solution was developed. The bank will soon offer the digital HELOC to a selected group of its own customers via a BBVA branded version of the platform. 


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“We are thrilled to have a partner like BBVA that believes, as we do, in the power of technology to improve efficiency and deliver a great customer experience,” said David Kimball, CEO, Prosper Marketplace. “Working closely with BBVA, we’re excited to be able to offer our customers the opportunity to quickly and easily apply for a HELOC online, which can be a smart and affordable financing option for things like home improvement and debt consolidation. We look forward to expanding this product offering to more states and continuously improving the experience.”


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“BBVA is the leader in digital banking globally, and as such, we’re focused on a transformation that leverages digital to help us drive growth and improve the banking experience for our customers,” said BBVA USA Head of Retail Banking Ça?ri Süzer. “The digital HELOC with Prosper is reflective of the type of transformation we think will carry us into the future, but more than that, we’re excited to work with a fintech stalwart like Prosper to help people quickly and easily access the equity that they have built up in their home.” 

Available home equity reached an all-time high of $6.3 trillion in the second quarter of 2019.[1] While many homeowners have equity available, the traditional process of getting a home equity line of credit has been a confusing, lengthy and cumbersome process.

Prosper has used its expertise in technology and consumer loans to create a fast and simple process for obtaining a HELOC, while BBVA is using its extensive experience in equity lending to deliver knowledge and a great customer experience to HELOC borrowers. The partnership is a unique example of how a fintech and bank are working together to provide a long-term relationship product like HELOC to customers with ease and efficiency.

Putting Together The Best Strategy For Future Success

Welcome to Lending Buzz, the podcast that gives you the latest news, trends, insights and strategies to help you grow your business. First up, in The My Take Section, I express my candid views about the true value of MISMO. In this week’s The Spotlight Section Special Guest Dori Daganhardt, Senior Vice President of Data Strategy at ClosingCorp, discusses new data that puts fees and a potential recession into focus. Lastly, The Industry Insights Section takes on how lenders can truly improve the borrower’s experience. Specifically, Amie Weaver, Administrative VP, Senior Mortgage Technology Manager at M&T Bank talks about how her company is improving the mortgage experience; John Whipple, Product Management at Blend, points out how a fully integrated point-of-sale can make all the difference; and Gerardo Caceres, Product and Data Operations Executive at ClosingCorp, notes that technology can be what boosts all of mortgage lending going forward…. Check out the conversation here:

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Report Will Help Lenders Get More Actionable Data Earlier In The Process

Finicity, a provider of real-time financial data access and insights, announced today the release of its new AssetReady Report that will rapidly identify a borrower’s assets using consumer-permissioned data during a lender’s pre-qualification process.  As a result, lenders will more easily qualify borrowers and generate a higher quality sales funnel for loan officers while enabling a seamless transition into other necessary asset, income, and employment verifications needed in the loan origination process.


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Lenders have the option to receive balances and other data without having to ask for or include consumer SSN or date of birth. Fast, high-value data with less friction on lower probability applicants can provide lenders with better insights on how to strategically move borrowers forward in the application process without asking for detailed verification reports.


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Once leads have been qualified, borrowers can seamlessly permission their data for Finicity’s other digital verification solutions like assets, income, and employment required for the origination process. This single-source solution model for verification optimizes lender workflows to maximize ROI.


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“Now lenders can receive more data earlier in the application process than ever before,” said Steve Smith, Finicity CEO. “This report will provide the opportunity for even more customization and better experiences for borrowers from their first interaction to close.”


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“Getting a verified snapshot of borrower assets during the pre-qualification stage is key to speeding up our business processes,” Bill Cosgrove, President & CEO of Union Home Mortgage, said. “Once a borrower has engaged with our digital pre-qualification solution the stage is set for a seamless transition into Finicity’s full suite of asset, income and employment verification tools.  A single-source solution provider is a great fit for our business model.”

The pre-qualification report includes current account balances and average balances over the previous two and six months, as well as the number of negative balances in the past six months and the most recent negative balance. The report also provides account owner and other account details.

Finicity is working with leading mortgage ecosystem platform providers to simplify lender access to the digital tools they need to improve the origination experience.

STRATMOR Study Finds Borrower Satisfaction Driving Lender Technology Decisions

According to the 2019 Technology Insight Study (TIS) from mortgage advisory firm STRATMOR Group, improving the borrower experience is the key driver for implementing technology with three of the top five perceived digital benefits specifically focused on enhancing borrower satisfaction with the loan process.


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“As with years past, lenders ranked increased borrower satisfaction, faster cycle times, increased transparency for borrowers and greater task, service orders and workflow automation as the top four benefits of digital mortgage,” said STRATMOR Senior Partner Nicole Yung in her article, Six Key Takeaways from STRATMOR’s 2019 Technology Insight™ Study. “Technology limitations impact many of the barriers to digital capabilities, but lenders report the benefits of digital are worth the effort,” Yung wrote. 


