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Tackling Industry Innovation

The PROGRESS in Lending Innovations Award Winners gathered to talk about the future of mortgage lending. Over 100 mortgage executives came together to attend PROGRESS in Lending Association’s Eighth Annual Innovations Awards Event. We named the top innovations of the past twelve months. After that event, we wondered what would happen if we brought together executives from the winning companies to talk about mortgage technology innovation. Where do they see the state of industry innovation right now? And what innovation is it going to take to get our industry really going strong? To get these and other questions answered, we got the winning group together. In the end, here’s what they said:

Q: Some say innovation has to be sweeping change. Others say innovation can be incremental change. How would you define innovation?

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MICHAEL KOLBRENER: At PromonTech we are very careful with the word “innovation”. While we strive to be innovative, whether or not we succeed isn’t our call, but our clients’ and the market’s. At the end of the day, innovation is in the eyes of the user. And innovation can manifest itself differently; it can be a “big bang” like Apple’s iPhone, or it can occur more gradually and quietly like Internet availability. Fannie Mae and FormFree are great examples in our industry of how significant technology opportunities require time in order to be realized. Day 1 Certainty is destined to be a game-changer, but adoption may take time. Just like it took time for the amazing tools in FNMA Desktop Underwriter to be appreciated. As technologists, it’s our job to celebrate the important technology opportunities and help our user communities keep working on adoption.

JOHN PAASONEN: Innovation, especially in our industry, takes many forms. Innovation pushes forward a process, changes a mentality, or reforms the way something is thought about or done. We’re seeing all forms of this in mortgage, whether it is Day 1 Certainty, upfront underwriting, or shared-equity financing. The best kind of commercial innovation sweeps people along with the change in the present, not 10 years from now, bringing actionable ideas to market quickly, iterating those ideas, and ultimately delivering meaningful impact to the experience, P&L or relationships in a business.

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PHIL RASORI: Traditionally, I would say that innovation in our industry has been more of a gradual, step-by-step approach with new products, services and enhancements being launched as vendors identified demand and areas for improvement.  However, the introduction digital mortgage movement, which has been rapidly building over the past few years has been sweeping, with an array of fintechs and new ideas being spawned to build a better overall lending process. The trick now is going to be the rate of borrower and marketplace adoption of these new technologies.  Think about this: even adoption of now comfortable mainstays such as online shopping with Amazon or online trading with Schwab didn’t happen overnight. Adoption took time, and it will in the mortgage space, too.

GARTH GRAHAM: At STRATMOR, we see the innovation as a combination of People, Process and Technology, a variation on the classic 3Ps of People, Process and Product. You can have innovation that applies to any of the three, but it’s best is when it’s applied to all three together.  In fact, that was a key message in my presentation at the most recent MBA Technology Conference — that changing across people, process and technology is what drives big changes.

SANJEEV MALANEY: I would describe innovation as significant positive change resulting from fresh thinking that creates value for its user. It’s a result. It’s an outcome. It’s something one works toward. There are no qualifiers for how groundbreaking or world-shattering that something needs to be, only that it needs to be better than it was before. Innovation is evolutionary, not revolutionary — like Einstein’s theory of relativity.

KELCEY T. BROWN: At WebMax, we believe that innovation means identifying a problem and coming up with a unique solution. Whether it be sweeping or incremental, that unique solution changes things for the better. Innovation, especially in mortgage technology, has been defined by streamlining processes, reducing operating and origination costs, and delivering a better borrowing experience.

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ADAM BATAYEH: For us, it’s all about progress. Almost any amount of progress will do no matter how incremental the change is. If you create something that is cool and trendy but doesn’t necessarily push things forward in a way that betters people/process/industry, that “innovation” was more novelty than anything and will likely find itself extinct.

So in terms of impact, the amount of impact/progress isn’t as important because of all that happens downstream that we may not see immediately. You could make an incremental change that has monumental implications years later. In our space, it’s sort of like the butterfly effect.

LUKE WIMER: Innovation is the achievement of a consistently better outcome for time invested in an activity. I think creative problem solving needs to be encouraged, so we need to think of it as incremental change, and then allow for sweeping change to be the aggregation of persistent innovation. In our industry context, we might refer to the ability to electronically sign a mortgage as an innovation and the ability to digitally process a mortgage end-to-end as the sweeping change we are all driving toward.  Innovation is also often the result of fostering a culture of continuous improvement. In our company, we set long-term aspirations, then we ask everyone to set improvement or innovation goals for the next quarter or half year. We don’t specify how to improve; we don’t want people to be constrained. Then we measure results, talk about what happened, and set goals for the next round, rewarding examination and striving rather than hitting the target itself. The pace of creativity is increasing as people get comfortable taking risks.

NEIL FRASER: Innovation, in most cases brings incremental change. Over time many incremental changes bring about what can appear to be sudden sweeping change. As the mortgage industry moves towards the sweeping change being called the Digital Mortgage, many innovations have been, and continue to be tried and tested. This is the necessary process for moving an entire industry towards a significantly different model.

At Paradatec, we are continuing to innovate in an effort to support the industry’s long term move towards a more efficient and accurate process for originating, servicing, and auditing mortgage loans.

More specifically, we define innovation in our particular niche as “the application of artificial intelligence to the problem of document recognition”. This could mean the creation of a new, more automated, document classification solution for a servicing world where scanned images of documents, that were originally paper, are still key, or it could mean the creation of new recognition capabilities for e-signed documents that never were paper. Regardless of the application, we at Paradatec are committed to an ever-expanding document recognition stack that covers origination, servicing and auditing mortgage loans.

Q: How would you define the state of innovation in the mortgage industry? Is it thriving or in a state of decay?

