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WEB-TME417-Digital Feature Art

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.
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The Regulatory Forecast

As of early 2017, the mortgage industry has already been affected by the 2016 election. We’ve seen rising interest rates, the rollback of a late-Obama administration move to lower FHA MIP rates, an executive order directing the Treasury secretary to review rolling back the Dodd-Frank Act, and an executive order instructing agencies to eliminate two regulations for every new regulation proposed. With changes coming fast, we can be certain that there will be more headlines in the coming months. As we see it, the focus will be on three questions: Will the Dodd-Frank Act be repealed; will this help or hinder innovation in mortgage solutions; and how will the US react?

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Chance of New Regulations: Low

Repealing or changing Dodd-Frank would require congressional action. Given the current split in the US Senate, only certain modifications can be made through reconciliation, a legislative tool that allows changes to be made with a simple majority in the Senate versus the traditional 60 votes. Additionally, as of this writing, the CFPB recently evaluated whether the recent executive actions apply to them and concluded they do not. This means, at least for the short term, no new regulations. If the CFPB determines that that they are not subject to the actions, then it will almost certainly lead to a court battle. Either way, it seems like the chance of new proposed or final regulations is low. But as a reminder, unless and until any rules are repealed, existing rules — even those with future implementation dates — are still in effect and financial institutions need to support the new HMDA reporting requirements.

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Chance of Technological Impacts: Medium

How about the impact on innovation? Fintech companies have established a new industry group to protect a small part of the Dodd-Frank Act within section 1033 (a) that states, “upon request, information in the control or possession of the covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including information relating to any transaction, series of transactions, or to the account including costs, charges and usage data. The information shall be made available in an electronic form usable by consumers.” The members of this group, as well as others, hold the opinion that this section allows them to access and retrieve, with the consumer’s permission, bank and financial information. The use of this section is reflected in the development of personal budget software tools that aggregate all of a consumer’s accounts in one location. The section is also a key driver of digital application and verification services in the mortgage industry. The potential repeal of this provision would have a big impact on mortgage technology innovation.

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Chance of State Law Impacts: High

Finally, compliance with state laws could become even more important in the industry. Just as we have seen state Attorneys General filing suit against the Federal government over the President’s executive order on immigration, Attorneys General from 17 states have committed to defend the CFPB in the PHH case. If the President works with Congress to repeal all or part of Dodd-Frank, it is possible that state legislatures could step in with additional statutes and/or regulations.

What does all this mean for the mortgage industry as a whole? Regulatory changes are not new to any of us. What will really define the future for lenders is the importance of continued partnership with quality technology vendors. Working in partnership to navigate regulatory changes and define process improvements remains the key to continued success.

About The Author

Seth Hooper
As Origination Platforms Product Manager, Seth Hooper is responsible for the strategic direction of both Mortgage Cadence flagship loan origination solutions, Enterprise Lending Center and Loan Fulfillment Center. In this role, he guides both product teams through strategic initiatives aimed at advancing our technology to stay ahead of industry trends. Hooper joined Mortgage Cadence in 2010 as a member of our Document Center team, transitioning to product manager of our reverse mortgage division, then advancing to Compliance Product Manager, overseeing the successful launch of Ability to Repay and TRID enhancements to the Mortgage Cadence product suite.
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Mortgage Cadence Makes Integrating Even Easier

Mortgage Cadence, an Accenture company, has reached an agreement to license FirstClose’s proprietary integration hub software platform, which provides loan services throughout the mortgage-origination process. The agreement will enable third-party service providers to integrate their services into Mortgage Cadence’s existing end-to-end loan origination product suite more quickly, providing lenders with additional one-stop loan origination capabilities.

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After an extensive evaluation of third-party integration platforms, Mortgage Cadence determined FirstClose’s user-friendly vendor management system to be the most modern and robust on the market, complementing its own product suite. Mortgage Cadence will include FirstClose’s technology in the first phase of its new third-party integration architecture, known as Services Center 2.0, in which vendors will be able to integrate their services into the Mortgage Cadence product suite quickly and easily.

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With FirstClose’s existing portfolio of services, Mortgage Cadence will immediately expand the scope of services it provides to include those related to:

>> Property valuation (e.g., appraisal, automated valuation model (AVM), condition reports, recertification, property details);

>> Title (e.g., American Land Title Association (ALTA), legal and vesting, property reports);

>> Income and tax verification; and

>> Mortgage insurance.

“By empowering vendor partners to integrate their solution into our product suite, we’re giving our clients access to a wider variety of services to meet their needs, including new categories like borrower asset verification and document aggregation,” said Trevor Gauthier, Mortgage Cadence’s president and chief operating officer. “The development of Services Center 2.0 is just one step in our continued efforts to fuel lender success by meeting the ever-changing needs of the marketplace.”