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The TIS is the only independent technology study in the industry that gathers data on how lenders feel about their mortgage technology, including both their own systems and those provided by vendors. The TIS includes comprehensive mortgage technology data, analyzed and quantified by STRATMOR’s team of data experts. The 2019 study found that for the fifth year in a row, Ellie Mae holds the top spot among point-of-sale (POS) mortgage systems. Other systems are gaining ground, however, including Blend, which finished in the number two spot for the second straight year. 


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In the lead management/customer relationship management (CRM) market, more than 20 percent of respondents said they do not use a company-sponsored lead management tool, while almost 6 percent said they use either a CRM built into their LOS or use an internally-developed CRM. The study also found that among the almost 80 percent of lenders using a CRM, 74 percent use one or more of the 25 third-party systems sharing the CRM market. Of those 25 systems, Top of Mind, Velocify and Salesforce held the top three spots, according to the TIS. Salesforce gained almost five points, followed by Velocify, which gained two. Top of Mind held 20 percent of the market, according to the study.


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The study found that the number of loan origination system (LOS) platforms used by lenders in the study is falling due to industry consolidation from M&A deals, fewer multiple-system offerings from vendors and because some platforms haven’t kept up with regulatory changes and new technologies, among other factors. The number of LOSs identified as the primary system used by lenders participating in the study has dropped 36 percent over the past four years, from 33 LOS platforms in 2015 to 21 platforms in 2019, according to study. 

STRATMOR found 20 percent of lenders utilize robotic process automation (RPAs) to automate business processes, with most using them in the processing and post-closing areas.The study also shows that 75 percent of those lenders use a third-party provider to implement RPA in their businesses. UI Path, Blue Prism and AIF were the most popular third-party providers, and all offer training and certification in RPA through their websites, the study found.

The article also notes that while technology is capable of improving the borrower’s experience, mortgage professionals using the technology have the greatest potential to make the borrower’s experience better.
 In a second article in the report, “A Tale of Three Borrowers,” STRATMOR Marketing Director Lisa Grote echoes that thought. She writes about three STRATMOR mortgage experts who recently applied for mortgages and had very different loan origination experiences. Grote found that while technology can enable a better borrower experience, it is the mortgage professionals who worked with the borrowers who made the mortgage experience memorable

Ellie Mae To Acquire Capsilon To Speed Up The Delivery Of End-to-End Mortgage Automation

PROGRESS in Lending has learned that Ellie Mae has signed a definitive agreement to acquire Capsilon, a provider of AI-powered mortgage automation software for mortgage lenders, investors, and servicers. With the acquisition of Capsilon, Ellie Mae is accelerating the vision of offering a fully digital mortgage by combining Ellie Mae’s Encompass Digital Lending Platform with Capsilon’s AI-powered solutions to create a comprehensive end-to-end SaaS solution for companies in the mortgage industry.


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“With the delivery of our next generation lending platform, we are accelerating our mission to automate everything automatable for the residential mortgage market. This includes making strategic acquisitions of best-in-class solutions to bring more value to the platform and the ecosystem faster,” said Jonathan Corr, president and CEO of Ellie Mae.


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“This is a significant day for the mortgage industry, as with the acquisition of Capsilon we are bringing together two market-leading companies and adding to our platform the pioneer of AI-powered intelligent automation leveraged by some of the largest lenders and servicers in the industry,” he continued. “As lenders and servicers continue to shift toward data-driven automation, we are excited to provide automated document recognition, classification and data extraction to further drive down costs and time of loan origination, acquisition and servicing.”


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The acquisition increases the productivity of mortgage lenders, investors and servicers by automating critical business processes to create massive efficiencies throughout the mortgage lifecycle. Capsilon’s best-of-breed platform, Capsilon IQ, is used by companies across the mortgage industry, including six of the top 10 originators and servicers, to automate manual work and power their businesses with trusted data.


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Additionally, the company recently introduced Capsilon Instant Underwriter, an autonomous underwriting engine that leverages artificial intelligence, data extraction and process automation to complete underwriting tasks in seconds, with greater consistency, accuracy and less risk.

“The team at Capsilon has built the leading AI-powered platform that is changing the economics of the industry by enabling mortgage lenders and servicers to significantly increase profitability on each loan,” said Sanjeev Malaney, CEO and Founder of Capsilon. “By joining forces with Ellie Mae, we are excited to extend our capabilities and deliver unprecedented functionality through deep integrations with the Encompass Digital Lending Platform.

“This will help lenders leverage automation from consumer engagement through investor delivery and servicing,” he continued. “We believe this combination will offer value to all of our customers and integration partners, regardless of LOS or servicing platform.”

Ellie Mae was advised by Sidley Austin LLP as its legal counsel. Capsilon was advised by Jefferies as its financial advisor and Kirkland & Ellis LLP as its legal counsel in connection with the transaction. No sale price was disclosed.