MICHAEL KOLBRENER: The mortgage industry is in an unprecedented phase of technology adoption. There is no doubt that Rocket Mortgage deserves lots of credit for truly introducing the “Internet” to the mortgage industry. Rocket has shown all lenders that technology is an integral part of the future of mortgage originations. Additionally, we are seeing lots of new technology companies competing in the mortgage space (including PromonTech!) We’re just beginning to realize the many opportunities to improve efficiencies.

JOHN PAASONEN: Twenty four months ago, my answer may have been different. But today, it is a thrill and a privilege to participate in the transformation occuring in the mortgage industry. For nearly a decade — in the wake of the financial crisis, the passage of Dodd-Frank, the creation of the CFPB, and major regulation like TRID — investment dollars were poured into compliance, not advancement. I’m incredibly encouraged by the increasing openness to the work of many innovators, from both inside and outside the industry, to incite progress. Innovation is alive and needs to be spurred forward.

PHIL RASORI: Post the mortgage crash and subsequent introduction of a myriad of new rules and changing regulations with Dodd-Frank and enforcement by the CFPB became a huge concern and instantly drew everyone’s attention to compliance adherence, which arguably distracted from technology innovation. Now more than ever, the mortgage industry is on a fast-track to achieve far-reaching changes via new technology, which is being fueled by anticipated demand for borrower automation and lenders’ positioning themselves to remain competitive, thus driving innovation across the board. We’re not only thriving right now, but some say we’re drinking from a firehouse. Again, adoption will be key to these innovations becoming reality.

SANJEEV MALANEY: The industry is ready for innovation and we’re starting to see major transformation impacting the end-to-end mortgage process. New companies are flush with venture capital. Lenders are funding innovation centers using their own capital investments. People from outside the industry with diverse sets of skills and experience are being hired to drive this transformation. We’re going to see more innovation in the next twelve months than we’ve seen in years.

KELCEY T. BROWN: Innovation in the mortgage industry is thriving thanks to the continuous flow of new ideas and products, and growing interest in technology from lenders. We’re seeing point-of-sale products become more intuitive and borrower-friendly, and financial data retrievers’ rules engines making loan processing faster and more efficient. Lenders’ interest in digital mortgages continues to grow as today’s home buyers lean more and more toward a digital borrowing experience. That said, a great deal of the industry still needs to transition to digital mortgages. Growing interest, paired with a sizable unaddressed market, makes a perfect storm for thriving innovation.

As much blame is put on regulation for technical stagnation, we like to thank it. It put our backs against the wall and forced companies to make major changes that they couldn’t handle or weren’t willing to take on. It led to that consolidation, and most importantly, it led to massive amounts of investment in what we like to call “foundation over feature” and that has helped increase transparency, accountability, and more. It’s what laid the groundwork for all the innovation you are seeing today.

ADAM BATAYEH: Innovation is thriving, thriving, thriving. If this were 2013, the answer would have been massive decay. The thing is, that decay was necessary and led to all of the innovation we are seeing today.

LUKE WIMER: Mortgage is a bit late to the innovation party compared to payments or online banking, so we are still more focused on automation and efficiency and just starting to affect true change to the consumer experience.  But we should not underestimate the potential for change and innovation. The industry has been gearing up over the years with steps toward digitization, creative partnerships, driving new standards, and these will allow a fast pace of change once the scale is tipped. I am thinking of how one of Hemingway’s characters went bankrupt: “Gradually, then suddenly.”

NEIL FRASER: Innovation in the mortgage industry is definitely thriving today. For the last twelve years, we at Paradatec have focused on building our mortgage technology through advanced OCR using artificial intelligence and an ability to learn over time and provide increasingly more significant innovations.

In the last twelve years, we have not only increased our ability to innovate, but have further greatly accelerated this ability to innovate from our partnerships and integrations with others in the industry. This is a trend we expect to continue for years to come.

GARTH GRAHAM: I think that innovation is truly accelerating, but too often people define innovation as simply technology. They think the next software product, the next shiny object will transform their business. At STRATMOR, we often see companies with good people and good process being able to overcome substandard technology, but rarely do we see a company with great technology that can overcome poor people or process. This does not mean tech is not important, in fact I believe that we don’t spend enough on technology — but if you don’t have the people and process lined up to implement change, then the technology alone will not drive the results you seek.

Q: Lastly, if there was one innovation that you would say the mortgage industry desperately needs to happen over the next twelve months, what would it be?

MICHAEL KOLBRENER: All of us, in lending, need to evangelize the potential of technology and encourage our user audiences to understand the role it can play in the future of originations. Over the next 12 months, we need to keep pushing data providers to make applicant data more readily available, particularly around income verification (and tax supporting docs). At PromonTech that’s where we believe that next big breakthroughs will come.

JOHN PAASONEN: We’re just beginning to see the early signs of moving beyond “digital paper.” Over the last 10 years, the mortgage industry has largely taken a paper-bound process and digitized it. A loan application acted much like its paper counterpart, just with the ability to type answers, for example. In the next 12 months, regulators, lenders, investors and innovators need to continue to push forward with initiatives to all-together remove the tremendous burden on borrowers, loan officers, processors, appraisers and others created by our legacy of paper-driven process. The winners will be those who realize first that data availability and fidelity is too rich, and computing power too strong, to be ignored.

SANJEEV MALANEY: While we have witnessed significant innovation over the past year, there remains a series of key friction points that must be addressed for the mortgage process to truly be reinvented.

