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The Drawbacks Of Developing Your Own Digital Mortgage Solution In-House

In today’s thriving mortgage industry, lenders are jumping at the chance to implement digital point-of-sale applications (POS). While some lenders have made the decision to develop their own application and website in-house, other lenders have taken the initiative and devoted this job to experts in the software development space to handle. In doing so, lenders assure that they create a digital mortgage platform that both benefits their borrowers and reduces operating costs.

Building a digital mortgage solution from the ground up is not as easy as it may sound. It is 2018 and technology has grown rapidly over the last ten years or so, becoming more complex and involved. As it continues to change, we will be faced with new and more in-depth challenges that we have to be readily equipped to tackle. There is nothing truly straightforward when it comes to today’s technology and quite frankly, lenders don’t have the time to develop their own advanced solution in-house. They need to be devoted entirely to the borrower, rather than grasping at straws attempting to develop their own digital mortgage solution.

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Part of having a fully developed digital mortgage solution includes a POS system. Thanks to digital POS applications, lenders can now validate a borrower’s employment, assets, and income all within a matter of seconds, which is how the mortgage approval process has been sped up.

POS systems enable lenders to give their borrowers an all new, digitally enhanced, and fully automated mortgage application that cuts operating and closing costs while saving time and energy. For example, a borrower and their loan officer can communicate back and forth through their loan portal, uploading documents, pay stubs, etc. without leaving the comfort of their living room. Due to the digital era, the borrower no longer has to go back and forth between their bank and their loan officer in order to get approved and close a deal. Whether they are on the go or sitting stationary at home, home buyers can easily apply for a loan online and get approved in a remarkable amount of time. What used to be more than a month long, ongoing process can now be done in significantly less time.

Award-winning digital mortgage solution providers are devoted full-time to developing these solutions which make them extremely difficult to replicate. Their developers are there to build, establish, and execute lenders’ websites, however their duties don’t end there. Digital mortgage solution providers are readily available to train clients on how to navigate their corporate site, branch sites, and loan officer sites as well as edit them themselves to incorporate features they may want such as adding or deleting a specific loan officer. Not only will they help you to become an expert on your own website, but they will also be there for any dilemmas that pop up. If a company is trying to build their own solutions in house, odds are that they are learning as they go; They work for a mortgage company, not a digital mortgage solution company. Therefore, they are not trained and are not as experienced as the developers who are doing this all day, every day.

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In addition, it is by no means cheaper for a lender to develop their own digital mortgage solutions in-house. The average salary for a typical senior developer is upwards of $100,000 which is approximately the amount, if not more, what they’d be paying a digital mortgage solution company. Keep in mind that you’d be expected to pay more based on their experience, as well. That is not including any other factors, such as hosting fees, server administration or what a they’d be paying for additional developers, project managers, etc. The bottom line is that development costs add up quickly.

Potential home buyers need a simpler, faster way to get a mortgage. In order to do so, there needs to be a development team solely devoted to providing the finest products on the market. Between the most up to date digital POS applications and custom website solutions, there is no need for lenders to waste time building their own digital platform.

POS applications need to revolve around efficiency. Let’s face it: not all questions on a typical 1003 application applies to every borrower. Therefore, individuals are answering questions that have nothing to do with them and doesn’t affect their loan. For example, leading applications in the industry have the ability to only provide the borrower with questions that apply to them. If a user states that they are married, another drop down box will automatically appear regarding number of dependents, and then their ages. Some borrowers feel overwhelmed with these mass amounts of questions, which is why providing them with only the questions that applies to them really matters.

Many providers run analytics on their POS application on a monthly basis. Where the industry typically has a 75% abandonment rate amongst digital POS applications, very few have as low as a 12% abandonment rate. With this being said, more borrowers are enticed to complete the application due to its overall smooth-sailing efficiency.   They can also analyze borrower behavior to see where users run into trouble in hopes of optimizing the product, allowing mortgage professionals to close more loans. This takes experience to accomplish, however. In order to complete features such as these in digital solutions it takes a full team of developers who know what they’re doing. Ultimately, a lender could be paying close to a half million when it comes to in-house development. They would need equipment, a well established team, plus the costs of managing and maintaining the solutions.

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In addition to in-house developed POS systems, one of the worst things you could possibly do is utilize the same website layout that every other mortgage professional is using. Not only does this make your website appear to be boring and unappealing to the borrower, but in-house developed websites also have a slew of other concerning issues that could affect your business as well as the individuals involved.

First and foremost, some sites that businesses are using to build their platform have security issues that could potentially put the borrower’s personal information at risk of a hacker. Some of them do not even limit login attempts, meaning that even if a hacker unsuccessfully breaches your login, your system can overload as a result. Your account can also then be suspended due to these failed login attempts. The PHP code that runs a website can also be easily exploited, which would give unwarranted access to the website. You must also keep an eye out for SQL injections where hackers try to insert data into your database in hopes of linking your site to malicious or spam websites. It’s best to avoid these horrendous problems that unfortunately do occur, and utilize a custom mortgage website where developers are trained to handle situations like these.

One of the biggest advantages of choosing a digital mortgage company rather than developing in house is being able to have a site admin manage websites for the whole team. This ensures that they are always compliant.

