WEB-TME417-Cover Story Art

Reaching Borrowers

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There is always talk about how much the mortgage industry has changed over the last twenty years. Most of it revolves around the flood of new rules and regulations, technology shifts, borrower expectations and the list goes on and on. One area that doesn’t get as much attention— but is just as critical to a lenders’ success— is how marketing to potential borrowers has changed. Julie Quinn, Vice President of Operations at TTP Enterprises, sat down with our editor to talk about how marketing to potential borrowers has evolved over the years and what it takes to drive business to the point of sale.

Q: You were involved with marketing automation before people even knew what marketing automation was. How would you define marketing automation?

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JULIE QUINN: I think it helps to begin with a quick overview of what marketing automation is before we discuss how it has evolved over the years. Marketing automation refers to software platforms and technologies designed for marketing departments and organizations to more effectively market on multiple channels (such as print, gifts, email, social media, websites, etc.) and automate repetitive tasks.

“At its best, marketing automation is software and tactics that allow companies to buy and sell like Amazon – that is, to nurture prospects with highly personalized, useful content that helps convert prospects to customers and turn customers into delighted customers. This type of marketing automation typically generates significant new revenue for companies, and provides an excellent return on the investment required.” Hubspot.

Q: How has mortgage specific marketing and more specifically marketing automation evolved over the years?

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In the early days of mortgage specific marketing, lenders started primarily with gifts to prospective borrowers through the use of printed items like calendars, and gifts of cookies, etc.

The next shift or advancement was for lenders to realize that past borrowers where a great source for repeat business and referrals to family and friends.

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JULIE QUINN: In the early days of mortgage specific marketing, lenders started primarily with gifts to prospective borrowers through the use of printed items like calendars, and gifts of cookies, etc. The basic concept was to gain mind share so when the prospective borrower was ready to make a decision, the lender who was marketing to them would be the first lender that they would contact.

The next shift or advancement was for lenders to realize that past borrowers where a great source for repeat business and referrals to family and friends. This is what caused the advent of print post-close loyalty programs. These programs are typically 3-5 year nurturing programs that would send printed materials such as Thank You cards, loan anniversary cards, birthday cards, recipe cards, etc. throughout the year to remind the borrower of the great job that the lender had done so that when the next opportunity arose they would continue to do business with them.

Then came the introduction of digital marketing (emails, and then social media). With more and more borrowers gaining Internet access, lenders realize the power of the Internet through email marketing. This is still a powerful tool in the arsenal of mortgage marketers. The key is knowing when and how frequently to use this tool. The natural extension of this was the use of social media for the exact same reasons.

While digital marketing was gaining traction, innovative lenders introduced Pre-Qualification and In-Process marketing to the fold. The right marketing automation solution automates engagement with prospective clients and provides relevant updates for in process milestones while developing and enhancing partner relationships.

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Lenders looking to stand out from their competition in today’s mortgage market must realize that these marketing tools are not mutually exclusive. The most dynamic marketing programs, the ones that produce the greatest results, have circled back to incorporating gifts and post-close print marketing into their digital efforts. It is the right combination of all of these marketing approaches that delivers the greatest ROI. The consistent communication with the potential borrowers, past borrower and referral partnerships in a highly professional and dynamic way shifts the relationship to one of a “trusted advisor.”
Q: There is so much talk in the industry about everything going digital including marketing to prospective borrowers. Why does the best marketing automation solution need to include the right combination of print and digital to produce the greatest marketing ROI?

JULIE QUINN: The key is for lenders to understand that there isn’t one proven approach, which reaches all prospective borrowers. Combining digital and print marketing increases the odds in your favor of potential conversion.

A digital only strategy certainly comes with a lower initial investment, but lenders need a much larger and higher quality prospect list. Remember that almost 85% of your email targets do not even open your marketing and a fraction actually acts upon it. Direct print marketing can see a response rate of 3-4% whereas Email is about 0.1%.

One of our customers specifically implemented mixed marketing approach utilizing both print and digital that generated over 60 new loans in less than six months of campaign. (With the average home price close to $200,000 x 60 loans= $12,000,000 in this campaign alone, that combined both print and digital).

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Our customers that have consistently had the greatest success have combined both print and digital to truly stand out in a highly competitive marketplace.

We are seeing a greater interest in establishing loyalty programs for older loans in lenders’ databases. We are also seeing increased interest in post closing gifts.

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Q: What are some of the pros and cons of email marketing and print marketing?

JULIE QUINN: Pros and Cons of Email Marketing: Pros – Good ROI, Low Cost, Easy tracking, low time investment (assuming you have a good database); Cons – Very competitive, easily discarded, SPAM filters.

Pros and Cons of Print Marketing: Pros – High ROI, Less competition, Personable, enhanced delivery, Great for relationship building, increased trust; Cons – Varying costs, more difficult to track and measure (although including some digital related call to action can help)

Q: With print still being a critical component of marketing automation can you provide some examples of how lenders are incorporating print into their campaigns?

JULIE QUINN: Our customers that have consistently had the greatest success have combined both print and digital to truly stand out in a highly competitive marketplace. For example, upon a prospective borrower reaching Pre-Qualification status, we are notified by the LOS system of this milestone and a personalized 12 page “Homebuyer’s Guide” is generated and mailed directly to the prospect. This book walks the prospect through the entire home buying experience and is branded to Lender and Loan Officer.

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We are seeing a greater interest in establishing loyalty programs for older loans in lenders’ databases. We are also seeing increased interest in post closing gifts.

Lenders are combining both methods by creating print campaigns to drive a prospective borrower to a certain online or digital activity (web application, engage in social media, download something) to gain traction and drive conversion.

Q: What can lenders do to drive new business to the point-of-sale?

JULIE QUINN: The first step for lenders is to get off the bench and make marketing automation a high priority. Remember that marketing automation is so much more than just an email blast or printed post card.

In addition, lenders need to tailor their program/materials/approach to the needs of their prospective borrower. No one approach works for everyone.

A combination of prospect marketing, in-process communications and post-close marketing will deliver the greatest results.

Q: Why is Marketing Automation important to lenders if they are serious about driving new business to the point-of-sale?

JULIE QUINN: In order to survive and thrive in this mortgage environment of constantly changing rules and regulations, heightened competition for borrowers and extreme pressure to produce results, you must realize the need to identify high quality business opportunities. It is critical to identify leads quickly and efficiently and then drive them to the point-of-sale with compliant communications for converting them into clients. It’s equally important to retain these clients and to maximize their on-going value through repeat business and referrals.

Engaging these prospective clients in real time across a multitude of channels such as the Internet, email, social media, print, video, and mobile devices highlights the importance of working with a proven marketing automation solution that can illuminate or emphasize the best in your marketing while easing your compliance burden.

That’s where marketing automation comes into play. Lenders focused on driving new business and attracting more borrowers are turning to advanced marketing technology to attract more borrowers in today’s highly competitive and regulated mortgage market.

Q: What role does compliance play in the right marketing automation solution?

JULIE QUINN: Regulation. It’s everywhere these days. And on the marketing side of every mortgage company’s operations, as much as any other, it means that management has to take a much more active role in ensuring its brand and its products are correctly and compliantly represented in the marketplace. Communications with prospects, customers and even referral partners – whether driven from the center or by loan originators – must be controlled, but without inhibiting genuine creativity and individual initiative. The right mortgage specific marketing automation establishes a controlled environment in which ingenuity and enterprise are able to flourish.

It does this by providing management with five levels of control over the players in the marketing process. All you have to do is decide what degree of control you want to exercise in relation to each of the system’s key functions. For example, you can make sure that Loan Officers are unable to edit company information or upload unacceptable graphics or run on-demand campaigns that breach corporate guidelines.

The levels of management control that should be available in the right mortgage specific marketing automation are as follows, working down from the most to the least restrictive:

Prohibition: Different types of users can be prevented from accessing a system function, or even an entire page, by means of the systems “permissions” capability.

Authorization: Marketing materials created by users at lower levels in the corporate hierarchy cannot be implemented until approved at the center.

Alert: A defined set of fields is monitored and changes are reported via a feed on the systems Home page, enabling quick action to remedy any departure from company policy.

Oversight: Users at higher levels in the corporate hierarchy can “impersonate” users at lower levels, giving management an instant window on the activities of Loan Officers.

Reporting: The solutions “My Reports” function provides information that allows management to hold users at lower levels accountable for their performance.

Q: As the market continues to shift and adjust to constantly changing condition, can you discuss how marketing automation can deliver a competitive advantage for lenders?

JULIE QUINN: Over the last 10 years more and more lenders are utilizing marketing automation. The key now is to differentiate yourself from the “standard content”. Working with your marketing automation solution provider, your marketing team can separate from the pack with unique messaging and materials.

Q: What should the ideal marketing solution include?