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Mike Detwiler, Mortgage Cadence’s chief executive officer and a senior managing director at Accenture, said, “The addition of FirstClose’s technology is consistent with our broader strategy of augmenting development capabilities through strategic technology tuck-ins and will enhance our ability to serve our mortgage lending customers with the industry’s leading loan-origination platform.

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.
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Mortgage Cadence Benefits From Big Acquisition

PROGRESS in Lending has learned that Accenture has extended the capabilities of its Mortgage Cadence subsidiary with the acquisition of BeesPath Inc.’s ClosingBridge platform, which facilitates simple, secure communications and file exchange for real estate finance transactions. Here’s why this acquisition is significant:

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The ClosingBridge platform will be provided under the Mortgage Cadence product suite and will be branded as Collaboration Center. In its first phase, the platform — which manages the communications between borrowers, co-borrowers, real estate agents, sellers, attorneys, lending staff, title agents and settlement agents on mortgage transactions — will be offered as a standalone product. In subsequent releases, Collaboration Center will be incorporated into Mortgage Cadence’s existing product portfolio.

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Todd Hougaard, president of BeesPath, will be joining the Mortgage Cadence team to help speed the integration and rollout of the solution and to spearhead product advancement going forward.

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“Taking an innovative approach to a long-standing challenge in mortgage — unsecure communications involving borrower data and information — BeesPath has created an elegant, all-digital solution that securely connects all parties involved in the closing process,” said Michael Detwiler, Mortgage Cadence’s chief executive officer. “ClosingBridge is another strategic addition to our forward-looking Mortgage Cadence platform.”

Founded in 2004, BeesPath provides web-based tools designed to bring all the people, workflow and information related to a loan transaction into one secure place, facilitating the efficient closing of loans by enabling easy communication, delivery, sharing and tracking of all loan details. BeesPath developed and released the ClosingBridge platform in 2015 to facilitate simple, secure communications and data exchange for real estate finance transactions.

“We are proud to welcome Todd and the Collaboration Center technology to the Mortgage Cadence product suite with near-immediate client availability,” said Trevor Gauthier, Mortgage Cadence’s president and chief operating officer. “Thanks to this exciting acquisition, our lenders will be able to provide their borrowers with the peace of mind that all collaboration regarding their transaction is being handled swiftly and securely for better compliance, efficiency and structured communication between all parties. In addition to accelerating our digital strategy, this asset acquisition puts more functionality into our clients’ hands sooner, enabling them to close loans more quickly while having the assurance that the loan communications are secure.”

Since the TILA-RESPA Integrated Disclosure (TRID) Rule took effect in October 2015, the added time needed to ensure the borrower has its closing disclosures within three business days of closing has created new pressure for lenders, title agents, and settlement agents. The acquisition of BeesPath’s ClosingBridge platform brings an immediate solution to the Mortgage Cadence product suite to help address the need for these parties to securely communicate, share documents and transfer data.

“Collaboration Center is highly complementary with Mortgage Cadence’s successful loan origination technology suite, and Mortgage Cadence is the company best positioned to get this into the hands of lenders and title agents, who will benefit tremendously from this solution,” Hougaard said. “I’m thrilled to be a part of this talented team and help drive this user-friendly and secure solution forward.”

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Mortgage Cadence Expands Digital Footprint With New Borrower Center

Mortgage Cadence, an Accenture company, launched the third generation of its Borrower Center, expanding the borrower self-service capabilities and enhancing the origination workflow of its Enterprise Lender Center platform. Here’s the scoop on this new technology:

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The Borrower Center is a cornerstone of Mortgage Cadence’s cloud-based technology, providing a highly secure, always-on-and-available-everywhere capability to help guide borrowers and lenders through the mortgage origination cycle. The new release, which builds upon the company’s proprietary technology that elevated the online mortgage lending experience more than 15 years ago, provides a superior experience for borrowers and a more-efficient, cost-effective process for lenders. Features of the third-generation Borrower Center include:

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Borrower Mobility. Borrowers will now enjoy a streamlined user interface that scales across devices, enabling convenient anywhere, anytime access. During application, borrowers create a secure account to which they return throughout the origination cycle to virtually collaborate and check the progress of their loan, upload documents, view conditions, and communicate with their lender.

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Single System of Record. A single, web-based technology platform – a Mortgage Cadence hallmark – that provides complete mortgage origination capabilities, whereas most other vendors use a cumbersome, multi-system integration approach. Borrower Center opens a gateway for borrowers and lenders to interact easily throughout the mortgage origination process. For lenders, our single technology platform means solid data integrity and security, enhanced features to help ensure compliance, a highly automated workflow, and an immersive borrower experience unmatched in the industry.