LOS Update Looks To Create A Superior Experience For Users And Boost Operational Efficiency For Lenders

 Wipro Gallagher Solutions (WGS), a Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) company and a provider of loan origination software solutions, has launched NetOxygen 6.2, the latest version of its NetOxygen loan origination solution platform, designed to meet lending challenges and borrower needs of the future.


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NetOxygen 6.2, will significantly boost operational efficiency for lenders, incorporate strategic integrations, meet new standards and regulatory compliance, and provide a better User Interface (UI) that will further improve borrower experience.

The following are the key features of NetOxygen 6.2: 


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Better Operational Efficiency:

Loan document management functionality that groups and sorts documents logically and indicates the ones used for decision-making—adding to the lenders capability to process loans with greater accuracy


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An enhanced MyTask Plugin that provides loan counts and color-coded visual indicators for tasks by SLA that directly improve lender efficiency

A workflow reassignment feature that alerts users to new tasks they can work on and reassign themselves as the loan contact, improving lender productivity


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A workflow archiving feature that significantly reduces the number of records in the workflow database allowing dashboards, loan selector and inbox queries to respond faster

Enhancements to the prequalification and preapproval feature to optimize the workflow and improve operational efficiency

Strategic Integrations: (structure of statements below is not consistent with the prior section)

NetOxygen 6.2 will also feature a new integration with middleware providers. This will allow lenders to seamlessly select from a wider array of interface vendors with easier implantation and additional national coverage

NetOxygen 6.2 is integrated with Capsilon’s document imaging solution, Capsilon IQ platform for enhanced imaging and data capture capability that lenders can use, to complete transactions faster and reduce origination expenses

Standards and Regulatory Compliance

Application screens to meet the requirements of Uniform Residential Loan Application (URLA), improving compliance and simplifying user experience

A Mortgage Industry Standards Maintenance Organization (MISMO®) v3.4-aligned capability that lets users import or export a loan without losing the loan details mentioned in the Uniform Loan Application Dataset (ULAD)

These enhancements are in addition to a UI refresh and a host of other powerful features that expand the product’s coverage. With this release, Wipro Gallagher Solutions becomes the only provider to offer functionality across multiple asset classes (non-real estate, residential, commercial, wholesale, and equity loans).

“At the core of these enhancements is our deep understanding of automation technology. We have consciously leveraged automation to improve operational efficiency for lenders,” said Alok Bansal, Vice President and Head, Wipro Gallagher Solutions. “NetOxygen 6.2 is a demonstration of our understanding of the lending needs of the future and it uses technological innovation to keep our financial services customers at the forefront of the lending space.”

New End-To-End Mortgage Origination Platform Debuts

Origence, a provider of lending technology and solutions to the financial services industry, has announced the launch of the Origence mortgage lending platform. Designed from the ground up to handle all a company’s digital mortgage needs, the highly automated platform enables lenders to streamline the mortgage process, improve efficiency, increase sales opportunities and deliver a better borrower experience.


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One of very few new loan origination platforms built since 2010, the Origence platform is an end-to-end system that combines powerful point-of-sale and origination tools to accelerate a lender’s loan production and improve closing rates, while significantly reducing costs. The platform is highly automated, scalable and configurable to meet the evolving needs of any mortgage organization. 


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“For years, lenders have been searching for a new mortgage platform that is capable of doing much more than current loan origination system (LOS) offerings, most of which were created years ago,” said Roger Hull, president and chief product officer of Origence. “As a thriving fintech company with a team of hundreds, we’ve leveraged our considerable resources to create a platform that can power a lender’s business for years to come—one that delivers an optimal digital experience for both lenders and borrowers alike.” 


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By bringing digital automation front and center to the mortgage lending process, the Origence platform solves four common pain points lenders face – sub-optimal pull-through rates, decreased productivity, rising costs and increasing borrower demand for a better mortgage experience.


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The platform provides everything lenders need to accelerate and enhance their customer experience, including tools that automate the borrower’s application process and overall lending journey. As a true, end-to-end solution, the platform also provides point-of-sale and fulfilment tools that empower lenders to reduce friction in the mortgage process. It includes automated file assignment, conditioning and tasking, as well as an open application programming interface (API) and microservices architecture for smoother integrations with third-party technologies and services. Meanwhile, the platform’s best-in-class marketing automation tools empower lenders to increase their sales opportunities and improve pull-through rates. 

“The lenders we are talking to are excited about the Origence platform’s automation features, such as its ability to automate orders from third parties and retrieve both data and documents, which reduces the need to rekey information manually,” Hull said. 

“We’re also getting amazing feedback on how our highly configurable platform enables lenders to create their own workflows and improve business efficiency,” he added. “And because the platform is built with current technologies, our clients will be able to avoid the common hassles associated with older platforms, such as system downtime and the constant need for workarounds. We are confident we’ve created nothing less than the mortgage platform of the future.”