JULIE QUINN: The ideal mortgage specific marketing automation solution must include:

>>The Right Mix of Print and Digital

>>Automated Loyalty Marketing

>>On-Demand Campaigns

>>Extensive Content Library

>>Comprehensive Marketing Compliance

>>Ability to Recruit & Retain Top Talent

>>Strong Partner Relationships

The ideal mortgage specific marketing automation solution delivers:

>>Increased Sales revenue

>>Increased Lead Generation

>>Improved Lead Nurturing

>>Improved Marketing Productivity

>>Improved Campaign targeting

The ideal mortgage specific marketing automation provides lenders with the ability to increase market share, stay legal and compliant, grow profitable relationships, protect corporate branding and attract and retain top talent within the organization.

INDUSTRY PREDICTIONS

Julie Quinn thinks:

1.) Lenders that best utilize the combination of print and digital will receive the greatest ROI from their marketing efforts.

2.) Consistency is critical to gain mind share of potential borrowers.

3.) Nurturing past borrowers will deliver referrals and repeat business in 2017.

INSIDER PROFILE

Julie Quinn oversees operations for TTP Enterprises covering the collection of client data through fulfillment of output. A significant portion of her duties include sourcing and implementing state-of-the-art print production equipment, software and processes. Julie has over 20 years of experience in commercial print, on-demand digital print, design, specialty binding, mailing services and all aspects of technology-based production. As a certified color and production design specialist for digital and commercial print, Julie brings TTP Enterprises the unique ability to provide high quality and consistent print production to our customers.

Progress In Lending
The Place For Thought Leaders And Visionaries
WEB-TME417-Audit Feature Art

Are You Ready For A CFPB Audit?

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On July 21, 2010, President Barack Obama signed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Among other things, Dodd-Frank established the Consumer Financial Protection Bureau (“CFPB”), an independent government agency under the control of the Federal Reserve and charged with “conduct[ing] rule-making, supervision, and enforcement of Federal consumer protection laws.” Today the problem for the CFPB is that it has been overly effective at that job. There is clear political push back from financial service entities that feel the regulatory environment has become so tight and expensive that normal business operations are unduly constrained. According to a memo that emerged in early February, Jeb Hensarling, the Texas Republic who heads the House Financial Services Committee, has determined to move forward with legislation to weakening the CFPB and its enforcement powers. The basic fact, however, is that the opponents of the CFPB haven’t provided many details about how they envision what comes next. While future rule making could well be curtailed, the rules that are now in place will very likely continue to be aggressively enforced by an existing bureaucratic structure that resents having its powers curtailed.

The 924 page CFPB Supervision and Examination Manual has prompted much hand-wringing within the leadership ranks of those “supervised entities” subject to CFPB enforcement, namely depository institutions and non-depository consumer financial services companies. This article assumes that examination and enforcement will proceed unabated and is intended to illustrate ways to mitigate enforcement risk within those organizations.

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An Overview of the Examination Process

A CFPB examination process generally involves an on-site visit lasting approximately 4 to 6 weeks. An attorney from the CFPB may be present in addition to the examiners.

The examination centers around nine modules: 1) Entity Business Model; 2) Accuracy of Information and Furnisher Relations; 3) Contents of Consumer Reports; 4) Permissible Purposes and Other User Issues; 5) Consumer File and Score Disclosures; 6) Consumer Inquiries, Complaints, and Disputes and the Reinvestigation Process; 7) Consumer Alerts and Identity Theft Provisions; 8) Prescreening, Employment Reports, and Investigative Consumer Reports; and 9) Other Products and Services and Risks to Consumers.

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While future rule making could well be curtailed, the rules that are now in place will very likely continue to be aggressively enforced.

Although the CFPB has published an examination manual, one would be wise to focus on the “concepts” or those areas of particular concern to the CFPB.

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The stated objectives of the examination are to “evaluate the quality of a supervised entity’s compliance management systems …”, “identify acts or practices that materially increase the risk of violations of federal consumer financial law, in connection with consumer reporting …”, “gather facts that help determine whether a regulated entity engages in acts or practices that violate the requirements of federal consumer financial law …”, and “determine, in accordance with CFPB internal consultation requirements, whether a violation of federal consumer financial law has occurred and whether further supervisory or enforcement actions are appropriate.”

1.) Preparing For The CFPB Audit

Ever wonder why open book tests seem to be the most difficult? Perhaps because there is such a large volume of information but only a few isolated concepts are tested. Although the CFPB has published an examination manual, one would be wise to focus on the “concepts” or those areas of particular concern to the CFPB. For example, consumer protection – not profitability – is a particular concern for the CFPB. If organizational decisions or operations can be viewed as sacrificing consumer protection for profitability, an audit examiner will take notice.

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Generally, CFPB investigations begin with a Civil Investigative Demand (“CID”) addressed to an organization requesting various documentary material, tangible things, written reports, answers to questions, or oral testimony. See CFPB Rules Relating to Investigation, 12 CFR 1080.1, et. seq. (“Rules”). The following checklist is not exhaustive, but can help prepare you for the road ahead.

2.) Take a Deep Breath. You Can Do This.

>>Know that some organizations have done well on CFPB audits. So can your organization with adequate planning and implementation.

>>Assemble a Compliance Team.

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In short, organizational and loan compliance begins with the loan application. Time wisely spent on your organization’s policies and loan document systems pays large dividends.

Proactively creating best practices within your organization, supported by knowledgeable professionals, are paramount in mitigating lender risk of non-compliance or adverse findings.

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>>Begin to set aside the time, human capital, and financial resources to adequately prepare for an audit. Set aside amounts vary by organization, but are well worth the investment.

>>Internally, identify critical compliance management, operations, and IT personnel. Appoint a project manager (presumably, the Chief Compliance Officer) who will have direct responsibility for the audit process.

>>Externally, identify third party audit companies and attorneys who will provide compliance audits and/or legal advice relating to CFPB requests for documents and overall legal defense. Discuss with an attorney the need for legal representation before, during, and after the audit. Know that examinees also have rights that should be protected and deliverables that can be negotiated with the CFPB.

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>>Ensure that your compliance team does not report to the business unit. This will allow the compliance team to perform independently and avoid any appearance or accusation of undue influence.

>>Stress test and train. Identify strengths and weaknesses. Focus on –and commit to writing—a plan to address and mitigate weaknesses.

>>Prepare critical employees for side-by-side sessions with a CFPB examiner. Use a neutral third party to conduct the training.

3.) Devise a Process to Isolate and Transmit Reliable Data.

>>Work with internal IT to identify Electronically stored information or “ESI” (defined in the Rules as any information stored in any electronic medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form).

>>Understand what data can be converted, stored, and/or transmitted. Address technical issues and move toward the capability to be able to deliver ESI within 30 days of a request.

>>Use sample transmissions to ensure the data will reach and be usable by the end user.

4.) Review and Test Policy and Procedures.

>>Be prepared to provide written policy and procedures for every process in the organization.

>>Evaluate internal controls to ensure that daily operations are in sync with written policy and procedures. If not, revise policy and procedure to coincide with business operations.

5.) Capture and Resolve Consumer Complaints.

>>Develop a method for obtaining and reviewing consumer complaints.

>>Document the handling and resolution of all consumer complaints.

>>Ensure that organizational documentation reflects that consumer complaints are handled timely and efficiently. If not, make necessary changes to correct the problem.

Inconsistency and the lack of organizational cohesion are easy targets for an examiner. With the proper plan and demonstrated action, any organization can avoid these pitfalls.

Penalties For Non-Compliance or Adverse Findings

The CFPB has authority to assess a range of penalties for noncompliance with Federal consumer financial laws. Although they exclude the imposition of punitive and exemplary damages, the remedies available to the CFPB are significant. See Dodd-Frank § 1055, codified in 12

USC § 5565.

1.) Administrative proceedings or court actions. A court (or the CFPB) can bring an action or proceeding to address the violation of any consumer law. Any of the following legal or equitable relief may be imposed, without limitation:

>>rescission or reformation of contracts;

>>refund of moneys or return of real property;

>>restitution;

>>disgorgement or compensation for unjust enrichment;

>>payment of damages or other monetary relief;

>>public notification regarding the violation, including the costs of notification;

>>limits on the activities or functions of the person; and

>>civil money penalties.

2.) Recovery of costs. The CFPB, State attorney general, or any State regulator is entitled to reimbursement of its costs after winning an action to enforce any Federal consumer financial law.

3.) Civil Penalties. Monetary penalties issued by the CFPB are assessed according to the following tiers and are adjusted periodically for inflation. See 12 CFR § 1083.1.

>>Tier 1=$5,526 for each day a violation continues or remains unpaid. This applies to any violation of a law, rule, or final order or condition imposed in writing by the Bureau.

>>Tier 2= $27,631 for each day for a person who recklessly violates a Federal consumer financial law.

>>Tier 3= Up to $1,106,241 for each day for any person that knowingly violates a Federal consumer financial law.

4.) Notice and hearing. No civil penalty may be assessed under this subsection with respect to a violation of any Federal consumer financial law, unless i) the CFPB gives notice and an opportunity for a hearing to the person accused of the violation; or ii) the appropriate court has ordered such assessment and entered judgment in favor of the Bureau.