Perhaps the most critical enabler in our space (not unlike other verticals) is the use of data, and by extension, how to extract insights from that data to make faster and better decisions, which is where Capsilon is focusing its innovation efforts. It is worth noting, however, that while “big data analytics” has suddenly become a go-to catchphrase for many in our industry, our own experience in the space suggests that the challenges associated with implementing and realizing value from big data are more subtle.

For the past 14 years, we’ve been helping clients collect, validate and leverage the data to drive automation and improve productivity in the mortgage process. Those who succeed will master the harvesting and delivery of relevant data at the right time so every user (borrowers, LOs, underwriters, processors, closers) in the loan process are provided the information and tools they need when, where, and how they need it to remove friction in the loan process.

KELCEY T. BROWN: Faster adoption of digital mortgages. The faster lenders adopt digital mortgages, the better off their business will be, from their balance sheet to borrower satisfaction. It is evident that through technology, lenders can close loans faster, with more efficiency, for a better cost. At the same time, that boosted efficiency means borrowers get in their homes faster and are more satisfied with their mortgage experience. Real estate agent satisfaction grows as their listings get filled and closed faster as well, which can boost referrals. Imagine that your company waited to adopt email, how would that have worked out?

ADAM BATAYEH: To use our internal phrase again: foundation over feature. It seems that everyone is racing to be first with the next big thing and it’s very tempting to follow trends. At the same time, it can confuse lenders and can make it harder on them to make a decision. We can create all the new features we want, but if they’re hard to integrate and implement, we’ll find ourselves pigeonholed.

An example I can give is Windows vs. Mac OS and their respective web-browsers. The Operating System was the “foundation” and the web-browsers were built as “features”. Buy the OS, get the browser for free. The browser would work flawlessly with its respective OS.

Google Chrome came out of nowhere as it’s “foundation vs. feature” priority was the reverse. Knowing the future was in the Cloud, they built an agnostic browser, which resulted in Windows and Mac users collaborating in a new way. As Microsoft and Apple built browsers that were feature-focused and complimented their foundational Operating Systems, Google was busy playing the agnostic game and with Chrome has quickly emerged as the leader.

LUKE WIMER: There are so many different needs. I would like to see clarity on where federal regulators are headed. I would like to see some of this mortgage application automation technology make its way further into the loan origination process. We appreciate the need for increased security and rigor in vendor management, and are pushing for increased acceptance of SaaS and the tools many of us are making available to offer plug-in solutions. I believe it will be a collection of innovation and providers, which will be needed to really transform. It is a resilient sector that rolls with the punches, and is complex enough that no single innovation will win or solve the problems of every player. Therefore I am glad there are many of us working on improvement from different angles.

NEIL FRASER: Accurate data which reflects the terms, borrower, lender, and property information from Mortgage loans’ source documents will continue to be a critically important requirement. As a result, there will continue to be a need to audit the accuracy of the data as it relates to the legally definitive required source documents. As loans and their servicing rights are passed from investor to investor and servicer to servicer, a more efficient process for efficiently and accurately onboarding these loans as these transactions occur is desperately needed. At Paradatec, we are continuing to innovate and this need is one of major focus for us in the coming year.

GARTH GRAHAM: So, there certainly has been a significant amount of technology innovation at the point of sale — dynamic applications are more commonplace.  I think it’s what occurs BEFORE the application that is critical for the next year.  The reason is that we are pivoting to a heavy purchase market — only 25 percent refinance — down from roughly 50 percent refinance (or more) for the past 20 years.  This is a MAJOR difference and will really stress originators who are not equipped to handle purchase opportunities.  At STRATMOR we have a methodology of creating a digital roadmap for lenders, and we often find that they are not adequately valuing the tools that are required prior to application. We refer this to Lead Engagement — the ability to interact with purchase consumers across multiple touch points and for longer periods of time.   We also feel that price competition will become more acute going forward.  Thus, we think innovation needs to tackle the functions that typically are considered CRM functionality — managing customer interactions over long periods of time — as well as presentation to clearly show what customers are going to pay for their mortgages.

Also, we think that there is going to be a lot of industry consolidation, both for mortgage origination companies and for the technology vendors that support the lenders it.  At STRATMOR we are active in M&A and have never been busier with lenders looking for strategic alternatives, and with buyers who are well positioned for the future, and are actively looking to acquire other entities to gain market share during this difficult period.  Vendors are finding a similar climate, and some smaller vendors are seeking capital partners. New capital is entering the market to acquire additional technology capabilities.

PHIL RASORI: I hate to use what many feel is an over-used term these days, but acceptance of the “digital mortgage” and what it encompasses will be key to much of what is to follow. We are seeing that successfully be streamlined right now at the point-of-sale for borrowers. Digitization of the secondary market is also picking up speed, which is what we at MCT have been focused on. Technology integrations are essential for lenders to keep systems operating in real-time, while automation is streamlining processes. Digital whole loan trading is revolutionizing the loan sale process. Embracing the digital mortgage at every step in the process is helping lenders to increase efficiency and profits.

And The 2018 Winners Are …

Prominent mortgage executives gathered to see who the Executive Team of PROGRESS in Lending named the top industry innovations of the past year at the Eighth Annual Innovations Awards Event. This honor is the Gold Seal when it comes to recognizing true industry innovation. All applications were scored on a weighted scale. We looked for the innovation’s overall industry significance, the originality of the innovation, the positive change the innovation made possible, the intangible efficiencies gained as a result of the innovation, and the hard cost and time savings that the innovation enables industry participants to achieve. The top innovations winners are:

Lodasoft

PROGRESS in Lending has named Lodasoft a top industry innovation. To address the CFPB requirements of improving the borrower experience, the first big wave of innovation has come out of Silicon Valley. Hundreds of millions of dollars have been invested in the consumer facing aspect of the borrower application. The term “digital mortgage” has been coined and a flood of shinny new mortgage websites and apps have been created to deliver borrowers an Amazon type borrower experience. However, the majority of dollars invested, have focused almost solely on the online application for borrowers. The problem is that mortgage lending is significantly more complicated than just a shinny new app. The right digital mortgage platform helps to drastically reduce the chaos in daily lending processes while improving communication to help lenders close more loans faster. Therefore, in 2017 Lodasoft introduced its truly innovative “Digital Mortgage Platform” featuring Intelligent Loan Manufacturing to address these industry challenges head on.