Aside from the extensive security problems that lenders can experience from an in-house website, they also must remember that added features like plugins, extensions, and add-ons will cost extra. As you can imagine, the price can add up in order to get the full website you really want. However, these extra fees can be avoided all together by utilizing a custom mortgage website that includes all of these services. All in all, this would be the right way to go if you want to ensure that homebuyers are going to choose you. Digital mortgage companies take their systems very seriously which is why more and more lenders are choosing them every day.

Many digital mortgage solution companies are centered around creating a lead capture friendly mortgage site with a comprehensive CMS (Content Management System), a prequalification application, member portal, LOS bi-directional sync, mobile responsiveness, and a wide variety of other features. These features help to further ensure the safety and privacy of homebuyers’ personal information. Loan officers and brokers even have the ability to use this system in order to obtain more leads online. In that way, these custom sites are always built with home buyers’ and the mortgage company’s best interests in mind. It is simply more efficient to pay a one-time fee and get exact what you want rather than finding your own developer and having to pay them more than what you’d be paying to out-source.

Remember, professionals who do this for a living will be able to do things that you’ve never even thought of, in a lot less time. Being a lending expert is one thing, but being a lending technology expert is a whole other circumstance. The main focus of a mortgage company should be on potential homebuyers, and not on their website. There are skillfully trained developers who put all of their time and energy into applications from start to finish which is why they will be more successful than any in-house development.

It’s understandable why building a solution in-house may seem like the best choice at first, but it’s important to review everything at hand before making the final decision. In the end, working with a digital mortgage company to get the full works may ultimately be the best option.

About The Author

Curt Tegeler

Curt Tegeler is responsible for providing direction for action to all employees and business initiatives. Tegeler’s main responsibilities include communicating and implementing the company’s vision and mission; leading, guiding, directing, and evaluating the work of executive leaders; formulating and implementing the strategic plan; forming, staffing, guiding, leading and managing WebMax; evaluating organizational success; and represents WebMax in civic and professional activities.

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.

The Digital POS Movement

The digital mortgage revolution resulted in a mad rush to mortgage websites and online 1003 applications. But lenders struggled to turn their new website visitors into borrowers. That’s where a digital POS factors in: A POS makes buying a mortgage like ordering a product off an ecommerce platform, at least the good ones do. With a digital POS application, mortgage companies can close more loans faster at a lower cost than traditional loan origination.

E-commerce volume increased nearly 12% y/o/y from 2016 to 2017. Expect for that same trend to follow people shopping for mortgages. According to a study by the National Association of Realtors, 44% of all homebuyers began their search online. 95% went online to gather information at some point, including 99% of Millennials and 77% of Silent Generationers. Digital home searching generated tangible results, spurring 76% of Millennials to drive by a home because they saw an online advertisement. Although the data indicates that digital is vital to capturing homebuyers of all ages, the data also demonstrates that capturing the Millennial buyer provides the most robust and lucrative opportunity for lenders.

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Millennials make up about one-fourth of the US population, signifying a 77-million-person opportunity for the mortgage industry. 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. As of 2017, Nielsen estimated that Millennials wield more than $1 trillion in annual buying power. The October 2017 composite forecast of Fannie Mae, Freddie Mac, and the Mortgage Bankers Association for 2017 mortgage origination volume reaches 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.

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Digital POS’s further impacts lenders by streamlining the loan origination process and mitigating the slowing effect of regulatory compliance. The loan origination process always stood as a long, arduous, drawn-out series of sending documents for verification, waiting to receive them back, and then reeling in borrowers to sign and approve each step of the process. Then came 2008. When the mortgage market collapsed, lawmakers dropped a bomb packed with regulations and compliance standards like Dodd-Frank, RESPA, TILA, and CFPB. According to the Mortgage Bankers Association, between 2010 and 2017, mortgages took 70% longer to close and origination costs skyrocketed 80% as the burden of regulatory compliance grew.

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But technology is turning the tides. According to a November 2017 article in The Mortgage Reports, mortgage closures averaged 43 days, down from 51 days earlier in the year — a near 16% decrease with no help from decreased regulation. With today’s most advanced digital POS, lenders need not send documents to various verifiers and wait days on end to receive confirmation. Seamless data integrations and automations engineered into digital POS’s shave days off of loan origination timeframes. As integrations and automation speed up loan processes, it also cuts costs and leads to more closed loans.

About The Author

Kelcey T. Brown

Kelcey T. Brown is Chief Strategy Officer & Executive Vice President at WebMax, LLC. Brown is responsible for developing, communicating, executing, and sustaining strategic initiatives. He acts as a key advisor to the company’s president on critical changes in the competitive landscape, internal employee development and the external business environment. Brown has worked for nine years in the Real Estate and Mortgage Technology Industry.

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.

 

 

Bringing High-Touch To High-Tech

I’m the CEO of a software company, and I’m not afraid to admit that high-tech needs high-touch in order to deliver optimal results for lenders.

Lenders invest significant amounts of capital to transition to digital, and spend time training their employees to harness their newly acquired digital mortgage platform.

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Then software and web development teams configure technology solutions that deliver on the digital mortgage promise: simplified applying for borrowers, and streamlined processes and reduced costs for lenders. Better yet, the technology continues to improve every day. It seems like every time I walk by our development team, I see one of their computer screens displaying a new feature or customization.