Civil fines obtained from administrative or judicial actions are collected and held in a civil penalty fund that will either distribute payment to victims or fund consumer education and financial literacy programs. http://www.consumerfinance.gov/pressreleases/the-cfpb-issues-civil-penalty-fund-rule/

Mitigating Lender Risk Requires Proactive Efforts

In the broadest sense, mortgage compliance takes two forms: organizational compliance and document compliance. The former generally references those policies and procedures implemented by your organization and governing loan officer compensation, scheduled time delays by which your organization issues disclosures and related material upon receipt of a loan application, and loan products marketed to differing locales, to name a few. Document compliance generally refers to inclusion of particular fonts and/or point types as may be required in the loan documents by the particular jurisdiction, inclusion of certain required language defining the borrower’s rights in the loan documents, or other legal mandates governing APR, points and fees, and the like.

While a CFPB examination is intended to address both areas of compliance, loan level data review comes from the compilation and analysis of those hundreds of data points assembled while building the document and/or disclosure package. Make sure the calculations, content, real time updates based upon changes to the law, and internal loan tests (to name a few) are appropriately represented and warranted by the document provider or the law firm preparing the documents.

In short, organizational and loan compliance begins with the loan application. Time wisely spent on your organization’s policies and loan document systems pays large dividends in preparation for the regulator’s arrival.

Conclusion

While news of an impending audit can instantly increase one’s anxiety level, it is important to remember the three main principles that guide the audit process: 1) “we will focus on an institution’s ability to detect, prevent, and correct practices that present a significant risk of violating the law and causing consumer harm;” 2) “the supervision function [of the CFPB] rests firmly on analysis of available data about the activities of entities it supervises, the markets in which they operate, and risks to consumers posed by activities in these markets;” and 3) “In order to fulfill its statutory mandate to consistently enforce Federal consumer financial law, the CFPB will apply consistent standards in its supervision of [depository and non-depository] entities, [using] the same procedures to examine all supervised entities that offer the same types of consumer financial products or services, or conduct similar activities.”

The first word of the Consumer Financial Protection Bureau is Consumer, which is that organization’s first priority. Proactively creating best practices within your organization, supported by knowledgeable professionals, are paramount in mitigating lender risk of non-compliance or adverse findings. At the same time, you are demonstrating a commitment to protect the consumer (and your borrower), which is the resounding principle of Dodd-Frank.

About The Author

Christina Jenkins
Christina Jenkins is an Attorney and Director of Customer Service for the Middleberg Riddle Group in Dallas, Texas, where she oversees day-to day loan document preparation and provides legal counsel to mortgage lenders. Before becoming a lawyer 10 years ago, she held various positions from origination to servicing- in loan operations for two large national banks, a small community bank, and a large non-bank mortgage lender.
YourVoice

The LOS That Does It All

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When we were evaluating a mission critical application such as a loan origination system (LOS), it was important the LOS vendor could provide configurable and customizable functionality to fit our specific lending needs. I’ve been working with my current loan origination system for five years and we are extremely happy with the features and benefits that it provides for my institution.

Today, we offer standard conventional mortgage loans including fixed and adjustable mortgages and HELOC products.

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One of the advantages of being a Community Bank is we don’t have to follow a standard “cookie cutter” process where “one size fits all” like many large lenders are forced to follow. Consequently, we configured our LOS platform to meet our lending policies and at the same time eliminated ALL manual processes. We don’t have to change our policies and procedures on the fly to get the loan through the system. In my experience, it is better when the “tail isn’t wagging the dog”.

From a lenders’ stand point, we value the ability to create our own customized workflow within the system. Our LOS software vendor asks us how do we process loans instead of them dictating to us “what to do” and ”how to do it.” Our goal was to find a LOS platform that allows us to conduct business “our way” but at the same time properly meet the state and federal lending guidelines. We also were looking for a LOS platform that helps us measure risk and address our internal policies and procedures. For example, when Real Estate owned schedules are generated, we want to calculate the schedules based on our internal underwriting policies.

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Our LOS software vendor asks us how do we process loans instead of them dictating to us “what to do” and ”how to do it.”

One of the advantages of being a Community Bank is we don’t have to follow a standard “cookie cutter” process where “one size fits all” like many large lenders.

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There are always many hesitations with implementing new technology. Our LOS vendor did an excellent job assisting us with transitioning from our prior LOS to our current LOS.

We actually killed two birds with one stone. Two of our goals were to eliminate duplicate data entry and improve data integrity. As a result of implementing our current LOS platform, we considerably minimized data entry mistakes and improved the quality of our borrower data because three or four people no longer have to enter the same piece of information at multiple data entry points. This greatly increased productivity and ensured accountability.

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As a result, we are extremely confident our HMDA LAR is accurate because we eliminated double data entry and we use data integrity functionality (i.e. “required fields” feature) which forces end users to enter critical information required to process a loan. Borrower data is being pulled directly from the loan database and we can track who is responsible for data entry and track ownership. Ever since being able to do this, submitting the HMDA LAR is exactly as it should be; a non-event.

When we sell a loan, we can create a ULDD file directly out of our LOS or we can go into a secondary loan sale platform, type in the same information, make mistakes and not have the information match what’s in the loan origination system. We worked closely with our LOS vendor to create the ULDD files to get that properly configured for loans we sell to the secondary market. While doing this, there was another community bank, probably 2 or 3 weeks ahead of us in the ULDD implementation process for our LOS, so they paired us up so we could talk to each other about what our current challenges were, how we addressed them, and what we should have we done differently which was very helpful to both of us.

Over the past five years working with our current LOS, one of the greatest efficiencies is the “embedded” printing capability that is included in our LOS platform. This allows us to print ANY loan document at ANY time during the lending cycle phase without having to leave the LOS platform. I know other LOS platforms rely on 3rd party Doc Prep providers which adds additional costs and time. With our current LOS, all loan documents can be printed directly from our LOS platform without depending on a third-party document prep provider.

Another advantage of having an embedded printing capability is we don’t have to worry about using a 3.2 Fannie Mae Case file which many LOS depend on when creating documents. If your LOS depends on a third-party document prep system, the steps include exporting the 3.2 Fannie Mae Case file and then importing (transferring) the 3.2 Fannie Mae file into another system. However, you always worry if the mapping is accurate. If mapped incorrectly, this is a recipe for disaster. Instead, it is better to have all loan documents generated directly from the LOS.

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There are always many hesitations with implementing new technology. Our LOS vendor did an excellent job assisting us with transitioning from our prior LOS to our current LOS.

If data elements are not properly mapped to third-party doc provider platforms, the final output will not be accurate.  This can lead to regulatory issues and/or costly fines.

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It’s critical that your LOS creates the Loan Estimate (LE) and Closing Disclosure (CD), which are somewhat different than your typical loan documents. Generating an LE or CD from a third-party document provider exposes the bank to more risk. If data elements are not properly mapped to third-party doc provider platforms, the final output will not be accurate.  This can lead to regulatory issues and/or costly fines.

Regarding HMDA, we can easily pull a HMDA LAR directly from our loan origination system. Even though we don’t utilize the system to process our commercial loans, we worked with the LOS vendor to configure the ability to capture and report HMDA data points for Commercial Real Estate Loans. This is a very important capability especially with all the new HMDA changes coming in 2018.

Regarding reporting, we are fortunate our LOS has excellent standard and AD-HOC reporting capabilities. We can select, sort and print any field on a report. When I first started working for my bank, no one had a lead role in managing the system so the loan process took a long time to complete. When I stepped in, I worked with our LOS vendor to help us create turn time reports to show how long each step in the loan process was taking. We wanted to measure productivity and this report showed us how we could consolidate time to shorten the lending approval process. Once we produced this report, we gathered useful business intelligence, which helped us reduce timeframes and create better efficiencies from start to finish.

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We have automatic reporting scheduling capabilities, which means we can generate and distribute reports automatically during off hours. In addition, we can convert ANY report into different 15 different formats including delimited file, Excel, .pdf, HTML, etc. It’s one of the most robust reporting systems we’ve ever used.

From a support perspective, I truly enjoy the online ticketing system that our LOS vendor utilizes. The system allows me to create a ticket, go back and search old and closed tickets, easily communicate back and forth regarding issues, and ensure all information is confidential and secure. In the ticketing portal, there is a community of users where we can share ideas and best practices based on our individual experiences. In the past I’ve seen this handled through email chains, which is tremendously inefficient. Our LOS vendor also provides online chat, which saves time. But of course, they also provide old fashioned “phone support” when the need arises to talk to a support representative.

Because of these efficiencies……….everyone on the residential lending team is able to work effectively and accountably. We are able to smoothly process, underwrite and close loans. The first year our LOS system was up and running we were able to have clear direction and tasks for each step of the loan process which resulted in a first year increase of over 200% in residential loan origination volume.