Flexible Administration. Easy-to-use admin tools provide full control over page names, content, titles, fields, and button names, with the option to preview updates prior to site publishing. The Borrower Center provides the flexibility that enables the lender to collect only the information needed to provide a great customer experience.

Powerful Branding. Borrower Center offers lenders the most powerful styling and branding opportunities available, making it easy for lenders to match the experience provided by their corporate website. Borrower Center’s design tools make it simple for lenders to adjust design and flow instantly, in real-time, as market conditions and borrower preferences evolve.

“Mortgage Cadence continues to lead the way in borrower-facing technologies — a road we started down almost two decades ago,” said Trevor Gauthier, Mortgage Cadence’s president and chief operating officer. “It’s exciting to release this next-generation borrower portal with the sole purpose of advancing our digital suite of technologies to ensure that our customers stay at the forefront of the lending industry.

“Staying ahead of industry and technology trends hinges on a thorough understanding of borrowers’ future needs. Last year we partnered with Accenture Research to conduct a study of more than 1,500 borrowers’ current and future expectations related to the origination process. Using data collected from the study, we have been driving development efforts around Borrower Center for Enterprise Lending Center and applying that knowledge to our entire product suite roadmap. Supporting our lenders is our number one goal, and we are excited to roll-out this forward-looking product.”

Michael Detwiler, Mortgage Cadence’s chief executive officer and a senior managing director at Accenture, said, “Since the acquisition of Mortgage Cadence in 2013, Accenture has invested heavily in the Mortgage Cadence suite of products, with a major focus on digital technologies inclusive of Borrower Center. Our view on where we want to take mortgage lending draws from the kind of disruption Uber has brought to the transportation industry — attacking the major friction points and fully digitizing processes to increase the speed and efficiency of lending services. Our new release of Borrower Center is the culmination of three years’ worth of investment and incredibly skilled employees bringing our vision to life, laying the groundwork for where we plan to take our digital lending experience to enable our customers to leapfrog the competition.”

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Mortgage Cadence Launches New Version Of Its Enterprise Lending Center

Mortgage Cadence, an Accenture company, will launch a new version of its Enterprise Lending Center (ELC) platform, with major enhancements designed to offer lenders greater extensibility, enhanced service ordering, additional regulatory support, and the framework for the third-generation Borrower Center.

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Paul Wetzel, Mortgage Cadence’s executive vice president of Product Management, said, “The latest ELC features go beyond compliance-related and general system updates, bringing to the table key enhancements that position our clients for continued success while giving us the framework on which to stay ahead of trends as the pace of technology evolution accelerates.”

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Specific enhancements to the ELC Platform include:

>>Brand-New API Functionality. The latest version of the ELC includes a new application program interface (API) layer designed with scalability and data integrity in mind, which maximizes configuration and enables extensibility through the software development kit (SDK). As a result, SDK users will have the ability to seamlessly integrate ELC functionality across their operations, from consumer mobile apps through servicing and secondary management, all while using the latest in design standards.

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>>Third-Party Integrations. Mortgage Cadence continually expands its ELC interface list to include access to best-of-breed third-party service providers, giving lenders ever-increasing flexibility to choose their preferred providers. Most recently, the company integrated MGIC as an additional mortgage insurance provider option to its ELC platform.

>>HMDA and UCD Compliance. Mortgage Cadence’s commitment to help clients stay compliant with the latest regulations continues with this latest release of ELC, which lays the framework for client HMDA requirements, including all new data points across all origination channels. The release also includes the new data points for collection of government monitoring information; provides the ability to collect via a URLA addendum; and adds the data points necessary to generate the UCD File.

>>Borrower Center for ELC Framework. Next week, Mortgage Cadence will debut the third generation of its Borrower Center, building on the company’s proprietary technology that elevated the online mortgage lending experience more than 15 years ago. This release will expand ELC’s borrower self-service capabilities, providing borrowers with a superior experience and lenders with a more-efficient, cost-effective process.

“This latest ELC release reinforces the highly regarded technical team we have put in place, showcasing our commitment to providing our clients with forward-looking functionality,” said Damir Matic, Mortgage Cadence’s executive vice president of Technology Architecture and Engineering. “Since joining Accenture nearly three years ago, Mortgage Cadence has more than doubled in size by focusing on hiring the industry’s best talent.”