Capsilon

PROGRESS in Lending has named Capsilon a top industry innovation. A truly innovative mortgage process means more than borrower-friendly loan selection and document submission, it is an end-to-end solution that keeps all stakeholders in the loop throughout the process. In 2017, Capsilon introduced Point of Sale Portals (POS), enabling the creation and delivery of quality loan packages that streamline every process step from application to closing. Capsilon’s POS Portals are powered by Intelligent Process Automation to supercharge loan production from intake to delivery of complete and compliant loan packages. This is an industry first, dramatically improving loan quality and speed, while drastically reducing production costs. Lenders are pressed to meet the challenges of production, compliance and profitability, as well as soaring borrower expectations. Instead of simply streamlining the traditional loan process, in 2017, Capsilon launched Point of Sale Portals that are fully integrated with its patented back-end technology to deliver on the promise of a true digital mortgage.

WebMax

PROGRESS in Lending has named WebMax a top industry innovation. According to Inc. Magazine, Millennials make up 66% of first-time homebuyers and 66% of them plan to buy a home in the next 5 years. Moreover, the same report found that Millennials associate home ownership with the American Dream more than any other generational demographic. The October 2017 composite forecast of Fannie Mae, Freddie Mac, and the Mortgage Bankers Association for 2017 mortgage origination volume is approximately $1.8 trillion. If Millennials compose 50% of this mortgage volume, and two-thirds of them apply online via digital applications, that represents $600 billion in digital mortgage origination. This number is massive. Better yet, it’s conservative. Millennials expect mobile-responsive mortgage lending sites and applications with a responsive layout from their potential lender. They want their mortgage application to be as easy as buying a t-shirt from an online retailer. Therefore, WebMax developed its innovative point-of-sale solution in 2017, called START, to not only meet the demands of borrowers, but to exceed their expectations and revolutionize the entire process. With START, WebMax provides a single location for the loan to exist for both the borrower and loan officer. There’s no shifting documents back and forth or waiting for verifications. START’s integrations to mission-critical third parties allows for the technology to do the work, streamlining workflows, reducing costs, and minimizing frustration.

Paradatec

PROGRESS in Lending has named Paradatec a top industry innovation. Other OCR solutions typically expect relevant data points to consistently appear in the same locations (or ‘zones’) on a document. If the data shifts due to changes in layout (again, think of bank statements), the zone-based approach will fail unless another layout template is created, making for a greater administrative burden with these solutions. A high volume, scalable OCR automation initiative requires the flexibility of Paradatec’s Advanced Mortgage OCR solution to process an unlimited number of document layouts without needing to develop specific templates for each layout variation. This capability is unique to Paradatec and a vital feature for creating an effective unstructured document classification and data capture solution. Paradatec’s Advanced Mortgage OCR solution is designed to make mortgage lending faster and more accurate. In 2017, Paradatec’s Mortgage OCR solution processed over 1,500,000,000 images (representing over 2,500,000 loans), helping lenders and servicers streamline their onboarding and compliance obligations.

Asurity Technologies

PROGRESS in Lending has named Asurity Technologies a top industry innovation. In 2017, MRGDocs was acquired by Asurity Technologies and introduced MRGDocs’ cloud-based platform which revolutionized the security of its dynamic document generation software featuring a secure system infrastructure to increase the protection of consumer data and deliver safer, faster, and more user-friendly systems while maintaining the content and support quality that has long been the hallmark of MRGDocs’ services and document packages. This solves for several mortgage industry challenges: the costs to secure big data, protecting the myriad of personal identification information collected, and managing compliance through a hyper secure platform. In 2017, MRGDocs built a comprehensive data security capability on a robust foundation that allows for the type of growth and expansion needed to serve even the largest of financial institutions, implementing a hyper-converged, virtual server platform with 24/7 SIEM-managed security monitoring.

STRATMOR Group

PROGRESS in Lending has named STRATMOR Group a top industry innovation. MortgageSAT is an online customer satisfaction measurement program that allows consumers to provide direct feedback on their satisfaction with the mortgage process, and provides lenders actionable insights from the results, all available via an online portal. Put simply, it’s Business Intelligence based on consumer insights. Why did STRATMOR create MortgageSAT? For many years, mortgage lenders have struggled to capture actionable feedback from borrowers by means of post-closing email or closing-table-completed surveys. By means of its powerful borrower satisfaction management tool called MortgageSAT, developed in partnership with the CFI Group, STRATMOR has led the way to fundamental change the way lenders manage and apply borrower feedback. MortgageSAT is the first and only borrower satisfaction monitoring tool to score satisfaction at all levels of the organization as regards retail, consumer direct and broker production. As a consequence, many MortgageSAT clients tie their employee reviews and, in some cases, compensation both to these scores and a review of borrower comments. When everyone’s performance review includes a measure of their contribution to borrower satisfaction, a borrower-centric culture is fostered that is aligned with the emerging competitive paradigm of “optimizing the borrower experience.”