About The Author

Michelle Gately
Michelle Gately is Vice President – Lending at Middlesex Federal Savings, a full service community bank that understands the importance of local decision making. For more than 125 years, the bank has built strong, long-term personal and business relationships with neighbors throughout the great Boston community. Michelle has more than 30 years of industry experience including origination, underwriting and compliance. She manages the Bank’s residential lending origination, underwriting, closing and secondary market efforts.
RecoveryTips

Not The ROI You Expected?

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Are you achieving the operational efficiency gains and ROI expected from the document management tool included with your loan origination system (LOS)?

In today’s highly competitive mortgage market, lenders are forced to deal with rising costs to originate loans, the need to minimize risk, and are compelled to respond to constantly changing regulations. This puts intense pressure on lenders to seek out ways to gain efficiency while reducing costs and minimizing risk.

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The right document management and delivery solution automates business processes throughout every step of the mortgage lending process, resulting in increased operational efficiency and enterprise-wide cost savings.

To respond to this need in the marketplace, many LOS providers have private labeled or bolted on document management tools to their LOS, but expectations don’t always match reality. While this was often done to “check a box” on a RFP and appease lenders, many lenders quickly realized that what they were getting from their LOS-provided document management tool did not provide the efficiency and competitive capabilities they had hoped for.

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Many LOS providers have private labeled or bolted on document management tools to their LOS, but expectations don’t always match reality.

Not all document management and delivery solutions are created equal, nor do they provide the same level of ROI.

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LOS providers have a hard enough time maintaining their core technology and meeting constantly changing regulations and delivering advancements to the LOS. As a result, most LOS providers fall short in delivering document management capabilities that yield high levels of efficiency.

On the other hand, an independent document management company solely focuses on what it does best, which is to develop and provide innovative, feature-rich enterprise document management and delivery solutions that incorporate best practices and years of experience. As a result, operational efficiency gains and ROI are delivered throughout the entire mortgage operation and beyond.

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Not all document management and delivery solutions are created equal, nor do they provide the same level of ROI. When comparing document management solutions, let’s look at a number of key features that will impact your ability to maximize cost savings, minimize risk across the organization and produce the greatest efficiency gains.

Let’s start with the ability to quickly and precisely deliver loan files and data electronically to investors, HUD for FHA insuring, servicers, subservicers, QC firms and MI companies.

LOS-provided systems require lenders to create and manage their delivery “bundles” which takes time to set up, adding manual work to the back office staff.  In addition, many LOS-provided systems do not include one-click delivery; instead lenders have to create a PDF “bundle” for each loan and then upload the PDF. This creates multiple unneeded steps, is more error prone and creates inefficiencies in the process.

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Lenders that take the time to explore the benefits of independent document management and delivery solutions realize significant efficiency gains.

The right independent document management and delivery solution includes an integrated electronic loan delivery application.

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The right independent document management and delivery solution includes an integrated electronic loan delivery application with the following capabilities:

>> Preconfigured delivery profiles that meet each recipient’s specific requirements and desired stacking order.

>> Secure, one-click delivery to each recipient’s server.

>> Notifications and alerts when required documents are missing.

>> Ability to preview loans in the recipient’s stacking order prior to delivery.

>> Real-time delivery status monitoring and audit reporting.

>> Single loan or bulk loan delivery.

These must-have capabilities maximize lenders’ secondary market execution and significantly minimize suspense issues and lock expiration penalties.

Another area that is typically lacking in the LOS-provided system is the use of optical character recognition (OCR) to automate document identification and indexing. The right independent document management solution leverages integrated, full text OCR of structured, semi-structured and unstructured documents.

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In addition, lenders can request an independent document management provider to “train” their unique, custom documents and program-specific documents so the OCR technology can correctly identify and file the documents. This eliminates time spent by lenders’ staff repeatedly naming and indexing their unique documents.

Another point of differentiation is LOS-provided systems typically have limited methods for document upload and capture. The right independent document management and delivery solution provides multiple methods for document upload and capture, including drag and drop, virtual printing, email tools, web portals and automated batch import of documents (e.g. appraisals) to all participants in the loan lifecycle, saving lenders time and money.

Many LOS-provided systems have a narrow set of acceptable file formats. Whereas, the right independent document management solution provides support for a wide array of file types that can be stored in their native format.

The advantages don’t end with the superior functionality provided by the right independent document management solution. For LOS-provided systems, the story usually ends with residential lending.  But if you truly want to experience increased operational efficiency and enterprise-wide cost savings, shouldn’t the use and functionality of document management technology extend to all lending areas and business processes within the financial institution?

Enterprise use of an independent document management and delivery solution supports any paper-intensive process and can be used for Servicing, Commercial Lending, Consumer Lending, Human Resources, Accounting, Policies and Procedures, Marketing, and Contract Management to name a few.

In addition to the numerous examples that have been discussed to help you make a more informed decision between a LOS-provided document management system and a “best of breed” independent document management solution, here are some additional big picture items that significantly impact your risk and long-term efficiency gains.

When viewing this decision holistically, it is critical to understand the impact that working with a provider whose core competency is LOS technology vs. Document Management.  Which provider has the knowledge, expertise, and experience to truly deliver the cost savings that document management can provide to your entire organization?

When the technology being used was not created by the LOS, but instead is private labeled vs. being created by the independent document management and delivery solution, who is better able to provide superior customer support?

Who is better equipped to make needed and timely updates to the solution?  Which provider is solely focused on the document management solution vs. which provider is trying to implement all the regulatory changes required in the LOS and doesn’t have time to make document management enhancements in a timely manner?

In today’s mortgage market, speed, operational efficiency, and access to information is critical, especially when responding to changing market conditions while trying to gain a competitive advantage.  Therefore, performance and speed should factor into your document management decision.  Many SaaS LOSs slow down or bottleneck at certain points during the day or most critically, at month-end.  What impact will this have on your productivity and business?

What happens if/when you replace your LOS? In fact, this happens quite often according to the STRATMOR Group, which shared highlights from its 2016 LOS Technology Insight Survey, gauging lender satisfaction with their loan origination systems (LOS). As Senior Partner Dr. Matt Lind explains, “despite the incredible operational disruption that comes hand in hand with a system change, 30 percent of lenders said they were not satisfied with their LOS, an increase from 28.7 percent in 2015. Of these, 19 percent are actively seeking a replacement for their current system and 11 percent are already in the process of implementing a new LOS, regardless of the fact that such a change can consume significant resources and disrupt an otherwise thriving mortgage origination platform.”

If your document management system is tied to the LOS-provider, when you change your LOS, you also will have to completely replace your document management system and processes adding significantly more disruption and definitely more cost. Some companies experience hostage type negotiations just to get their loan data.  Consider that headache doubled if you have to negotiate for your digital loan files as well.

If you change your LOS, and your independent document management and paperless process remains the same, you will experience significantly less change management, little to no disruption to mortgage operations and greatly mitigate organizational risk.

Lenders that take the time to explore the benefits of independent document management and delivery solutions realize significant efficiency gains and increased ROI, while simultaneously enhancing their ability to mitigate risk.

About The Author

Cy Brinn
Cy Brinn is President of VirPack, McLean, Va., a provider of document management and delivery technology to the mortgage banking and financial services industries. He has been involved in creating and delivering innovative technology for residential and commercial mortgage origination and servicing since 1986. He can be reached at cy.brinn@virpack.com.
WEB-TME417-Trump Feature Art

What Should Trump Do About The GSEs?

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Great news! It was announced that the housing market has fully recovered from the debacle of the Great Recession. While good for the housing industry as a whole, the better news for mortgage lenders is the elimination of any new regulations.  Having dealt with two of the most difficult fallout of the crisis can we now wipe our hands of the problem and get back to running business the way we did prior to 2004? Well, not quite. There is still the issue of Fannie Mae and Freddie Mac to address.

Everyone, including consumers, is aware that these entities were up to their eyeballs in the lending programs between 2004 and 2008. Despite the fact that they each provided an AUS for use by lenders, the rules were written so that it would basically approve every loan submitted. Staying competitive seemed to be the only criteria. Their punishment however was slightly different. They were taken into government conservatorship after being bailed out by the federal government. And here they have remained. But now it seems that the time has come, or the industry has determined that it is time to finally resolve this problem. So what’s to be done and when.

The interest in answering this question seems to have generated a number of ideas about what to do and when to do it. For example, on a recent conference call one speaker, when asked about the GSE’s situation stated that he did not see any political catalyst to do anything at the present time. One of the primary reasons is the belief that the FHFA and its director, have a reasonably well run organization which allows for a delay in any action. He went on to say that while some changes in the charter and mandate are likely to occur, the issue of repaying taxpayers the $187B owed by them has to be addressed.

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Prior to these statements, articles in industry magazines were suggesting that there seems to be some disagreement on exactly what to do with the GSEs. While most agree that there is a continuing need for the government to be involved in the secondary market, whether this is the current GSEs or some other type of entity seems to be at the heart of the debate. One popular idea is to create a public utility with government control of all fees and charges through regulation. Paramount in this approach is the expectation that this entity will continue to offer access to all lenders and provide them with equal pricing.