Take this for example: You’re the COO of a lender. You meet with a couple mortgage software providers, pick your favorite, it develops a stellar digital mortgage platform, and you train your loan officers, processors, and underwriters on it. Job well done – well, not exactly.

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Business constantly changes—especially in today’s world, and especially in the mortgage and technology industries. Lenders need to adapt to continuously changing regulatory landscapes and borrower demands. High touch gauges arising issues and emerging trends. High tech, when coupled with high touch, allows lenders to adapt faster and more deftly than ever before.

For instance, perhaps the CFPB comes out with a new requirement for loan underwriters. Mortgage software providers can first implement functionalities for that new requirement into their products. Then, they can meet with their clients to train them on the new requirements and demonstrate how to satisfy the accompanying obligations through their digital platform.

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Another way software providers bring high-touch to high-tech is through analytics. Speaking for WebMax, we don’t just develop mortgage software and say, “Hey, good luck.” We become a part of our clients’ business. For START, our point-of-sale application, we analyze borrower behavior to see where users run into trouble or even worse, abandon the application. We leverage these insights to optimize our product, so that our clients close more loans.

Equipped with powerful digital tools, loan officers still bring high-touch to the loan officer-borrower relationship. I remember when I used to meet prospective borrowers at their homes and fill out forms at their kitchen table. While today’s loan officers might avoid those trips, they do miss out on some homemade treats.

That said, point-of-sale applications like START allow for loan officers to be more hands-on than before. Equipped with a two-way portal, loan officer and borrowers can simultaneously look at the same application and communicate. The loan officer can walk the borrower through the application, answering any questions along the way. Borrowers can get into their homes faster because when discrepancies need to be settled or additional documents need to be received, there’s no sending documents or communicating through phone, email, and in-person. It all takes place in one central location.

High-touch, combined with high-tech, provider lenders the most optimal digital mortgage platform. Moreover, it gets borrowers in their homes faster, with bigger smiles.

About The Author

Curt Tegeler

Curt Tegeler is responsible for providing direction for action to all employees and business initiatives. Tegeler’s main responsibilities include communicating and implementing the company’s vision and mission; leading, guiding, directing, and evaluating the work of executive leaders; formulating and implementing the strategic plan; forming, staffing, guiding, leading and managing WebMax; evaluating organizational success; and represents WebMax in civic and professional activities.

A Critical Inflection Point

When you look at the 2017 J.D. Power U.S. Primary Mortgage Origination Satisfaction Study, it shows that 43 percent of mortgage customers applied digitally in 2017, compared to just 28 percent in 2016 – that’s a 15 percent increase on a nominal basis, but a 54 percent jump on a relative basis.

“We’re at a critical inflection point in the mortgage industry where new technology and the growing use of digital mortgage application channels has made it possible for the origination process to move more quickly; however, the customer is still the final judge of speed and quality,” said Craig Martin, director of the mortgage practice at J.D. Power, in a press release.

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So, what does this mean? It means that consumers’ preference for digital mortgages continues to grow, and that lenders need to adapt to maintain their top and bottom lines. It also means that lenders must provide the optimal digital mortgage experience, or borrowers will open up a new tab, scan Google for another lender, and find an easier way to get a mortgage. Configurability is a key factor to operating an optimal digital mortgage platform. Essentially, technology – software especially – must be customizable and adaptable, two key tenets of configurability.

Technology isn’t meant to completely overhaul business and make it unrecognizable. The right technology—configurable technology—plugs into lenders’ operations and augments their capabilities. This includes meeting operational requirements, satisfying borrower demands, and maintaining brand integrity.

The J.D. Power study also indicated that among other factors, trust in the brand of the lender plays an important role in attracting borrowers. Consistency plays a key role in branding.

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For instance, if a lender’s logo is black, blue, and grey, that lender’s website design should align with those colors. On a higher level, let’s say that lender specializes in VA loans. If that lender buys a cookie-cutter website, it might not be able to highlight its VA loans or separate it from other loan types like the rest of its marketing collateral does. Customizable websites allow the lender to add in factors like this, maintaining its brand integrity and satisfying its borrower base.

Digital point-of-sale (POS) applications are just as vital to maintaining brand consistency. Let’s say that lender’s website fulfills its role at marketing, and a website visitor decides to apply for a loan. The borrower clicks the “Apply Now” button, giving way to the POS application. If the software transition from website to POS isn’t smooth, then the website visitor’s transition to borrower might not happen. If the POS application isn’t customized, it might appear like a foreign site—not controlled by the lender—to the borrower. Mortgages require sensitive information, and borrowers don’t want to hand it over to just anyone or any application. Customization maintains trust. Trust maintains that borrowers complete digital applications.

Configurability also allows for lenders’ digital mortgage platform to sync with their existing operations and business needs. For instance, let’s say a lender already operates through a loan origination system, but plans to add a POS to its digital mortgage platform. That POS needs to integrate with the loan origination system to ensure that lenders enjoy the full benefits of digital mortgages—to ensure that processes get expedited and workflows get streamlined.