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.
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Looking To The Future

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Last year PROGRESS in Lending Association named Mortgage Cadence a top innovation. The Mortgage Cadence Configuration Migration Utility (CMU) is an advanced configuration promotion tool only available through the Enterprise Lending Center. This new, patent-pending utility enables the easy migration of ACE Actions, business rules, and formulas from one environment to the next – whether development, staging, or production. The utility also dynamically discovers differences between environments, then surgically migrates the specific configuration changes to the desired environment. With the need to fluidly adapt to constant regulatory and investor requirements, the CMU allows lenders to effectively manage complex configurations efficiently and reliably. We followed up with Sarah Volling, the Marketing Lead at Mortgage Cadence, to talk about her background and what’s new at Mortgage Cadence. Here’s what she said:

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Q: You got your start in the mortgage industry in 2008 – the heart of the financial crisis. With little context on what the industry looked like prior, how has the last near-decade transition looked from your perspective?

SARAH VOLLING: Not only have I had the pleasure of seeing the industry bounce back since I started out nine years ago, but I learned at an early age the benefits of home ownership, buying my first home two years into my entrance in the mortgage industry and finalizing the purchase of my fourth home just this week. While working in the industry has taught me a lot and exposed me to its ins and outs, no other experience has shed light on the industry’s progress than being on the receiving end of a mortgage transaction. One thing is clear: The industry is not as far along as we might think.

My first home buying experience back in 2010 was, by far, the easiest mortgage origination transaction I’ve experienced to date. In theory, there should have been a lot working against this. I was a 22 year old recent college graduate and a first-time homebuyer, buying a house in the aftermath of the financial crisis. The key differentiators between that purchase and all of those that have followed can really be boiled down to three things: less regulatory requirements, great communication, and superior technology for the time.

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Q: Can you expand on the role you believe regulations, technology, and communication play in today’s origination lifecycle?

SARAH VOLLING: At the time of my first mortgage, I did a lot of online research before beginning the process, using lender’s websites to educate myself. This, in fact, is how I found the lender I ended up going with. This, in essence, was the best technology of the time. Lenders turning to borrower self-origination and education were not nearly as advanced as those today. In fact, even though technology was improving, I recall many instances where I was out of state and had to track down a printer and scanner to print, sign, and return documents to the lender. Today, many of those items simply require digital signatures. While this certainly has made life easier, many things have been made harder. My first mortgage was quick, smooth, and straightforward – all thanks to active communication from the lender, less regulations required by the lender, and the best technology available at the time.

More recently, I’ve had very different experiences. My last two homes were purchased through the same large midmarket lender. The second time around we chose simply for convenience and less about our prior experience, which was average at best. With our current loan being through them, we figured much of the process of buying a new home would be streamlined. We were wrong. We had to provide all of the information – from our names down to our 2015 W2 – that was supplied two years ago during our last origination. We chalked that up to internal compliance checks.

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Then, it got worse. Everything from the inspection resolution to the appraisal was in, and we were three weeks away from the closing date. Easy enough to push the closing up, right? Not if your lender needs to put the Closing Disclosure in the mail, forcing you to wait six business days for a document that only requires a three day turn if provided electronically. It got me thinking – how much money is lost each year due to this slowdown in the origination lifecycle? We all know the cost-to-close is higher than it has been in quite some time, and it’s no wonder. While regulations certainly have made things harder, imagine how much could be saved by simply having the means to provide documents electronically.

Also – the lack of communication could have been solved quite easily. Let us know when you receive documents, give us a heads-up about what remains, and work with us to make sure we are comfortable every step of the way. While I’m no stranger to the origination process, the mystery about where in the process our loan stood at any given time was enough to cause doubt in anyone’s mind. To me, it makes me question the lender’s abilities. They might be extremely capable and efficient, but if they don’t let me know what is going on, I come to my own conclusions. I can only imagine how much worse this must be for those new to, or less familiar with, the origination process. Even if we didn’t have active communication from our loan officer, something as simple as an online site to check loan status, upload documents, and see outstanding underwriting conditions would have gone a long way toward improving the situation.

Q: As a member of the Millennial generation, your perspective on the mortgage process is unique. Do you believe this generation is more demanding than Gen X and Baby Boomers?

SARAH VOLLING: It’s funny. Millennials have often been tied to the digital mortgage revolution of the past decade. They’ve been portrayed as this ominous, “Are You Ready?” generation set to shake up the industry forever. While it’s certainly true the idea of the digital mortgage is important, I would argue it is equally important across all generations. As a society, we are all equally accustomed to smartphones and companies designed to make our lives easier through continuous, real-time service. In fact, we recently completed a study of over 1500 US borrowers who had just been through the mortgage origination process and found that Millennials are not only the most likely generation to meet with their loan officer in-person during their home purchase, but are the ones that want to meet with their loan officer face-to-face. To some, this may come as a surprise, but to me, as a member of the Millennial generation, the reason is simple: We want to know the source. You may be familiar with a scene from a sketch comedy show that takes place in the Northwest, where the guest at a restaurant asks the waitress about the chicken. Not about how it’s prepared, but how big the area where the chicken roamed was and what the chicken’s name was. This is perhaps a little extreme, but it makes a great point: Millennials prefer to support businesses they trust, as they want to know where their money is going. Along those same lines, they want to look their loan officer in the eye and have a real conversation about such a major financial decision. Gen X and Baby Boomers not only care less about the back story, but they are also more likely to be familiar with the home buying process already, so they are just as happy to interact digitally with their loan officer and would prefer to do so.