Maxwell

PROGRESS in Lending has named Maxwell at top industry innovation. No matter how digital the process, every mortgage is saddled with documents and data, over 500 pages, according to the Mortgage Bankers Association. As a result, an average of 20 days during the mortgage process is consumed by the search, preparation and review of those documents. Maxwell, the leading digital mortgage solution for small and midsize lenders, removes this friction with its platform. Sitting as the digital interface between the lender and their borrowers, Maxwell manages collaboration through the loan process, significantly reducing cycle times and driving delight. Originating teams on Maxwell are able to focus on what they do best, advising and coaching clients through the largest transaction of their lives, while Maxwell’s technology handles the rest. As one head of production attested, “Maxwell allows us to focus on what we love: working with real people. While loans get done faster and my team is happier.”

PromonTech

PROGRESS in Lending has named PromonTech a top industry innovation. The Borrower Wallet is the first offering from Promontory MortgagePath’s technology arm. From a lender’s perspective, the Borrower Wallet captures leads and fosters borrower/lender collaboration to drive enterprise efficiency and improve loan pull-through. In addition, its built-in collaboration tools deliver high-quality data and documents needed to feed and accelerate the downstream underwriting process. As a white-label offering, the Borrower Wallet makes the latest technology accessible and affordable to mid-size and smaller lenders, enabling them to compete with mega lenders. PromonTech’s culture of mutual respect between “techies” and mortgage industry experts made it possible to create a mass-market POS where both consumer and lender needs are equally important. The Borrower Wallet is not the first digital POS, but it’s the first to engage consumers while anticipating lender needs in such a balanced way. It combines creative design, industry analysis and data governance to create a unique user experience.

MCTlive!

PROGRESS in Lending has named MCTlive! a top industry innovation. Over the past year, MCTlive! developed a major mortgage technology advancement with the addition of what the company branded its “Bulk Acquisition Manager” (BAM) solution, which is accessible via MCTlive! BAM is a Digital Loan Trading solution. BAM completely automates the process of packaging and transferring bulk loan bids, which benefits investors, lenders and MCT’s team of in-house mortgage loan traders. The result is a much quicker pricing process for bulk bid tapes, greater data security, better communication between counterparties, increased transparency for all parties, process consistency for investors within their existing platform, and centralization of data. BAM helps facilitate digitize loan trading on the secondary market. The effectiveness of the BAM technology has already gained 100% adoption by the ENTIRE investor community on the secondary market — across the board. And the level of transparency it offers between buyer and seller is hugely attractive and makes investors and lenders feel at ease.

Ellie Mae

PROGRESS in Lending has named the Ellie Mae Encompass NG Lending platform a top industry innovation. The Encompass NG Lending Platform allows lenders, service providers, and independent software vendors the ability to build custom applications in the cloud, integrate external systems and data, and extend Encompass in order to meet any and all industry challenges. Mortgage lenders and mortgage service providers can build, integrate, or customize solutions, and get them to their customers and market quickly. Lenders, partners, and third-party providers gain access to data and systems across the mortgage ecosystem. In the end, all participants can easily view and share loan date, sales pipeline, loan events, documents, and order services. A shared system of record allows all parties in the loan process to see the same up-to-to-date information in the same format. Everyone in the ecosystem can easily share, interact, and collaborate without having to create and support new channels.

 

 

The Shifting Landscape

According to STRATMOR Group’s Senior Partner Nicole Yung, mortgage technology is changing. These observations were recorded in the firm’s 2017 Technology Insight Survey (TIS). Over the past three years, the TIS has become the mortgage industry’s go-to reference for unvarnished peer views on major commercial-off-the-shelf (COTS) loan origination systems (LOSs) relating to market share, overall satisfaction, functional performance, implementation experience and more.

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However, as Yung explained, while still an invaluable resource for LOS intelligence, the 2017 TIS has expanded to become a broad-based mortgage technology survey. “While there have been many significant advances in mortgage technology over the years, most of were focused on improving lender processes and productivity, not on fundamentally changing the borrower’s experience,” said Yung.

“But, as the publicity surrounding Quicken’s Rocket Mortgage and the Agencies’ stated commitment to Day 1 Certainty attests to, Digital Mortgage (DM) may well be a game changer that no lender can afford to ignore. Recognizing this, STRATMOR has expanded our TIS survey to include an entire new section addressing lender adoption of Digital Mortgage technology.”

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So, how is the mortgage technology landscape changing? “Today, we are in the midst of a technological shift that is fostering this new competitive paradigm, one that is driving how a consumer gets a mortgage and how a lender gets to the consumer. While most lenders think of DM solely in terms of the ‘how’ of customer interaction, STRATMOR’s functional view of DM extends to how a lender uses consumer/borrower data in its marketing activities. In this ‘sea-change’ environment, getting the right technology – and using it in the right ways – takes on special importance,” answered Yung.

“The new 2017 TIS is the only independent industry technology survey gathering crucial data on lenders’ experiences with their LOS and other origination systems in the context of DM as well as more traditional lending operations. At STRATMOR we view the TIS and report not so much as a product, but as an essential industry utility. It can only continue to serve this purpose if lenders participate, whether or not they buy the detailed TIS report.”

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Any resource that can help lenders better understand technology is welcome in my view.

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.

STRAMTOR Report Guides Lenders Through Digital Lending

This month in the In Focus section of the October edition of its STRATMOR Insights report, STRATMOR Senior Partner Garth Graham explores the steps lenders should take to make the best decisions about their digital investments. As Graham explains, he has observed that many lenders struggle with a clear sense of the problem they are trying to solve with digital technology, beyond the general idea of “making the mortgage process better.”