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If that lender operates in different states, its POS might require customizations to request additional information or provide different disclosures. Configurability makes sure that a borrower in New Jersey doesn’t read disclosures that are specific to Texas or Ohio, and vice versa.

If you’re investing in digital mortgage software, you should receive the software you want. Let’s say you have 10 key components you’re looking for in digital mortgage software, and you’re looking at two companies to provide a POS application. Company A satisfies 8 of your components, while Company B only satisfies 7. Company A does not have configurable software, while Company B does. Within a matter of weeks, Company B can develop its software to satisfy all 10 components – while Company A can’t.

And technology keeps changing. You might come up with new requirements. Company B, the configurable one, can adapt and change as your business needs change. Perhaps you open a branch near the coast, and need to integrate flood insurance information into your digital POS application. Configurable software allows developers to add in data-entry fields for flood insurance and integrate with new third parties. Digital POS’s request address information of the prospective home tied to the mortgage. When borrowers enter that information, the POS can integrate to third parties that verify the address location, and identify if that home will require flood insurance. This integration allows for flood insurance information to only appear when it’s required, maintaining the integrity of your digital mortgage while acquiring new business.

Something else that keeps changing: Compliance – one of the most crucial factors lenders worry about. Today, lenders can’t close loans—let alone operate—without compliance. Imagine that you invest thousands of dollars in manufacturing your digital mortgage platform and spend hundreds of hours training your employees, then the CFPB comes out with a new or changed regulation. If your software isn’t configurable, making this change may pose difficulties. If it is configurable, the pain is lessened. Moreover, chances are that your configurable technology provider emulates the software it produces – being cutting-edge, adaptable, and forecasting potential changes. Thus, they might have already anticipated this change, and are in position to make this adjustment as seamless as possible.

Perhaps the most critical factor to configurability entails the capability to integrate freely and seamlessly with third-parties. I mentioned loan origination systems earlier. Other third-parties include websites and content management systems, customer relationship management (CRM) systems, credit and data verifiers, banks and other financial institutions, and the IRS. Some companies fulfill a range of these needs, which make their integrations even more valuable.

Integrating to third parties expedites process, streamlines workflows, and reduces costs. Integrating with CRMs allows for loan officers to process leads and bolster marketing efforts. It also helps them maintain updated statuses with current prospects and borrowers. Integrations with credit and data verifiers ensure the secure collection of valid, compliant information from trusted third parties. Integrations with banks and other financial institutions plug asset and income information into borrowers’ applications. Borrowers no longer write—let alone type— line after line of information; they simply enter their account numbers and move onto the next part of the application. Originators and processors no longer need to request bank statements, wait to receive them, parse through them, mark red flags, contact the borrower, and snail mail the document back and forth to settle discrepancies. Integrations pull bank statements for originators. Automation helps processors parse through the statements with more ease. Digital POS’s provide a digital portal for loan officers and processor to settle discrepancies with borrowers with a few clicks of a mouse.

All of these integrations change – think about how often your smartphone updates itself. Lenders’ digital mortgage software needs to seamlessly adapt to integration partner updates. Let’s say the IRS conducts a regular software update. If a lender’s POS application doesn’t update along with it and the integration goes haywire, borrowers won’t be able to pull their tax information into the application. Now, the borrower will have to wait to enter that information at a later time, and the loan origination timeframe gets extended—the opposite of what digital mortgages are intended to do. Even worse, the borrower might get frustrated, abandon the application, and find another lender.

At WebMax, we configure our software to fit our clients’ needs. Whether it’s designing the front-end to fit branding guidelines, plugging into a third party’s API, or adapting to new regulations, we constantly innovate and design to ensure our clients remain on the cutting edge of the digital mortgage revolution.

A key integration for us is our bi-directional sync with Encompass, the loan origination system, which we achieved thanks to our configurability capabilities. This brings boosted efficiency and even smoother processes to loan origination workflows.

Digital POS’s and loan origination systems do not always employ two-way communication. We all know that just because a mortgage application is submitted, it does not mean that the application is complete. The borrower may re-enter to submit supplementary documents, add another bank account, or update some information. When the borrower updates his/her information in the POS application, his/her information may not get updated in the loan origination system. On the other hand, if a loan officer, processor, or underwriter updates information in the loan origination system, the POS might not receive that update.

The bi-directional sync with Encompass ensures that fluid, two-way communication exists between POS applications and the loan origination system. This makes sure that loan processes are accurate and functional, and that information is up-to-date and compliant.

“It is not the strongest or the most intelligent who will survive but those who can best manage change,” said Charles Darwin.

Technology may be powerful and game-changing. But if it isn’t adaptable—configurable—then it will not last the digital mortgage revolution.

About The Author

Zachary Rosenberg is Chief Technology Officer at WebMax, LLC. Rosenberg has more than fifteen years’ experience with software development and coding. He is responsible for overseeing all technical aspects of the company and its clients. He works with executive management to grow the company through the use of technological resources and works to attain the company’s strategic goals. Rosenberg also manages client relations from a technical standpoint, conducts research for the enhancement of our products, and development tasks.