Q: This study sounds quite interesting. What other key findings did you learn from your study?

SARAH VOLLING: Aside from the stereotype-shattering idea that Millennials are the only generation driving the digital mortgage revolution, the most important finding is that 3 in 5 borrowers would be more than happy to provide their private information – including login credentials – in order to streamline the origination process through data aggregation. Allowing borrowers to self-originate was the first step, but the majority of the industry has made that leap. Now, it’s time to think bigger, driving technology advancements that make borrowers’ lives even easier.

In fact, this is a good thing. It’s not a good feeling having to put your deadlines in someone else’s hands, anxiously waiting for a borrower to get you requested documents. Through data aggregation tools, you can take back control of the process, gaining just one more way to accelerate the origination process in the midst of an ever-increasing cost to close.

Q: As a marketer, you sit uniquely between business-to-business (B2B) and business-to-consumer (B2C) marketing worlds. What trends are you seeing that transcend all industries?

SARAH VOLLING: No surprise here: All-things-digital. To expand upon what that means, attention spans are getting shorter. The amount of time you have to get noticed with consumers is next to nothing. While videos are certainly a stronger route than traditional text-heavy websites and sales materials, I would suggest going even shorter with GIFs. These looped video clips are often 2 seconds to 10 seconds long, with content that does not need sound. I saw a great use of this on Facebook as a sponsored post for a local food chain. The ability to get in front of a wide audience through social media using a video clip that automatically plays as consumers scroll past it on their phones offers distinct benefits that traditional videos simply can’t compete with.

As it relates specifically to the mortgage industry, I would suggest keeping your efforts as honest as you can. As I previously mentioned, Millennials are interested in full transparency. To capture this audience’s attention, they want to know what you stand for and that your best interests are with your customers.

Q: With the political landscape causing great uncertainty for our industry, what is top of mind for Mortgage Cadence heading into 2017?

SARAH VOLLING: It’s hard to predict the direction – specifically related to the regulatory landscape – in which we will be heading in the next several years. What can be predicted — and what lenders should focus on for the time being — are technology advancements to support the consumer experience and provide the full transparency the next largest generation of their customers expect.

The trends I’ve already mentioned lead to some very strategic initiatives for Mortgage Cadence. We were fortunate enough to use the borrower study we recently completed to provide some real-world evidence regarding the top priorities tomorrow’s borrowers have about the origination process. This is driving many initiatives related to consumer-facing technologies. We expect to have three major technology announcements in the next few months that will really give lenders the tools needed to succeed no matter what the regulatory landscape shapes up to be in the years ahead.

Q: Your highly regarded annual user conference is just a short time away. Can you provide a sneak peek of the themes you are planning for this year’s conference?

SARAH VOLLING: Our annual user conference, Ascent, is by far the most anticipated event we put on each year. We spend easily nine months planning the agenda, lining up influential speakers, and structuring networking opportunities with the goal of topping the previous year’s events. This year is no exception.

This year, we decided to break our agenda up into tracks designed to give our customer base sessions relevant to their interaction with our technology. Not only do we offer two leading loan origination solutions, but we draw various system users – from business operations to IT power users – to our conference, and we want everyone to have content to meet their needs.

In addition, we’re excited to bring back our 2017 Benchmark Study, which will build on data collected since 2012 on key performance indicators (KPI) of our customers’ businesses. Comparing their KPIs to those of the industry at large not only gives our customers insight into how they compare to industry averages, but gives us insight into where inefficiencies lie within today’s origination processes, helping guide their future operational strategies. Ultimately, we strive to be a partner for a customers and not just a technology provider. Our user conference is one of our best opportunities for us to continue our commitment to partnership.

Insider Profile

Sarah Volling is the Marketing Lead for Mortgage Cadence, an Accenture Company. Beginning her career with the company in 2008, Sarah now oversees the marketing department, strengthening brand identity through thought leadership, industry participation and guerilla marketing. Prior to joining Mortgage Cadence, Sarah earned her Bachelor of Arts degree in Communication from the University of Colorado.

Industry Predictions

Sarah Volling thinks:

1.) While digital lending will continue to be critical to long-term success, the value of face-to-face interactions with borrowers will make a comeback.