With one of the GSE mandates being to provide affordable housing options to working class families, those involved in organizations that monitor this also want to ensure that this focus continues. However, based on the latest HMDA data, which shows that the greatest correlation to denials for non-white, Hispanic males or females was whether they were to be sold to one of the GSEs. This issue will continue to be burdensome to the agencies and despite the fact automated systems will continue to evolve, the on-going use of rules-based algorithmic models will do nothing to ensure the viability of any lending program, especially for these affordability issues. One thing seems consistent through all of these discussions. In whatever structure this government involvement takes place, it cannot be allowed to pose such an enormous risk to taxpayers again, nor can it ever again place the broader financial system at the level of risk it did during the Great Recession.

Another voice in the on-going discussion of what to do with Fannie Mae and Freddie Mac is the Mortgage Bankers Association (MBA) who recently published an introduction of its forthcoming proposal for addressing this issue. Based on the document it is clear they support a new secondary market approach. This initial document places an emphasis on the role of the federal government and the necessity of preventing this new “market” from fluctuations due to political turmoil, favoritism and/or changing administrations.

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The GSEs cannot be allowed to pose such an enormous risk to taxpayers again, nor can they ever again place the broader financial system at the level of risk it did during the Great Recession.

While most agree that there is a continuing need for the government to be involved in the secondary market, whether this is the current GSEs or some other type of entity seems to be at the heart of the debate.

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The focus of any congressional actions, according to the MBA position, should be to promote liquidity that stimulates investor purchases of mortgage-backed securities and prevent the taxpayers from taking on the risk of these securities. There are four critical elements they have identified that they believe must be part of any long-term solution. These include establishing the value of combining competition and regulations; providing equal access for all lenders regardless of size or structure; enhancing their current public mission for promoting affordable housing and finally, to maintain the level of liquidity for both single and multi-family housing. Furthermore, the MBA has included in this statement support for allowing the creation of additional privately owned entrants to compete with the reformed Fannie Mae and Freddie Mac.

These entities, including the new Fannie Mae and Freddie Mac would be organized as private utilities with a regulated rate of return and a public purpose of providing credit to the conventional mortgage market. In addition to this “end state,” MBA has identified a series of “Guardrails” that must be implemented to reinforce this new mandate. Among these are such standards as the maintenance of a “bright line” between the primary and secondary markets; these utility companies must be standalone to prevent any undue influence (such as those from big banks) and the resulting utilities should be regulated as a Systemically Important Financial Institution (SIFI).

So, What’s Missing?

Although these ideas and discussions are preliminary presentations of the more in-depth concepts discussions and legislative actions to come, the common thread in all the current offerings is the focus on Fannie Mae and Freddie Mac’s role in a new secondary market functionality. Emphasis has been placed on the idea that these new utilities will be aggregators of conventional single family and multi-family loans. So, where does that leave the other activities of that these agencies now control?

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One of the most obvious is that of creating and administering credit policy. While one of the “guardrails” listed in the MBA’s GSE Reform Principles and Guardrails, released on January 30, 2017, is the operation and management of “…the government’s QM-like single family eligibility parameters…”. What is not clear is whether the credit policies to be put in place will be unique to each utility or whether there will be one set of guidelines for everyone. One question left unanswered is whether the QM exception in place today will remain past the current stated end date.

As everyone is aware today, Fannie Mae and Freddie Mac compete through the variations in these guidelines, even to the point of differing calculations for determining income for rental properties. If this level of diversity in guidelines was to exist in several different utilities, it seems likely that it would cause confusion as well as set up any number of these entities to take risks that are would not be acceptable. Furthermore, the ATR/QM standards are the result of the CFPB regulations that the current administration as well as congressional opponents have vowed to eliminate.

In addition to these problems, while Fannie Mae and Freddie Mac have as a foundation of their charters the requirement that they expand homeownership opportunities for potential borrowers requiring more affordable housing, the reality is that this has not occurred. All one must do is review the past year’s HMDA data, including 2015, to see that the denials for non-white, Hispanic, men and women are most highly correlated to the intent to sell the loan to Fannie Mae or Freddie Mac. So, the question remains, if the current guidelines are failing to produce the results required of these agencies, how does adding more of the same expand that opportunity? On the other hand, will the emergence of very divergent guidelines individualized from each utility cause too much confusion and misdirection for the industry to handle?

Another expensive and antiquated program that are part of the agency requirements is Quality Control. Following the mortgage meltdown and the abundant evidence that quality failures were a direct cause of the mortgage failures, both agencies introduced loan quality initiatives. Unfortunately, these programs did not address the primary issues of ensuring the processes that produced these loans were under control, but continued to rely on controlling each loan through an inspection process both before the loan went to funding as well as afterward.

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Despite the fact automated systems will continue to evolve, the on-going use of rules-based algorithmic models will do nothing to ensure the viability of any lending program.

The issue of what to do with Fannie Mae and Freddie Mac will continue to play out for some time to come.

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While the intent to “discover” problems prior to funding was a noble effort, the result has been companies implementing 100% reviews on approved loans without a clear understanding of what to do with the results, how to cure many of the problems or obtaining updated information. Furthermore, the post-closing QC still occurs 90 days after the loan is closed and the sampling programs acceptable remain biased and the results incomprehensive.   To add insult to injury, these additional reviews double the cost while adding little if any, value.

With the adaptation of multiple utilities will the existing QC requirements remain, will each aggregator have the option to determine how they expect this analysis process to be completed or will every lender can design their own? Regardless of how it plays out, the value of quality control can be added in by ensuring that pricing reflects the product quality sold.

Last, but not least is the issue of compliance with regulatory requirements. Up to this point the GSEs have deliberately avoided evaluating individual compliance to regulations. While there are some valid reasons for this approach, with the new utilities, will this continue or will utilities decide to become involved with this process.

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The issue of what to do with Fannie Mae and Freddie Mac will continue to play out for some time to come. However, forward thinking originators and servicers will also be scoping out how any of these options can impact their business and be prepared when it does happen.

About The Author

Rebecca Walzak
rjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak, a leader in operational risk management programs in all areas of the consumer lending industry. In addition to consulting experience in mortgage banking, student lending and other types of consumer lending, she has hands on practical experience in these organizations as well as having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.
ProcessImprovement

A Time To Reflect

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In covering the mortgage space for more years then I’ll admit, I’ve always been concerned about how slowly this industry moves. In addition to moving slowly there’s this follow-the-neighbor mentality whereby lenders are hyper focused about what other lenders are doing because they don’t want to go first when it comes to doing anything new. There’s no self reflection it seems. If you’ll stick with me, I’d like to share this blog written by the head of my son’s school where he talks about the importance of self reflection:

“We focus on the outside world in education and don’t look much at inwardly focused reflective skills and attentions, but inward focus impacts the way we build memories, make meaning and transfer that learning into new contexts. So what are we doing in schools to support kids turning inward?”said Helen Immordino-Yang, Professor of Education, Psychology and Neuroscience, University of Southern California.

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“Here at Wooster School, reflection is a big part of what we do because we agree with Dr. Immordino-Yang, and understand that we learn more, and forget less, when we’ve had a chance to “think again,” “mull it over,” or even “sleep on it.” Like many an old adage, these express something we’ve always known to be true, but now also have the science to back up. Ever more frequently our teachers are providing the time for students to reflect in class, and are asking them to do so in many different ways. We take this time because we know that when done consistently and well it helps the learning stick.

“According to an article about Dr. Immordino-Yang’s and her research published by the Association for Psychological Science, “when children are given the time and skills necessary for reflecting, they often become more motivated, less anxious, perform better on tests, and plan more effectively for the future. And mindful reflection is not just important in an academic context – it’s also essential to our ability to make meaning of the world around us. Inward attention is an important contributor to the development of moral thinking and reasoning and is linked with overall socioemotional well-being.”

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As you develop self awareness when it comes to your total business, you become better able to make changes.

Now that lenders have begun to get a handle on their TRID-related defects, they should have more capacity to address other defects.

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“At Wooster School, we aren’t just talking about how schools can do a better job preparing our students to be better thinkers, learners, and people — or nibbling around the edges of the same old curriculum with the same methodologies — we’re taking the science and putting it into action. Our Days of Reflection, like the one we are having this year, are an opportunity for students and faculty to reflect together about some bigger picture goals related to skill and disposition development. They are also a great time for community dialogue about our shared struggles and successes. As faculty members, we are always impressed with the depth of thinking that happens on these days, and how willing these digital natives are to slow down and think about their aspirations and progress. Students have fun with it, and they learn from it. They also like the crumbcake we serve. And yes, I’ll have a big piece too. As I said, no nibbling around here.”

Why did I share that blog? Well, I thought it would be educational. It was interesting to me that an educator was talking about the power of reflection and critical thinking. I’m just not sure that goes on too much in mortgage lending, and that’s a shame.

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Case in point, the industry had a knee-jerk reaction to the recent TRID requirements. Instead of reflecting on how to make the entire mortgage process better, most lenders were just looking to comply with the rule and some were totally dependent on their LOS to ensure compliance. That’s not how it should be, and the results reflect the industry’s poor efforts.