Discussing Digital Innovation

At WebMax the name of the game is innovation. The company is 100% dedicated to helping lenders embrace a better mortgage process that is both digital and customer centric all at the same time. But how do you do that? Well, Curt Tegeler sat down with our editor to share his vision. Curt is President and CEO of WebMax LLC. He is responsible for providing direction for action to all employees and business initiatives. Tegeler’s main responsibilities include communicating and implementing the company’s vision and mission; leading, guiding, directing, and evaluating the work of executive leaders; formulating and implementing the strategic plan; forming, staffing, guiding, leading and managing WebMax; evaluating organizational success; and represents WebMax in civic and professional activities. Here’s how he sees the mortgage market:

Q: You say that innovation is vital to successful or game-changing technology. What innovation do you project for mortgage technology moving forward?

CURT TEGELER: First, I’d like to touch on innovation from the technology side because innovation isn’t just vital to good technology, it’s inherent. Innovation lives in game-changing technology’s DNA. We can’t forget that behind every technological innovation, every line of code, is a person, or group of people. These innovators constantly seek out new ways to do things and make processes better. People don’t make technology because it’s cool. People create new technology to solve problems, streamline inefficient processes, and improve people’s lives. Dee Hock, the founder of Visa, didn’t create Visa to have its name plastered at cash registers and on e-commerce platforms everywhere. He created Visa to provide a solution to a then disorganized and fraud-rampant credit card industry. Hock decentralized Visa’s payment processing system to give the power to its franchises, or member banks. In doing so, Hock revolutionized, and practically created, the fintech/payments industry. Visa was the hottest new thing on the payments block since the check. The point is, as long as inefficiencies, in any industry, exist, people will innovate and create game-changing technology.

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Now, let’s address the mortgage industry. We’ve witnessed this massive secular move to digital mortgages because, well, lenders suffered from a load of inefficiencies. Yes, of course, the move to digital also coincides with changing consumer preferences and our society’s transition from pens and paper to keyboards and touchscreens. In any industry, a business is nothing without its customers. Businesses must adapt to what their customers want, or in some cases demand. So if borrowers in general, and Millennials especially, demand a digital mortgage experience, lenders must meet them on the internet and satisfy that demand. That said, technology wouldn’t revolutionize the mortgage application and origination processes if it was less efficient than doing it with pen and paper. Take cars, for example. Consumers demand fuel efficiency. So, car makers dropped 6-cylinders and 4 and added a turbo booster instead, which proved to be more energy efficient and cost-effective while increasing horsepower and torque. The case is comparable to mortgages. Inefficiencies, coupled with consumer trends in behavior and preferences, has led to the digital mortgage revolution.

Q: What inefficiencies do you see in the mortgage industry? What innovation do you predict for lenders going forward?

CURT TEGELER: Lenders face many inefficiencies, but three key issues include the loan origination process timeline, rising origination costs, and borrower abandonment rates on digital applications. That’s why I think innovators will target digital point-of-sale (POS) applications in the near and intermediate future. A good POS application employs integration and automation, which reduces loan origination times and ensures valid information to produce compliant loans. This digital mortgage innovation drives lenders to close more loans faster. The integrations and automation that power the backend of digital POSs create a seamless application process for the borrower, which reduces completion time and origination costs. Automation does the work for the borrower, leading to decreased abandonment rates. Rather than sending borrower information to a credit or asset verifier, digital POS’s integrate with verifiers’ APIs. When borrowers input information, the POS simultaneously communicates with the APIs in real time. In effect, the POS verifies borrowers’ information while they complete the application. Borrowers need not fetch a bank statement; just plug in your account number and the POS will retrieve everything it needs. Lenders’ demand for these results will drive technology providers to brew another pot of coffee and get to innovating.

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In the long term, I think Blockchain has the potential to impact the mortgage space. Before I go on, I want to clarify that I’m not pandering to the pandemonium surrounding bitcoin and cryptocurrency. While I do see the risks and inefficiencies of the cryptocurrency market, I do recognize the power of its underlying technology, blockchain, and what it can mean for fintech. For instance, we’re seeing properties listed for bitcoin and nothing else. These could be marketing gimmicks or someone trying to flip their listing by jumping on the latest trend. However, with examples of this showing up regularly, it could be a sign of things to come in our industry.

All of the big banks are looking into blockchain technologies, and some have even filed for patents. Blockchain is all about transactions. Key examples include the transfer of shipments in logistics operations and the exchange of securities through trading on Wall Street. Blockchain might enter the mortgage industry a variety of ways in the coming years, whether through verifying the data collected through integrations, regulators and GSEs ledgering closed loans, or even processing the monthly payments made by the borrower. Blockchain is in its infancy stage, so the best hasn’t even yet been thought.

Q: You said that the length of the origination process and rising origination costs plague lenders nationwide. Can you expand on how the digital POS solves these problems?

CURT TEGELER: According to the Mortgage Bankers Association, the costs to originate a mortgage skyrocketed 80% in the last 7 years. At the beginning of 2017, the national average to close a loan stood at 51 days, up from an average of 30 days just 7 years ago as the burden of paperwork and broader requirements to vet borrowers weigh on lenders. The loan origination process always stood as a long, arduous, drawn-out series of sending documents for verification, waiting to receive them back, and then reeling in borrowers to sign and approve each step of the process.