2.) The focus of the Digital Mortgage is finally going to shift away from the consumer and more onto how all of the companies that are part of bringing a mortgage together can streamline efforts.

3.) Despite current and future industry changes and regulatory demands, the consumer will always be the biggest driver of change, pushing their expectations of greater transparency and better communication even further onto the lender.

Progress In Lending
The Place For Thought Leaders And Visionaries
WEB-TME217-Panic Feature

This Is No Time To Panic

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Let’s admit it. Mortgage rates in the three and low four percent range were very cool to experience, and not just for mortgage nerds and econ geeks. Yes, this period of uber-low rates pulled the US housing market out of a deep, dark recession. At the same time, these rates changed the nature of housing: Owners with low interest rate mortgages are loath to give them up since they can’t be replaced, so they will likely stay in their homes much longer than they used to. Low rates were good. Now they are gone, and everyone is worried. Is it time to panic?

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The short answer is no. There is no reason to panic. Rates have risen to their highest levels since April 2014, though at about 4 3/8% for a 30-year loan, rates are far from high. Rather, today’s rates present a remarkable homeownership opportunity, one similar to the opportunity the grandparents of today’s Millennials had when they bought their first homes in the late 1950s and 1960s.

Why the comparison? Rates were about the same in the era of Eisenhower and Kennedy as they are right now. Rates were rising, then, too, from the post-WWII lows that Millennials’ great-grandparents enjoyed. Rising rates in the late 50s and 60s did not deter baby boomer homeownership; quite the contrary. Like the Millennials, Boomers were the biggest cohort of potential buyers the economy had ever seen. And buy they did, despite interest rates exceeding a whopping 5%.

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Rates matter (although rates are but one variable in the housing equation). The trouble is, rates are getting all the attention despite the fact that they are not the most important variable at the moment. Affordability, not rates, is what mortgage lenders should be talking about.

Affordability, Not Rates

While mortgage rates cannot and should not be ignored, our focus should be on the broader measure of affordability. This is where rates, along with home prices and incomes, present a more accurate answer to the question, “Is now a good time to buy a home?” This is important because affordability right now is at one of its best levels in years, though potential homebuyers may believe now is not a good time to buy a home since rates have increased.

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Fortunately, information on affordability in the form of the Housing Affordability Index (the HAI or the Index) is readily available from several sources including the National Association of Realtors, which publishes its affordability index monthly, as well as HUD, which publishes less frequently yet provides an important, long-term historical view on the subject.

Even though rates are rising to levels not seen for many years, they are, as mentioned above, on par with the low rate environment of the mid-1960s. Despite the alarmist news that rates are rising, rates are attractive and remain low. This is why it is important to look at affordability. According to data released by the National Association of Realtors, housing affordability in October 2016 was 170.2. According to HUD, the HAI for 2015 was 163.9. Since 170.2 is greater than 163.9, that would indicate that housing was more affordable in the fall of 2016 than throughout all of 2015. It would also indicate that all the ‘sky is falling’ nature of the news about rising interest rates is wrong, or at least misdirected.

What do numbers such as 170.2 and 163.9 really mean in this context? How are they calculated? The housing affordability index is just that: an index. When the index measures 100, it means the homebuyer earning the median income has exactly enough income to purchase the median priced home. When the HAI is greater than 100, as it has been, according to HUD, since 1986, then housing, using this measure, is affordable. When the index reads less than 100, as it did in the early 1980s (more on this shortly), it means buying a home is not affordable and is out of reach for the median wage earner.

Last October’s index of 170.2 means the median wage earner has 1.7 times the income necessary to purchase the median priced home. During 2015, that same wage earner had 1.6 times the necessary income. Housing is, by this measure, affordable for today’s buyers. But what about those grandparents back in the 1960s? Was housing affordable for them? The median home price in the mid- 1960s was $13,600, with a median income of $6,450. Assuming a mortgage rate of 5.50%, their affordability index would have been slightly above 200. Although better than 170.2, the environment in which they purchased their homes was roughly equivalent to what we are experiencing now. Those grandparents bought lots of homes; so should today’s consumers.

Calculating the housing affordability index is easy. The formula for doing so is:

HAI = (Median Family Income / Qualifying Income) * 100

Median Family Income data is readily available. Qualifying income is another calculation based on the monthly payment on the median priced home at then-prevailing interest rates. The Index also assumes the borrower makes a 20% down payment. There’s no need to do the math, however, as the index is readily available.

With rates rising, shouldn’t affordability be falling? The answer, as is true with so many things: It depends. It depends on the trend in median incomes, which is currently positive. So, while rates are up, so are incomes, offsetting higher rates and making housing slightly more affordable. There is one more variable in the equation in addition to median income and interest rates: The median home price. This has been rising, too, though not enough to negatively impact the Index.