ARMCO reported that after peaking in Q1 2016, the overall industry critical defect rate dropped to 1.63 percent in Q2, ending an upward trend spanning the previous three quarters. Defects in the Legal/Regulatory/Compliance category also waned in Q2, comprising 34 percent of all defects reported and marking the first decline in nine months. However, this category still represents the largest reported defect category.

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As an industry, we all have to be more self aware so we can adapt to constant change.

While TRID-related defects are still driving the majority of Legal/Regulatory/Compliance defects, we’re seeing a decline in defects in this category.

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“While TRID-related defects are still driving the majority of Legal/Regulatory/Compliance defects, we’re seeing a decline in defects in this category as a result of corrective action planning lenders undertook through the first six months of 2016,” said Phil McCall, COO for ARMCO. “As lenders determine the most effective strategies for addressing TRID-related defects, we expect to see this category decline further.”

Loan Package Documentation defects increased slightly in Q2, accounting for 26.7 percent of reported defects in Q2 versus 26.4 percent in Q1. Also of note is the increase in defects reported in credit-driven categories in Q2. Income/Employment leads this group as the third most frequently reported defect category in Q2 at 9.8 percent, followed by Borrower and Mortgage Eligibility at 8.9 percent and Assets at 6.8 percent.

“Given the magnitude of compliance-related defects lenders were facing in Q1, it’s not surprising to see upticks in other areas,” said Avi Naider, CEO for ARMCO. “Now that lenders have begun to get a handle on their TRID-related defects, they should have more capacity to address those credit-related defects. Thus, we should see those categories normalize in Q3.”

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See what I mean? It took the industry so long to comply with TRID before they finally turned to a smarter, more automated approach that is just now driving down TRID-related defects. I have two questions: Why did it take the industry so long to get to this point? Why are TRID defects still high? The answer is simple: There is a lack of true self reflection.

As an industry, we all have to be more self aware so we can adapt to constant change. When you think about it, self awareness is about having a clear perception of your personality, including strengths, weaknesses, thoughts, beliefs, motivation, and emotions. Self awareness allows you to understand other people, how they perceive you, your attitude and your responses to them in the moment.

We might quickly assume that we are self aware, but it is helpful to have a relative scale for awareness. If you have ever been in an auto accident you may have experienced everything happening in slow motion and noticed details of your thought process and the event. This is a state of heightened awareness. With practice we can learn to engage these types of heightened states and see new opportunities for interpretations in our thoughts, emotions, and conversations. Having awareness creates the opportunity to make changes in behavior and beliefs.

As you develop self awareness when it comes to your total business, you are able to make changes in the thoughts and interpretations you make. Changing the interpretations in your mind allows you to change your actions. Self awareness is one of the attributes of Emotional Intelligence and an important factor in achieving success.

Self awareness is the first step in creating what you want and mastering your business. Where you focus your attention, your emotions, reactions, personality and behavior determine where you go in life. Having self awareness allows you to see where you are and where you need to go. Until you are aware in the moment of your thoughts, emotions, words, and behavior, you will have difficulty making changes in the direction of your business. This industry has to be more self aware.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.
WEB-TME417-Appraisal Feature Art

Collateral Valuation: 10 Ways To Prepare For The Busy Season

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Appraisal turn times are longer and fees are higher in many areas of the country, and we’ve just barely begun the Spring buying season. Many lenders are scrambling to make sure they’re ready for an uptick in originations, and process and efficiency of operations can make a major difference to your bottom line.

In the mortgage industry, we almost always see an increase in activity in the Spring, and many analysts are predicting more activity than is usually forecasted for the Spring of 2017. When volume really heats up, it’s critical that your collateral valuation process can support your increase in production. If not, you will waste tremendous time in operations, you could delay closings, face disappointed borrowers, and even lose deals.

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You CAN be prepared and meet these challenges head on to really add significant value to your institution. There are powerful collateral valuation tools available that will help you stay ahead of your competition and power your operations to run more smoothly than they ever have before. You can be prepared for the busy season, and even be in a strategic position to support your growth moving forward. Here are 10 ways to streamline your collateral valuation and operations.

1.) Trade spreadsheets for software. If you’re still managing your collateral valuation operations with spreadsheets, consider using an appraisal management system. Change is always hard, but talk to some of your industry colleagues to get feedback on the right system for your institution. Don’t be intimidated by costs. Appraisal management systems typically charge on a per-order basis, so you only pay for what you’re actually using. Plus, many of these systems allow you to pass the software fee to your vendor, so you see all the efficiency benefits and aren’t actually paying for it. You may think spreadsheets are enough if your volume is fairly low, but you can get several more efficiency benefits out of your appraisal management system so take a look at this option before the Spring real estate market really heats up.

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In the mortgage industry, we almost always see an increase in activity in the Spring, and many analysts are predicting more activity than is usually forecasted for the Spring of 2017.

If you’re still managing your collateral valuation operations with spreadsheets, consider using an appraisal management system.

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2.) Get easy access to more than enough vendors so you’re covered. Whether you use appraisal management companies (AMCs) or appraisers directly, now is the time to make sure you have more than enough vendors to support you when things get busier. If you’re scaling up operations in specific regions of the country, plan ahead to make sure your valuation vendors are in place and can handle your assignments. If you’ve had trouble finding the right appraiser or AMCs in certain areas in the past, it’s time to beef up your pool of eligible vendors now so you’re not left without a vendor as your volume heats up.
Make sure you have the flexibility to easily add or swap vendors. In your appraisal management system, you should be able to place orders with either AMCs or appraisers, and you need the ability to quickly add new vendors to your system without hassles or delays.

3.) Monitor your vendors’ capacity so orders can be distributed and your turn times are faster. Your appraisal management system should provide a view into your vendor’s current workload so you’re not assigning orders to someone who is already overloaded. Sending the order to a vendor who is already at full capacity, or even late with some of your appraisal orders, will only delay your report. If they accept the order, you may be waiting longer than you prefer. If they don’t accept the order, you will have wasted that time up front, and have to start again by re-assigning to the next vendor in line and wait for them to accept or decline the order. This inefficient process can add days to your turn times at the beginning of the process, but there are many ways to mitigate these administrative delays.
Instead, you can use technology to automatically select multiple appraisers and contact them before assigning the order. This can get your appraisal started much faster since you will avoid assigning orders to vendors who can’t meet your turn time, only to blindly assign to the next in line, who may also be too busy. In this process of going from individual vendor to the next in line, you can waste days just trying to assign the order.

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4.) Use vendor ratings. Inside your appraisal management system, use the ratings system to grade each vendor after each assignment is delivered. It will only take a few seconds on each order if you’re using a simple star rating system, but it will give you a broad view of performance across multiple orders. You can use those ratings to more efficiently assign future orders, plus you could avoid a problem vendor with poor ratings and save valuable time by choosing a highly rated vendor instead.

5.) Check vendor performance data. Detailed statistics on vendor performance should be automatically tracked inside your appraisal management system. It’s important to take a few minutes to review these performance stats periodically and adjust your order routing accordingly. You can track acceptance rates, rework rates and several other metrics, plus revision turn times. Make sure your appraisal management system gives you easy access to these vendor performance statistics. Also, look for a platform that will deliver custom reports on the performance stats that mean the most to your operation.

6.) Make sure vendors are using technology to accelerate their turn times. Your appraisal management system provides powerful mobile tools to appraisers (for free) that can help appraisers manage orders and respond to you much faster. Mobile apps have proven to reduce order response time by ?, and they can cut a full business day off report delivery turn times. Since the mobile applications are free, make sure to encourage the appraisers in your fee panel to use the technology at their disposal to provide faster service.

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In less than 10 days, you can be in a much stronger and more strategic position to help your institution leverage the busy Spring mortgage markets.

If you want to take advantage of the busy season, it’s critical you have a collateral valuation plan in place to support your production team and your borrowers.

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7.) Integrate your appraisal management system with your LOS. This will save valuable time with several benefits. First, you will eliminate data entry mistakes that cause delays. Since order information flows directly from the LOS into the appraisal data, you won’t have to manually enter orders. Second, an integration with your LOS will give your staff a live status on their appraisal order. Instead of wasting your time with phone calls and emails asking for status, they can see exactly what’s going on with the appraisal right inside the LOS. Third, your staff will save valuable time since they’re not forced to log in to a variety of systems just to order an appraisal. If everything is handled from inside their familiar LOS, the valuation process can be simplified and accelerated significantly.

8.) Use a single dashboard to view all your collateral valuation operations. With a consolidated dashboard, you can view all your collateral valuation orders across all channels. These technology dashboards are easy to customize to suit your workflow and preferences, so processing and managing your operations is easier and must faster.