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Then came 2008. The Housing Crisis dropped a bomb packed with regulations and compliance standards. Regulators posed new laws as recent as October 2015, with the passing of the TILA-RESPA Integrated Disclosure laws, which required lenders to send borrowers documents 3 days prior to closing. If any changes are made, they must wait another 3 days. In effect, timelines got extended as loans had to maneuver through an approval process inundated with checkpoints. Moreover, costs to originate increased as regulators pressured lenders to maintain compliance. The mortgage industry needed technology then more than ever, not to just adjust to consumer preferences, but to survive in the new lending world.

We discussed how integrations and automations streamline the lending process. As a result of receiving borrower information faster, lenders can start their compliance processes earlier in the loan lifecycle. Plus, borrowers can get pre-approved in minutes, equipping them with a budget and allowing them to start their home-searching process earlier than ever before. This resulted in faster loan closures.

As of November 2017, mortgage closures averaged 43 days, down from 51 days earlier in the year, a near 16% decrease. Although this is a great improvement we can attribute to technology, it still doesn’t satisfy those of us who embrace the digital mortgage revolution. All we can do is continue to innovate and drive that closure time down. By leveraging the seamless data integrations and automations engineered into digital POS applications, we can turn days-long processes into minute-long processes.

This affords more time to generate new business, so lenders cut costs and increase top line numbers simultaneously. When digital POS’s help maintain compliance, lenders can allocate more time to improving their respective companies’ loan process and borrower relationships. A good POS also reduces overhead costs. The newest POS’s allow the entire loan process to live in a single location. Borrowers and loan officers can upload documents at any time to share, communicate with each other important messages, and check for updates. Loan officers need not pay for shipping documents, nor spend money on lavish offices to entice potential borrowers.

Q: What about abandonment rates? How do digital POS’s factor into application completion rates and ROI?

CURT TEGELER: Lenders’ POS applications provide the majority of a borrower’s digital mortgage experience. Without an easy-to-use, user-friendly POS, lenders fail to convert applicants into borrowers. For instance, WebMax’s POS application, START, provides smart data entry and smart data elimination. What this does, essentially, is make it so the borrower can only input the correct information in the appropriate sections. Software developers need to create these products with the least tech-savvy user in mind. That said, we aim to erase any exit points for the applicant. Lenders can lose a potential borrowers at any hiccup, any roadblock in their digital application. In addition to navigating the application or not know what information to enter into which fields, START closes another key exit point for borrowers: time. START verifies data in real time by connecting to LOS’s, pricing engines, credit verifiers, asset verifiers, banks, and location services. These integrations ensure speedy results for the borrower while providing accurate, compliant information for the lender. As a result, START can pre-approve borrowers in less than 10 minutes.

START provides lenders a dramatic drop in abandonment rates. User experience is vital in reducing abandonment rates and increasing closed loans. The Fintech industry’s average abandonment rate of users who fail to complete an application fluctuates between 50-75%. The average abandonment rate of users using START stands at roughly 12%, providing a proven ROI on your integration by increasing completed applications by up to 84%.

Assuming the low end of the average at 50%, a conservative estimate, lenders can increase closed loans by 76%. Let’s assume that a lender attracts 100 borrowers per month, the average loan is $200,000, and the profit margin is 600 BPS.

>>With a 50% abandonment rate, the lender will close 50 loans. This equates to $10 million in monthly loan volumes and $600,000 in revenue.

>>With a 12% abandonment rate, the lender will close 88 loans. This equates to $17.6 million in monthly loan volumes and $1.056 million in revenue.

In this example, the difference between START and an average digital POS application equates to $7.6 million in monthly loan volume and more than $450,000 in monthly revenue. Annualized, this renders $91.2 million increase in loan volumes and a $5.4 million increase in revenue. This example does not account for other ROI factors such as decreased origination costs, reduced overhead, loan officer productivity, and streamlined workflow. Moreover, if we assumed the high end of the average, the difference between START and an average digital POS application equates to $12.6 million in monthly loan volume and more than $750,000 in monthly revenue. Annualized, this renders a $151.2 million increase in loan volumes and a $9 million increase in revenue.

Q: What role does a digital point-of-sale application play in attracting Millennial homebuyers?

CURT TEGELER: You might be surprised, but a digital POS plays a vital role in attracting all borrowers. According to a study by the National Association of Realtors, 44% of all homebuyers began their search online and 95% used online websites to gather information at some point throughout the process, including 99% of Millennials and 77% of Silent Generationers. That said, the data also demonstrates that capturing the Millennial buyer provides the most robust and lucrative opportunity for lenders, and that digital is the key to capturing that opportunity.

Millennials make up about one-fourth of the US population, signifying a 77-million-person opportunity for the mortgage industry. As the leading edge of this massive demographic reaches its early thirties, they enter their prime earning years, start families, and buy homes. The vast majority of this 77-million-person demographic will search for homes and mortgages on their smartphones, tablets, and laptops, just as they shop online. E-commerce volume increased nearly 12% y/o/y from 2016 to 2017. Expect for that same trend to follow people shopping for mortgages.

Millennials in the U.S. wield about $1.3 trillion in annual buying power, making them a significant force in the home-buying market and mortgage industry. 85% of them use smartphones as their daily technology device, and 49% seek to buy their first home. 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.