The multi-variate nature of the Housing Affordability Index is exactly why affordability is a more important, more relevant story than rates, and the one everyone in our industry should be telling. Borrowers need to understand the whole picture, not just the view from the rate window.

Rates will probably continue to rise. The Mortgage Bankers Association predicts the 30-year rate will top 5.25% in 2019. That’s a step up from the lows of the past several years, though still remarkably low by historical standards. When rates were 7% and 8% in the 1970s, affordability was slightly greater than 150. This is another indication that neither lenders nor borrowers should obsess about rates.

When Do We Panic?

If you are going to panic, it’s best to do so with full information. Panic, in this case, means all or most homebuyers sitting on the sidelines because affordability has tanked.

Parents of millennials, in contrast to grandparents of millennials, know about panic, at least when it comes to affordability (and rates). As the 1970s came to a close, so did the long, many-decade run of low, single-digit interest rates. From 1980 through 1985, mortgage affordability plummeted below 100, bottoming out at 68.9, meaning that the average wage earner purchasing the median priced home had only about two-thirds of the income necessary to purchase that home. Rates had a starring role in affordability’s reversal, exceeding more than 15% in 1981 when the index hit its all-time low.

The early 1980s were a good time to panic, or at least to put the idea of homeownership on temporary hold. Having just two-thirds of the income necessary to buy anything is a strong indication that it is best to skip or defer making the purchase. That is just what many people did throughout the 1980s.

Now, on the other hand, is no time to panic. It’s time to seriously consider homeownership. Potential buyers have 1.7 times the income necessary to purchase a house. That’s good. Even better, according to an article published by Zillow on November 16, 2016, buying is a better economic play than renting in that a mortgage today consumes just 14% of income whereas renting consumes 29%.

While an extreme example, the 1980s do illustrate that rising rates have a chilling effect on home buying sentiment as well as purchases themselves. But the 1980s were a long time ago. Mortgage rates are more than 1100 basis points lower than they were in 1981. Rather than fretting over rising rates there should be celebration about housing’s continued affordability.

What Do We Do?

The first step for lenders is to stop being our own worst enemy. The mortgage business is about making loans, which depends on potential and repeat buyers entering the market. To enter the market, they have to believe their timing is right. Given current affordability levels, timing is excellent. Unfortunately the lead story is rates, a misleading and inaccurate picture of the housing market.

We should start educating the public, especially first-time homebuyers, on affordability. Rates are easy to understand: No math, no calculations, no deeper thought. Yet homeownership requires deep thought and even better understanding of all things it encompasses, especially the economic aspects. Rates are only relevant to the extent they affect affordability.

Rates are rising, but the sky is not falling. Housing is becoming more, rather than less affordable. The responsible approach, when talking about the housing market with buyers (and especially first-time buyers), is to talk about affordability in conjunction with rates. It is a good time to buy a house, and lenders should make sure that buyers understand why this is so.

About The Author

Dan Green
As Executive Vice President, Operations for Mortgage Cadence, Dan Green works with the team to create greater efficiencies in all areas and coordinating efforts that enhance service quality and teamwork. Formerly, Green served as Chief Operating Officer/Chief Marketing Officer of Prime Alliance Solutions followed by Marketing Lead for Mortgage Cadence. Prior to that, he had an eight-year career with CUNA Mutual Mortgage where he was responsible for origination, servicing, lending technologies, process reengineering and education. With over 30 years of financial services and mortgage experience, he’s keenly interested in lending performance and performance benchmarking that helps lenders constantly increase efficiencies while enhancing the financing experience for borrowers.
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Sustained Winds Of Change To Continue

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We’re all conditioned to think about change coming in waves with ample time in between to recover before the next wave hits. This is true in both our personal and our professional lives; we see it within a year and within a lifetime. But what happens when the waves of change become so frequent that it’s hard to tell where one ends and the next begins?

Since 2009, the US mortgage industry has experienced back-to-back changes. Not only have we seen typical purchase/refinance cycles, but we’ve also had countless compliance changes: RESPA, ATR/QM, KBYO, and so on. It’s not just the mortgage industry, either. Across seemingly all aspects of modern life, largely thanks to technology, the pace of change is quickening. For example, the VHS was introduced in the US in 1977, followed by the DVD 20 years later in 1997. However, Blu-ray entered the scene just 6 years later in 2003, and now we have the 4K revolution quickly setting in – something YouTube adopted in 2010. Now, with the election of a new kind of presidential administration, there is no reason (on top of all others) to think that the pace of change in the US mortgage industry will ease. There will be considerable uncertainty around regulation and interest rates. Add in innovations like those for borrower experience now further fueled by Fannie Mae’s Day 1 Certainty program and industry movement towards eClosing and the overall view can be daunting. Our new normal is nearly constant change. The question becomes: How is this constant change impacting your staff, and what can you do to support their needs in order to best serve your customers?