9.) Consolidate all valuation orders to one platform to save more time. If you’re ordering residential appraisal reports, QC reports, AVMs, commercial appraisals or AMC services from multiple websites, consider consolidating these orders to one technology platform. You can still use your preferred vendors, and you will save valuable time by avoiding multiple websites or processes. Your appraisal management system can serve as a single login for all your collateral valuation operations, and you gain a wide view of everything in your pipeline, rather than have it scattered on various vendor websites.

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10.) Automate vendor selection based on what’s most important to you. You can use your appraisal management system’s tools to customize criteria so the best vendors are suggested for each order. If you prefer a vendor be within a certain radius of the subject property, use technology to filter and show you only those eligible vendors. The automation options are endless, and you can easily filter vendors by their ratings, their turn times, on time percentage, quality ratings, professionalism ratings, order acceptance percentages and more.

If you want to take advantage of the busy season, it’s critical you have a collateral valuation plan in place to support your production team and your borrowers. To be prepared, it doesn’t take nearly as long as you might think. In less than 10 days, you can be in a much stronger and more strategic position to help your institution leverage the busy Spring mortgage markets.

About The Author

Patrick Scott
Patrick Scott is a Senior Sales Consultant for Mercury Network, a vendor management platform used by more than 700 lenders and AMCs. His appraisal management and compliance expertise spans smaller community banks and credit unions to the largest lenders and AMCs in the country. He consults with Mercury Network clients on appraisal workflow, compliance, and efficiency issues and he can be reached at Patrick.Scott@MercuryVMP.com.
BusinessStrategies

You Can Do Better

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What’s in a brand? A brand is the idea or image of a specific product or service that consumers connect with, by identifying the name, logo, slogan, or design of the company who owns the idea or image. Branding is when that idea or image is marketed so that it is recognizable by more and more people, and identified with a certain service or product when there are many other companies offering the same service or product.

Marketing professionals work on branding not only to build brand recognition, but also to build good reputations and a set of standards to which the company should strive to maintain or surpass. Branding is an important part of Internet commerce, as branding allows companies to build their reputations as well as expand beyond the original product and service, and adds to the revenue generated by the original brand.

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When working on branding, or building a brand, companies that are using web pages and search engine optimization have a few details to work out before being able to build a successful brand. Coordinating domain names and brand names are an important part of finding and keeping visitors and clients, as well as branding a new company. Coordination of a domain name and brand names lends identification to the idea or image of a specific product or service, which in turn lets visitors easily discovery the new brand.

Branding is also a way to build an important company asset, which is a good reputation. Whether a company has no reputation, or a less than stellar reputation, branding can help change that. Branding can build an expectation about the company services or products, and can encourage the company to maintain that expectation, or exceed them, bringing better products and services to the market place.

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Thanks to the Internet, your potential customers are being flooded with dozens — if not hundreds — of different buying opportunities every hour.

For your company’s branding to really work, it will need to be more than just a name.

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In the article entitled “6 Tips to Building a Stronger Brand Using New Media,” written by Margaret Garvin, she emphasizes that branding has always been important, but it’s never been as essential as it is now. Thanks to the Internet, your potential customers are being flooded with dozens — if not hundreds — of different buying opportunities every hour.

While quality, cost and execution will all play a role in a customer’s decision, trust remains the key way to win the sale. Branding is one of the most important things you can do to win trust, so it’s important you do it right.

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Here are simple tips for marketing your brand with new media.

Spend Moments On Execution, But Months In Prep.

For your company’s branding to really work, it will need to be more than just a name. A logo, tag line, tone of approach and color scheme can be important.

Consistency in these choices is just as important as the choices themselves. A decision to change any element of your business brand can undermine a lot of hard work, so be willing to take your time — months, if needed — to decide exactly how you want to present your brand.

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If you’re not consistent from site to site, customers won’t recognize your brand, won’t build trust, and your efforts will end up fairly impotent.

Branding is a constant effort that gets reinforced with every move you make, and doing so carefully is just one more aspect of “smart business.”

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Actionable tip: Consider creating a comprehensive brand uniformity guide where your branding elements will be standardized.

Monitor Your Brand-Related Queries.

Whatever people are searching about your brand on Google indicates what they think about it and, importantly, what problems they have. Moreover, if too many people are searching [your-brand-name scam], this phrase will show up in Google Auto-suggest results as others.

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Monitoring what people are searching and where your own site ranks for different search phrases is crucial. You can use various keyword research tools in combination with keyword position monitoring software.

Kiss Still Applies.

The famous battle cry of “keep it simple stupid” is thoroughly embedded in the jargon of every salesman. This lesson doesn’t start and end on the sales call, though. Simplicity has been shown to be more effective in branding efforts as well, especially since it makes your company more memorable.

Get Into Social Media and Interactive Content.

Facebook, Twitter, Instagram, LinkedIn, Pinterest, Ello . . . I could go on for hours. There are tons of social media sites, and people age 18 to 34 actually spend more time on these sites than they do watching TV.

Obviously, you need to get your company onto these sites; however, your work won’t end there. You need to post regularly, add valuable content and use as much interactivity as you can by putting out videos, interactive presentations, editable infographics, and so forth. Rich interactive designs have been the hottest trend for a few years now.

For instance, Target successfully reached out to college students with their “Made for U College Styler” and ServiceNow captured the attention of their target audience with an interactive quiz.

Interactivity doesn’t have to be expensive or complicated. Smartketer claims that something as simple as animating your banners can significantly improve your campaign performance.

Be Consistent With Your Branding.

Whatever the details of your company, you need to repeat yourself for your brand to stick. Did you catch that? You need to repeat yourself for your brand to stick.

If you’re not consistent from site to site, customers won’t recognize your brand, won’t build trust, and your efforts will end up fairly impotent. So, keep in mind: You need to repeat yourself for your brand to stick.

Brand consistency requires scalable team collaboration. Make sure you have tools in place for your whole company to be aware of your branding efforts.

When In Doubt, Hire Out.

How much is a good-looking logo worth to your company? What about the creation of the right tag line or company motto?

If you’re not sure you can come up with something really solid on your own, then employing a copywriter, graphic designer and brand strategist is a very wise move.

Branding is a constant effort that gets reinforced with every move you make, and doing so carefully is just one more aspect of “smart business.”

By being consistent, memorable, and just a little bit omnipresent, you can build a brand that separates you from your many, many competitors.

About The Author

Michael Hammond
Michael Hammond is chief strategy officer at PROGRESS in Lending Association and is the founder and president of NexLevel Advisors. They provide solutions in business development, strategic selling, marketing, public relations and social media. He has close to two decades of leadership, management, marketing, sales and technical product experience. Michael held prior executive positions such as CEO, CMO, VP of Business Strategy, Director of Sales and Marketing and Director of Marketing for a number of leading companies. He is also only one of about 60 individuals to earn the Certified Mortgage Technologist (CMT) designation. Michael can be contacted via e-mail at mhammond@nexleveladvisors.com.
MarketPulse

The Next Real Estate Boom

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A new white paper titled “Landlord Land” done by ATTOM Data Solutions and Clear Capital analyzes the “who” behind the recent real estate boom that has seen home prices reach near all-time highs nationwide even while the national homeownership rate remains near its 50-year low.

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“Though prices in several markets are nearing pre-bust levels, the composition of both the supply and demand of today’s real estate market is starkly different than a decade ago,” said Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. “As such, it’s imperative for all market participants to understand the nuances of the New Normal Real Estate Market.”
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Leveraging proprietary data from ATTOM Data Solutions and Clear Capital Analytics, along with insights from national and local market experts, the white paper follows the arc of the recent housing boom starting with the rise of institutional investors as early as 2009 in some markets. It then traces the eventual pullback of institutional investor acquisitions followed by a brief uptick in first-time homebuyers and a more sustained surge in smaller rental investors that in turn is feeding a renewed home flipping frenzy.

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A housing recovery that is highly dependent on real estate investors is a bit of a double-edged sword.

Rapidly rising home values have been good for homeowner equity, but also have caused an affordability crunch for the first-time homebuyers.

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“A housing recovery that is highly dependent on real estate investors is a bit of a double-edged sword,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Rapidly rising home values have been good for homeowner equity, but also have caused an affordability crunch for the first-time homebuyers the housing market typically relies on for sustained, long-term growth.”

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“There are a few hard money lenders here, and they bring people who are not fulltime investors and people who are end users … to the (foreclosure) auction and are outbidding anyone who is a traditional investor,” said Chris Richter, CEO at Audantic Real Estate Analytics, a Seattle-based company providing predictive analytics for real estate investors.
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“Early on it was the mid-size investors all the way up to the large institutions (that) had the most urgent need for capital,” said Ryan McBride, COO at Colony American Finance, an Irvine, California-based company providing financing for real estate investors. “We see a lot more opportunities from the smaller, midsized operators, and so that is where we are focusing our efforts: the broad base of the pyramid.”

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We have one Google engineer who just bought his sixth house. He said ‘this is fantastic, real estate is so expensive here and I don’t want to be tied just to Bay Area real estate.’

I’ve noticed more millennials or their parents calling me and saying … ‘my son wants to buy a house and we’re willing to help with the down payment.’