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To help lenders as they evaluate digital solutions, Graham offers five tips that can serve as a pre-investment assessment for making the most of digital technologies. Among those tips, he points out that lenders should take the time to define the business case for any investments they are planning. “Without a very specific business case, it is difficult to generate the additional revenue or lower expenses to the level necessary to generate a return on investments in new technology,” said Graham. He also shares important insights on current market realities and future market scenarios lenders should consider as they create a specific business case. “Of course, it’s fine to want the mortgage process to be better in general, but lenders should get very specific about how they want the process to be more efficient, lower cost, and/or provide higher revenue per loan,” Graham continues.

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Also included in Graham’s tips for making the most of digital technologies is his advice that lenders make sure that any solutions they consider will work well for their high producers. The latest STRATMOR Originator Census Survey shows that roughly 40 percent of originators generate 80 percent of the business. “What this means is that if lenders can increase the production of their top-tier originators by 25 percent, this production increase would equal the volume generated by the bottom 60 percent,” said Graham. “With such productivity gain potential, lenders should consider how the digital technology tools they are evaluating can help make top originators more productive.”

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In addition, this month’s report features highlights from the latest STRATMOR Originator Census Survey, which provides lenders with valuable insights into the makeup of their sales force and how it compares to peer lenders. Looking at how originator age varies between retail and consumer direct originators, the survey shows that, on average, consumer direct originators are ten years younger than retail originators. The average age of consumer direct originators is 37 years versus 47 for retail originators. While there are retail originators under the age of 30, their numbers are not proportional to the under 30 bracket in the consumer direct origination space. More Millennial hires are occurring in consumer direct call centers where they work in a centralized environment that facilitates training and coaching.

This month’s report also announces that the next STRATMOR Originator Census Survey will open in January 2018. Survey participants receive a report that includes 15 pages of individualized results. Any originators interested in learning more should contact STRATMOR here.

Click here to download the October 2017 edition of STRATMOR Insights, and to sign up to receive the report each month, please click here.

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.

Parsing The Data

While STRATMOR has always been a strong proponent of lenders using internal performance data to manage and improve their performance, according to senior partner Dr. Matt Lind, it is only by comparing peer-to-peer performance, i.e., benchmarking, that lenders will gain the most accurate and useful assessment of their competitive performance.

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“Mortgage lenders have utilized virtually the same metrics to assess performance for the past 30 years,” said Lind. “Considering how dramatically our market has changed during this time, STRATMOR felt it necessary to enhance the way lenders can measure performance versus peers. The result is a new approach, one based on a substantial lender-level data that enables lenders to place the efficacy of their operations in the context of peer performance on the same characteristics.”

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Lenders can apply STRATMOR’s new method for benchmarking production or servicing performance to virtually any traditional performance metric, from direct production margin and direct origination expense per loan to loans serviced per servicing FTE and more.

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“With common benchmarking comparisons, lenders are only able to make comparisons to the averages,” Lind continued. “This leads to statements like: ‘My direct retail origination expense per loan is $200 less than average,’ but with our new method, lenders can now determine how a value measures up or down in terms of standard deviations from the mean. The new method enables lenders to better judge performance, which is reflected in statements such as: ‘My direct retail origination expense per loan is equal to or better than 62 percent of lenders.’ The understanding gathered from statements like the latter are much more meaningful to our clients than the understanding derived from internal comparisons alone. The bottom line is that it is significantly more valuable for lenders to be able to measure against peers, rather than to simply measure against internal metrics.”

STRATMOR also details select findings from its 2016 LOS Technology Insight Survey (TIS), specifically, lenders’ opinions on the efficacy of functionality in their respective Loan Origination Systems (LOS). Less than 25 percent of lender participants indicated that the compliance tools in their LOS were ‘Highly Effective’ and afforded them a competitive advantage. Between 40 and 50 percent of participant lenders rated their LOS’ compliance functionality as ‘Adequately Effective.’

Additionally, STRATMOR’s TIS findings show ‘Lead Generation/Management’ as the lowest rated functionality. Only four percent of lender participants stated that their LOS provided ‘Highly Effective’ lead generation capabilities. ‘eSignature’ and ‘Product/Price/Eligibility Decision Engine’ capabilities were also among the lowest rated for effective functionality. A continued lack of functionality satisfaction in these important capability areas will most likely drive lenders to seek alternatives.

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.

Less Than 25% Of Lenders Rate LOS Compliance Functionality ‘Highly Effective’

STRATMOR Group released the September edition of its STRATMOR Insights report, with a focus on the company’s approach to measuring lender performance. While STRATMOR has always been a strong proponent of lenders using internal performance data to manage and improve their performance, according to senior partner Dr. Matt Lind, it is only by comparing peer-to-peer performance, i.e., benchmarking, that lenders will gain the most accurate and useful assessment of their competitive performance.

Featured Sponsors:

 

 
“Mortgage lenders have utilized virtually the same metrics to assess performance for the past 30 years,” said Lind. “Considering how dramatically our market has changed during this time, STRATMOR felt it necessary to enhance the way lenders can measure performance versus peers. The result is a new approach, one based on a substantial lender-level data that enables lenders to place the efficacy of their operations in the context of peer performance on the same characteristics.”

Featured Sponsors:

 
Lenders can apply STRATMOR’s new method for benchmarking production or servicing performance to virtually any traditional performance metric, from direct production margin and direct origination expense per loan to loans serviced per servicing FTE and more.