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It’s in our nature as humans to react to, and then absorb, a wave of change. We also expect that the dust will settle before the next wave of disruption hits. However, when change continues unabated, it can be stressful. As managers, it can be equally stressful to help your staff adapt to these times. One way to simplify the impacts change has on us is to think of change similar to the well-known stages of grief: denial, fear, acceptance, commitment:

>>Denial. With change often comes an unwillingness to accept what lies ahead. Fortunately, there are steps you can take to help your staff overcome this make-or-break stage. First, get buy-in from staff early on. By communicating what the change means to each team member long-term, you are more likely to advance through the four stages without as much resistance or push-back.

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>>Fear. Denial and fear often go hand-in-hand. Again, communicating regularly about what this change means for each employee and how you seek to make the transition as smooth as possible for everyone can make all the difference. Most important for this stage is establishing an action plan for addressing the changes. This step can significantly help your staff see the big picture and the “light at the end of the tunnel”.

>>Acceptance. By now, you should have buy-in from your team that the change is happening but is manageable thanks to the plan you’ve put in place. At this stage, you should encourage that acceptance and continue keeping the lines of communication open. Without ongoing communication, staff could very well revert back to the previous stages, thinking the plan established is not, in fact, being acted upon.

>>Commitment. Because the waves of change are sure to be constant going forward, the four steps can become cumbersome and hard to constantly manage. In order to gain true commitment from your staff, ensure you have a nimble “change-enabled” origination process in place. By creating systems and processes that can easily adapt to meet change, you can significantly reduce the impact of future changes on your staff and your customers.

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By better understanding how we, as humans, process change, while also taking our own advice by going through the 4 steps to accept that we now live in constant change, we can begin to best position our organizations for long-term success. The next step in riding the winds of change is to establish the processes and systems that will lead your staff towards long-term commitment.

While as an industry, we can’t avoid or ignore external change like required security or compliance updates, lenders and vendors alike can build vetting and prioritization processes to make sure that only the best changes/improvements are put in place to truly support where your business needs to go. If you have too much “self-introduced” or discretionary change, then you might add unacceptable levels of risk. On the flip side, if you have too little self-introduced change, then you’re sure to be exclusively reactionary and passed by competitors.

So what are common criteria for vetting and prioritizing change in the mortgage industry? Compliance risk, financial risk, impact to borrowers, impact to staff efficiency, level of effort and/or expense all are great starting points. For a given proposed change, many of those categories might be mixed (positive in some areas, negative in others). Some will be easier to quantify than others, but this should not mean that subjective measures can’t be used. For those that might fear bureaucracy, you can introduce a lightweight and flexible process. The point is that you collect additional facts only when appropriate to the size/impact of the decision. Frequently, you will decide based only on readily available information but still will take the time to capture it in a structured way. Having a transparent and fact-based process helps get the right discussions going between the right people and will make difficult decisions easier.

So a process around vetting and prioritizing change is essential. In addition to that, what aspects of an origination platform will help manage change? True flexibility is required, but what specifically in a technology platform provides flexibility? An open architecture that is extensible means having a developer’s toolkit and an API surface. An exposed rules engine is also important so that you can easily configure workflow, drive efficiency like automatically ordering services, kicking off exception processes, etc. Last but not least, delivering all this in a SaaS product model is critical to stay current on the latest releases. This is no longer optional thanks to regulatory changes and ongoing security enhancements to keep your borrowers’ data secure. Custom or quasi-product models allow for the customer to lag on an out-of-date version. When this happens, you’re not only missing the latest security and compliance updates, but you’re also limiting your ability to effect change because of the friction of moving your enacted change through multiple version upgrades.

As John F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” By working with your staff, updating your processes, and advancing your technology, your daily concern will be less about adapting to change and more about anticipating the change. Let your focus turn towards the future, which is sure to look brighter than ever before.

About The Author

Paul Wetzel
Paul Wetzel has led Product Development and Product Management activities through most of his 20-year enterprise software career – over the last 10 serving the Financial Services industry. In his current role, Paul manages both customer and industry requirements to drive product enhancements while also ensuring Mortgage Cadence leads the way in innovative loan origination technology. Paul began his career with Accenture in software development where he rose to the level of Director, Business Development for an Accenture subsidiary. Before joining Mortgage Cadence in 2009, Paul spent several years with FICO in product marketing and corporate strategy roles.