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“A lot of demand is people in the Bay Area and New York City looking to buy in the Southeast,” said Gary Beasley, CEO and founder at Roofstock, an online marketplace for single family rentals. “We have one Google engineer who just bought his sixth house. He said ‘this is fantastic, real estate is so expensive here and I don’t want to be tied just to Bay Area real estate.’”

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“I’ve noticed more millennials or their parents calling me and saying … ‘my son wants to buy a house and we’re willing to help with the down payment. He’s been living with several other friends in an apartment … and they want to continue to live together,’” said Edward Krigsman, Managing Broker with Windermere Real Estate in Seattle.

Progress In Lending
The Place For Thought Leaders And Visionaries
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What’s A Digital Mortgage, Really?

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Every mortgage publication these days either has an article about, a quote mentioning, or an advertisement declaiming the virtues of digital mortgage lending. For the moment, abandon all logic and surrender to the hype. This might have you believe offering digital mortgages will make you younger, leaner and more attractive to today’s borrower.

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While some of this coverage is certainly hype, it is a reality that today’s borrowers want the true digital mortgage. This was confirmed in a recent study of actual borrowers commissioned by Mortgage Cadence and conducted by Accenture Research. The study found that the old-fashioned analog mortgage is too inconvenient and too cumbersome for borrowers’ busy lives.

This is especially true if the future homeowner already has a relationship with you. As they see it, you know everything about them already, so why the constant requests for information about this asset or that particular liability? In the borrower’s view, you should know that, or, at the very least, be able to figure it out.

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While some of the coverage is certainly hype, it is a reality that today’s borrowers want the true digital mortgage.

The truth is, borrowers really don’t understand, nor do they want to understand, why getting a mortgage loan is any harder than a $20 withdrawal from their nearest ATM.

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Borrowers live in a digital, connected world. They want their lender to move into their neighborhood, so to speak. While we all know the digital mortgage is important, do we really know what the digital mortgage really is — and should be?

The Digital Mortgage: a Mythical Creature

Choose your favorite mythical creature. The unicorn? That works. Abominable snowman? OK. Loch Ness Monster? Sure, why not. The digital mortgage is almost as elusive precisely because there’s no actual Oxford English Dictionary definition. Sure, there are many concepts and ideas the industry holds, though there’s no authoritative definition.. A first step in dealing with the digital mortgage is to reach agreement on what it really is.

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The true digital mortgage exists nowhere physically. It lives entirely in the ether. A collection of electrons that come together at exactly the right time to form a complete mortgage that, on screen, looks exactly like its paper-file counterpart. The difference between it and a traditional mortgage is that the digital mortgage will never take up actual space, nor will an old-fashioned pen ever be used to sign it. No courier ever move it from one place to another and back again: It is digital from start to finish.

In a true digital mortgage, borrowers begin the process by submitting their application online. Their lender picks up the digital application, ideally after their system has performed tasks appropriate to the borrowers’ situation, quickly taking actions that move the mortgage as close as possible to closing. Closing takes place in a virtual signing room using an eNotary. Delivery of the loan file to investors, or back to the lender, takes place through the wonders of the Internet. Voila! A true digital mortgage is now complete and has moved electronically into its home in the servicing system where it will live out its life, hopefully peacefully.

More like an ATM Transaction, Less Like the DMV

The truth is, borrowers really don’t understand, nor do they want to understand, why getting a mortgage loan is any harder than a $20 withdrawal from their nearest ATM. Their lives are busy, working and getting kids from school to sports, to dinner, to homework, then back again, day in and day out. The mortgage represents a long list of things to do – things that get in the way of the more important things they have to do every day.

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A true digital mortgage is more than an app or applet that collects some (although not enough) borrower information to act upon.

For many borrowers, the traditional mortgage process feels like a trip to the DMV, only longer. But this does not have to be the case.

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To most borrowers, getting through the mortgage process feels a lot like getting a new driver’s license in a new state. Think about the average homeowner aged 18 – 54: he or she has been driving for a number of years and may have a ticket or two, though generally the individual’s record is more than acceptable. This person moves to a new state and needs a new driver’s license, so he or she heads to the department of motor vehicles (DMV). There, the newcomer takes a number — usually 1,291 when the digital ‘now serving’ sign (the only digital device in the place) has been aggravatingly sitting on 47 for about 37.5 minutes. It’s going to be a long day.

This painful analogy is actually quite appropriate to the mortgage experience. Driving records are, or should be, available state-to-state electronically. Why would a state want to torture a new resident with a byzantine process to get a new version of what they already have? This is unnecessary in an increasingly online and on-demand world.

For many borrowers, the traditional mortgage process feels like a trip to the DMV, only longer. But this does not have to be the case. The true digital mortgage, unlike the Abominable Snowman, can be made real and is within our grasp, using technology that exists today. All lenders have to do is make the big commitment: No more paper. No more paper in the mortgage process, anywhere, any time.

The Digital Mortgage Incentive

Keep this in mind: The absence of paper is its own reward.

We have been in the digital mortgage business for more than seventeen years, spanning three decades of mortgage lending. Digital, in fact, is the reason we are in business at all. We could see, in 1999, the challenges both lenders and borrowers faced on a daily basis. We could also see the promise of the Internet, and, through a somewhat cloudy crystal ball, the coming technologies that could and would change this industry for the better.

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In 2008, we closed the first true digital mortgage using those technologies. The process started with a simple yet bold commitment to entirely banishing paper –including physical loan files in all their forms — from the mortgage process once and for all. It was a bold step and more than a little scary for everyone involved. Almost ten years later it turns out that the only thing we had to fear was fear itself.

The absence of paper is indeed its own reward. Think about it: ten years of no physical loan files. For most of us in mortgage production it would be an easy thing to forget about loan files past. Our CFOs don’t forget, however, as storing files is expensive, and the cost mounts with each closed loan and every passing year. Our information security officers think about them, too. Early in the evolution of the digital mortgage everyone worried about borrower information flowing electronically on the internet. Then a funny thing happened as eCommerce took over. Now everyone conducts business online, and, as this was happening, eSecurity became better and better. Now we take it for granted. E-security is a lot of work, but it is more reliable than actual security guards who can’t possibly keep an eye on every loan file in every warehouse. In this case, paper and physical files represent risk and impose a penalty upon those who use them.

The excuse that digital mortgage lending is expensive is just that, an excuse. Traditional, paper mortgage lending is very expensive, and the cost grows year over year, as relying on outmoded processes and human beings to follow increasingly complex lending rules takes more and more time, and more and more people.

If you need proof, simply look at the trend in the costs of mortgage production, published quarterly and annually by the Mortgage Bankers Association. It cost $7,120 to close a loan in the second quarter of 2016, which is significantly up from less than $3,600 when the first digital mortgage closed in 2008. On average, more than 50% of the cost to close is labor. As productivity drops, the cost to close a loan rises. The cost of technology, on the other hand, has held steady between 5% and 10% of the cost to close. The cost of that technology is the same technology that will close a true digital mortgage. Technology is the lender’s great financial ally in this equation. When used as intended, technology increases productivity and drives down the cost to close. It is also the gateway to the mortgage experience that borrowers have told us they want from their lender.

Eliminating paper, investing in technology, and embracing the process revolution is the path to realizing a true digital mortgage in your lending practice. When you get away from paper, your lending solutions can be data-centric, and from there you can support your staff with workflow, validations, logic, and integrations. Your lending practices and portfolios can then be transparent, your compliance streamlined, and your overall cost of doing business reduced. Let the technology do the hard work and empower your people to lend.

You Will Never See a Unicorn

In all likelihood, you will never see a unicorn, or a yeti. But some have seen a true digital mortgage using our technologies, one that begins its life online with a borrower self-originating, gets electronically handed off to the processor, underwriter, closer, funder, investor and servicer, and spends the rest of its life as a collection of electrons in a digital vault with a bunch of other mortgages.

A true digital mortgage is more than an app or applet that collects some (although not enough) borrower information to act upon. Nor is it a hand-off to another system. That is so early 2000s. Today’s true digital mortgage gives borrowers pretty much what they want and need: an ATM transaction-like gateway to their new home, without a lot of their precious time or energy invested in the lender’s processes. These are processes, which we, as an industry, can and should abandon – just like we should abandon paper.

About The Author

Jim Rosen
Jim Rosen is Document Center Product Manager for Mortgage Cadence, an Accenture Company. As the Document Center Product Manager for Mortgage Cadence, Jim Rosen oversees a team of seasoned professionals, offering dynamic document preparation services to lenders on the Mortgage Cadence platforms and independent, directly integrated lenders across the lending spectrum. The Document Center solution supports automated, compliant document preparation for residential mortgage origination customers throughout the mortgage lifecycle. Additionally, the Document Center extends document preparation to include distribution, electronic signature and e-closing integrations that enhance and drive efficient processes for mortgage lenders. Jim holds a bachelor’s degree from the University of Colorado and has served in various capacities in the mortgage services industry for over 17 years with particular depth and experience around residential mortgage document preparation.