Featured Sponsors:

 
“With common benchmarking comparisons, lenders are only able to make comparisons to the averages,” Lind continued. “This leads to statements like: ‘My direct retail origination expense per loan is $200 less than average,’ but with our new method, lenders can now determine how a value measures up or down in terms of standard deviations from the mean. The new method enables lenders to better judge performance, which is reflected in statements such as: ‘My direct retail origination expense per loan is equal to or better than 62 percent of lenders.’ The understanding gathered from statements like the latter are much more meaningful to our clients than the understanding derived from internal comparisons alone. The bottom line is that it is significantly more valuable for lenders to be able to measure against peers, rather than to simply measure against internal metrics.”

This month STRATMOR also details select findings from its 2016 LOS Technology Insight Survey (TIS), specifically, lenders’ opinions on the efficacy of functionality in their respective Loan Origination Systems (LOS). Less than 25 percent of lender participants indicated that the compliance tools in their LOS were ‘Highly Effective’ and afforded them a competitive advantage. Between 40 and 50 percent of participant lenders rated their LOS’ compliance functionality as ‘Adequately Effective.’

Additionally, STRATMOR’s TIS findings show ‘Lead Generation/Management’ as the lowest rated functionality. Only four percent of lender participants stated that their LOS provided ‘Highly Effective’ lead generation capabilities. ‘eSignature’ and ‘Product/Price/Eligibility Decision Engine’ capabilities were also among the lowest rated for effective functionality. A continued lack of functionality satisfaction in these important capability areas will most likely drive lenders to seek alternatives.

A New Servicing Approach

STRATMOR Senior Partner Michael Grad explored the ways in which economic opportunities inherent in a superior mortgage servicing operation can raise the stakes on the transfer of servicing (TOS) to new providers and/or systems. Recognizing the critical importance of successful TOS, STRATMOR has developed a standardized, “battle-tested” TOS methodology for its mortgage industry clients. As Grad explained, it is not surprising how much of the industry’s focus has shifted to mortgage servicing operations and cost containment over the last several years.

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“Servicing operations have risen in prominence over the last several years for a variety of reasons,” Grad said. “Not the least of which has been the increased scrutiny by both state and federal regulatory authorities which has in turn contributed to a dramatic increase in the direct unit cost of servicing a loan. Likewise, the regulatory imbalance between bank and non-bank servicers – with the latter subject to fewer constraints – has increased the size and frequency of bulk servicing transfers from bank to non-bank servicers. At the same time, the coupling of GSE fee parity between large and smaller lenders with historically low interest rates has made retention of servicing rights far more attractive to many mid-size and smaller lenders. Near-term, STRATMOR expects an increase in bulk servicing transfers as some of these lenders bring their servicing in-house while others sell servicing rights to capitalize on increased portfolio value or offset potentially lower origination income.

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“We analyzed the relationship between borrower retention and the value of mortgage servicing rights, finding that retention rates of 50 to 75 percent can increase the economic value of an MSR by 33 to 50 percent.” Grad continued. “There is significant borrower relationship value at stake when a large servicing portfolio is transferred from one platform to another.  For the borrower, a smooth transfer is one that’s invisible – no interruptions, missed payments or degradation in customer service and most importantly, no errors. Since satisfaction with a current lender is a key driver of the likelihood of borrower retention, mismanaged transfers can directly impact the value of purchased MSRs. For existing owned servicing portfolios, a botched TOS from one subservicer or platform to another can destroy years of relationship value. That being the case, a TOS process and methodology must be established that facilitates the transferring of borrower relationships, while also successfully transferring loan data.”

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Understanding that it is critical to assure such transfers are expertly performed in all their complexity, STRATMOR has developed a seven stage TOS methodology, detailed in Grad’s In Focus piece in this month’s STRATMOR Insights. The process leads to successful borrower-centric, fact-based and disciplined servicing transfers, as perceived by the transferor servicer, the transferee and, most importantly, the borrower. STRATMOR’s TOS Methodology was recently put to the test by a top-tier lender in the transfer of hundreds of thousands of loans from one subservicer to another. On every Key Performance Indicator – from borrower contact, communications and complaints, to payment processing and subsequent delinquencies – the results exceeded the targets established early-on in the project.

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.

Eyeing Future Happenings

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STRATMOR Group released the May edition of its STRATMOR Insights report. This month, STRATMOR Senior Advisor Rob Chrisman looks into the changing credit landscape, and what that means for mortgage originations. As Chrisman explained, after perhaps overcorrecting in the wake of the 2008 financial crisis, underwriting standards are beginning to loosen once again in an attempt to broaden the reach of the mortgage market to more borrowers.

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“STRATMOR data shows that after the financial crisis in 2008, borrowers’ average credit scores rose significantly,” Chrisman said. “It also shows a material decline in those scores, beginning in 2013, driven primarily by non-bank lenders. As of 2016, overall borrower FICO scores averaged 729, the lowest since 2008, before the bottom fell out of the market. Bank originated loans saw average credit scores of 743 last year, as opposed to just 719 for independents. A diminishing pool of higher credit borrowers, who had been fueling the majority of purchase and refinance lending, has shifted market activity to lower credit groups. More generally, the mortgage industry is dealing with slower growth, due to a variety of factors, including demographic and lifestyle changes and home affordability. Looser underwriting standards – with risk-based pricing – are a way for lenders to counter those headwinds.

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“We’re already seeing lenders adjusting guidelines to suit borrowers with higher loan-to-value and lower credit score mortgages becoming more prevalent,” Chrisman continued. “Likewise, lenders – and investors – are advertising programs aimed at opening up credit to borrowers previously unable to access the mortgage market. At the same time, forthcoming reporting changes by credit bureaus are expected to improve the credit scores of tens of millions of borrowers, bringing them into acceptable ranges. Together, these developments hold the potential to unleash first-time homebuyer demand. The question is, will this be enough to boost mortgage originations? Unfortunately, probably not, at least in the near-to-mid-term. Originators have told STRATMOR that housing constraints are a bigger impediment to volumes than a lack of borrowers.”