When it comes to attracting younger borrowers, lenders’ digital platform poses so important that it can outweigh the impact of interest rates. Lender A might offer a mortgage at 4%, while Lender B offers it at 4.25%. But if Lender A fails to show up in search results or deliver a subpar digital experience and Lender B does, Lender B will win the borrower. Millennials feel most comfortable transacting via digital. They don’t go to the mall, they go onto their laptops and shop e-commerce platforms. That’s where an industry-tailored mortgage website factors in. Once online shoppers fill their cart, they enter the POS application. Yes, a mortgage POS is much more complex and information intensive than an e-commerce POS. But that doesn’t mean lenders can’t provide an easy-to-use mortgage shopping experience. Lenders leverage their website to gain digital traffic and attract more borrowers. An effective POS ensures that they convert their shoppers — or applicants — into borrowers.

Q: You consider yourself a “first responder” to real estate and mortgage. How are you a first responder to POS?

CURT TEGELER: In 1999, I provided realtors, especially the smaller ones, the ability to compete in the dot-com boom and seize the power of the internet. In 2008, the Housing Crisis left the mortgage industry in shambles. I was there, in the rubble. I didn’t just help clean up the mess; I started building. I created MortgageWare, a digital mortgage website solution equipped with a proprietary content management system and integrations to LOS’s, pricing engines, the whole bit.

I’m a first responder to POS, because, well, we created START to satisfy our clients’ demands. They had this awesome website that attracted the digital traffic they craved. The problem was, it didn’t result in the increased loan closures they hoped for. They needed more. They needed a better applicant-borrower process. So, we made START to make our clients’ transition to digital accretive to their top and bottom line.

INDUSTRY PREDICTIONS

Curt Tegeler thinks:

1.) Digital point-of-sale applications will dominate lenders’ cap-ex and investments.

2.) Integrations and automation will drive the next leg of the digital mortgage revolution.

3.) Despite rising interest rates, the housing and mortgage markets will post a solid year of growth as buyers rush in to lock lower rates.

INSIDER PROFILE

Curt Tegeler is President and CEO of WebMax LLC. He is responsible for providing direction for action to all employees and business initiatives. Tegeler’s main responsibilities include communicating and implementing the company’s vision and mission; leading, guiding, directing, and evaluating the work of executive leaders; formulating and implementing the strategic plan; forming, staffing, guiding, leading and managing WebMax; evaluating organizational success; and represents WebMax in civic and professional activities.

Growing FinTech Companies Partner To Revolutionize Digital Lending

WebMax, a digital mortgage solution provider, and FinLocker, a financial data and analytics platform, have finalized a partnership as a result of successful execution on their five joint customers. The partnership aims to build on 17 months of collaborative efforts to further propel lenders into the digital mortgage revolution.

According to the Mortgage Bankers Association, between 2010 and 2017, mortgages took 70 percent longer to close and origination costs skyrocketed 80 percent as the burden of regulatory compliance grew.

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“The best ideas, especially in technology, are born out of the need to solve a problem. Home buyers need a faster, easier way to get a mortgage. Lenders need a more efficient, less costly way to originate loans. The combined solution of WebMax and FinLocker makes that happen,” said Curt Tegeler, president and CEO of WebMax.

WebMax streamlines the mortgage application process with a range of products, including enterprise-level mortgage websites, graphic pre-qualification forms, and point-of-sale (POS) applications. FinLocker automates previously manual loan processes by collecting, verifying, and analyzing crucial borrower information like assets, employment, income, taxes, credit and more. Essentially, WebMax provides a portal for borrowers and loan officers, while FinLocker integrates with the portal to automate slow and costly back end loan processes.

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“Based on marketplace feedback – what our customers told us – this partnership provides the leading solution to improve the home buyer’s experience while significantly reducing costs for the lender at the most cost-effective price,” said Peter Esparrago, CEO of FinLocker.

“We created a task force team last year that was made up of business leaders from originations, compliance, operations and executive management with the goal of finding a best in class provider to provide a digital customer experience and improve loan efficiency. We looked at over 20 different providers in the space and determined that the combination of WebMax/FinLocker was the best in class provider that allowed us to achieve the digital customer experience and reduce loan manufacturing costs,” said Mike Goldman, COO of AmCap, a mortgage lender with 900 employees across 120 branches and 30 states.

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WebMax’s POS application, START, makes borrowing easier with smart data entry, auto-fill fields, and a user-friendly interface that walks applicants through each step of the loan application. START is reactive, meaning that it intuitively adapts to each borrower and condenses the application into the shortest possible version.

Unlike other data providers, FinLocker does far more than collect and supply financial information. FinLocker verifies and analyzes the borrower financial data. It utilizes its advanced rules engine and intelligent algorithms to sift through the data, identify irregularities and red flags, and determine vital loan processing and underwriting factors such as qualifiable income. This advanced data analysis automates manual and time consuming processes to significantly reduce lenders’ costs while allowing for faster loan approvals for the home buyer.

“When FinLocker identifies red flags, loan processors can go right into START and communicate with the borrower to solve the issue. It’s a one-two punch,” said Tegeler.

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.