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This month’s report also features select findings from STRATMOR’s recent Spotlight Survey on perceived benefits and barriers to adoption of the Digital Mortgage. Based upon respondents’ expectations of the top benefits of adoption – increased borrower satisfaction, faster cycle times and increased transparency for borrowers – it is clear that lenders view Digital Mortgage as a way to improve the borrower’s experience. Systems and vendor integration and difficulty in getting loan officers to adapt to new processes and behaviors were both cited as leading barriers to adoption, as was cost.

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.

LendingQB Earns High Marks In Vendor Satisfaction, Customer Support In Annual STRATMOR Report

LendingQB has earned high marks for its vendor satisfaction and customer support in STRATMOR Group’s most recent Technology Insights survey report.

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Per STRATMOR’s LOS Technology Insights survey, LendingQB included roughly 11% of the respondents amongst loan origination software (LOS) providers, making it the second largest in terms of this survey’s overall lender respondents. Likewise, LendingQB earned an end user effectiveness rating of 93% and exceeded functionality expectations for 22% of its respondents – top marks that surpassed even proprietary systems. Overall, LendingQB achieved a vendor satisfaction score of 96% and the highest marks for user experience among the major LOS providers included in the report.

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“Lenders need more than LOS technology, they need a vendor that is committed to their success,” said Tim Nguyen, President of LendingQB. “We have almost two decades worth of experience in providing SaaS technology to businesses, so we know better than anyone the importance of customer support in a SaaS environment.”

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LendingQB’s LOS is completely web-based and designed to provide lenders a flexible, innovative workflow. Its open-architecture application protocol interface (API) enables lenders to select the tools that best help their efficiency. In addition to the technology, LendingQB provides lenders with a combination of workflow analysis, best practices and training to help fully adopt and optimize the LendingQB LOS.

“The STRATMOR Group Technology Insights survey findings are based on 266 participants ranging in size from under $250 million to $10 billion in annual volume. These results reflect lender opinions on how they view their success with LOS technology when vendors are actively engaged in helping them meets their business objectives,” Nguyen said. “LendingQB’s lean lending strategies, best of breed integrations, and focus on ‘adoptimization’ reflects the level of support lenders need and value in addition to reliable technology.”

Learn more at http://www.lendingqb.com/TopRatedLOS.html.

STRATMOR Group is a mortgage industry advisory firm that offers a range of programs designed to provide lender CEOs and senior executives in sales, marketing, technology and operations with comprehensive performance benchmarking data and a full spectrum of expert mortgage lending consulting services. The firm serves more than 250 companies operating in the sector and provides consulting on strategies and actions to improve growth and profitability, reduce risk or position themselves to make an acquisition or sell the company. For more information, visit http://www.stratmorgroup.com.

LendingQB is a provider of Lean Lending solutions. The Lean Lending solution consists of a 100 percent web browser-based, end-to-end mortgage loan origination system, best of breed integrations with key industry partners and ‘adoptimization’ services that result in faster cycle times and lower costs per loan. For more information, please call 888.285.3912 or visit http://www.lendingqb.com.

Are LOS Companies Ready For The Digital Mortgage?

As the industry prepares to gather for the upcoming MBA National Technology Conference in Chicago, STRATMOR Senior Partner Garth Graham presents an analysis of two years of Technology Insights Survey results data to assess the readiness of the current loan origination system (LOS) landscape for the coming age of the Digital Mortgage.

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“When looking at STRATMOR Technology Insight Survey results data, we see lackluster satisfaction with LOSs,” said Graham. “That’s not surprising – it’s old news. But when considered in the light of the pressing demand for digital mortgage capabilities, the areas in which today’s originations systems fall short become even more glaring. When STRATMOR is consulting with clients – typically within the context of reengineering or establishing new origination platforms – we work toward implementing specific digital mortgage functional capabilities organized primarily around sales and fulfillment processes.  Very few can currently be found in a commercial, off-the-shelf LOS. Rather, they’re most often specialized applications that need to be hooked up to the system. Where they are currently available, satisfaction levels pale even behind those of LOSs in general.

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“To be fair,” Graham continued, “the effectiveness of any LOS depends on both the system’s functional capabilities and the skill with which the system is deployed. Regardless of where the fault lies, LOS systems are not delivering what they could. This only becomes more pronounced when one considers the functional capabilities necessary for the digital mortgage process. In light of STRATMOR’s Technology Insight Survey data, technology vendors need to carefully consider where they are in the mortgage technology ecosystem, and how they will compete in the future, because the status quo as of today is insufficient. Likewise, lenders need to determine their current state of technology and from there, develop their own individual roadmap to the future.”

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The 2017 STRATMOR Technology Insight Survey launches the last week in March and will include expanded questions on LOS vendor support and lender opinions on cybersecurity. To participate, click here.

This month’s report also looks at MortgageSAT borrower satisfaction data to help quantify the relationship between certain practices related to the mortgage closing and levels of borrower satisfaction. Seemingly minor events – making contact with the borrower prior to closing, or having the closing begin on time as scheduled – can have a significant impact on borrower satisfaction. Among the majority of borrowers who are contacted prior to closing, for example, average satisfaction scores a 93 out of a possible 100. For the roughly eight percent of borrowers who are not contacted, satisfaction plunges to just 61, a 32-point differential. Likewise, for the 93 percent of borrowers whose closing starts on time satisfaction ranks a 92, as compared to a score of 76 for those whose closing started late.

Click here to download the March 2017 edition of STRATMOR Insights, and to sign up to receive the report each month, please click here.

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