Get Smart About Your Point-of-Sale

Imagine this, you invest in creating a state-of-the-art website to compete in today’s digital mortgage revolution. Your website conveys the most critical parts of your brand and maintains a consistent theme throughout every page. However, there’s a problem. When a borrower types “mortgage” or “mortgage application” into Google, thousands of results come up in the search. Because of this, you decide to employ search engine optimization tactics. Great, you are more visible on Google and traffic is being driven to your site. People are so impressed, they decide to fill out a pre-qualification application or even apply for a mortgage. Let’s say a couple begins to fill out the application, they enter in their names, their dates of birth, and all required information. The couple clicks and continues to the next page and then, something happens. They realize that they forgot to put the middle initial in one of their names. The couple tries to go back but is unable. Frustrated, the couple abandons the application. That right there is the scariest part of the digital mortgage process. You invest money in a beautifully designed site, spend time boosting your Google search results, and lead a client to apply for a loan all to have them abandon the application before it’s even completed. This is the reason that having a strong digital point-of-sale (POS) application is so critical in providing a digital mortgage experience to turns leads into loans.

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There are five key components that separate a point-of-sale in today’s most advanced digital solution. The first major component is cleanliness. Your POS needs to be clean on every level. Let’s start at the software level. Any imperfection in the software will result in hiccups that make borrowers abandon the application. Borrowers need to breeze through a digital application with ease. There are too many other things they can get distracted by on the Internet. If you give your applicant one second of difficulty, or one second to contemplate whether they want to complete the application, you risk losing them. Competing for people’s attention isn’t easy, especially in the digital landscape. This is the reason it is so important to keep your users attention at all times.

Clear labeling, prompts and directions tell applicants how to properly input information and guide the borrower step by step. Your digital loan application must also be easy to complete by even the least tech-savvy borrower. It’s easy to get lost with so many different pages, tabs and lines of information to fill out. Your POS must not only guide borrowers through each step, but afford them the ability to go back and forth and jump around. Moreover, borrowers should navigate the application with ease through a dashboard or content map.

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The digital mortgage experience entails much more than having a website where borrowers can enter their information. It envelops integrating with mission-critical third parties, verifies borrower information in real time and streamlines the loan origination process. The digital mortgage affords loan officers and borrowers alike the most valuable asset and that is time. By expediting the loan origination process, they avoid waiting for weeks on end to verify assets and other pertinent information. If your POS doesn’t integrate, then you don’t have a digital POS. A POS that doesn’t integrate is a data collector at best, that merely changes the application process from handwriting information to typing it. A POS that integrates transforms the application process into the digital mortgage, where data gets verified in real time and more loans get closed.

Integrations include, but are not limited to: pricing engines, loan origination systems, customer relationship management systems, credit bureaus, asset verifiers like FinLocker and Account Check for bank accounts, and location pre-populators such as Google Maps. Integrating with these third parties means that the POS does the work for the borrower and loan officer. Integrations with credit bureaus verify borrower information while he/she fills out the application; integrations with asset verifiers connect all of a borrower’s bank account information with the ease of logging into your bank account; integrations with pricing engines do the math and determine proper, compliant loan terms. The list goes on and on. The main point is when all of these tools come together, it creates a dynamic POS and powerful digital mortgage experience.

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Along with integration comes the need for automation. Automation delivers some of the most useful impacts of technology. With automation, technology does the work for you. You don’t have to guide it, direct it or check up on it. Automation streamlines the loan origination process and strengthens your integrations. Automation tells your POS to communicate with Google Maps when a borrower types information into the “Address” field of the application. This allows the field to pre-populate addresses as the borrower types. With each character the borrower adds, Google Maps automatically adjusts and refines the pre-populated addresses. Automation alerts borrowers when they fail to properly input information or skip a step. Automation creates loan terms based on applicant information computed through algorithmic calculations, ensuring proper risk-reward balance and the production of compliant loans. Basically, automation ties together all your integrations. Automation should follow integration, wherever it is.

Automation also drives real-time capabilities. If your POS doesn’t verify data while the borrower completes the application, then it’s not fast enough. A borrower should be able to complete your digital application in seven minutes or less. Basically, once a borrower completes an “Address” field, the POS should recognize and verify that address in seconds. If the application requests a social security number at the first step of the application, it should be processed and back-checked within minutes by the end of the application. If your POS doesn’t boast real-time capabilities, you’re giving your potential borrowers more chances to abandon the application. Borrowers can get pre-qualified for a mortgage within ten minutes of filling out a form. Millennials dominate the home buying market right now, and they demand speed. The Internet, text messaging, social media, and all things digital deliver information so quickly and so readily that it shifted their expectations and perceptions of how things should operate. Applying for a mortgage is no different. The millennial borrower wants to know how big of a mortgage they can get at what rate, so they can launch a new tab and start searching for homes.

Let’s imagine your POS offers all the above: cleanliness, integration, automation, and real-time capabilities. With these components, chances are your borrowers are going to complete their application. But, what happens after the application is completed? The mortgage application began online; the rest of the process should operate online, too. Moreover, the post-application process should operate within the POS application. Mortgages entail the handling of people’s most sensitive information and processing one of the biggest transactions of their lives. Thus, processes and communication among a borrower and loan officer need to exist in a secure environment. Loan officers should not email a borrower to follow up on a completed application. Rather, POS’s should equip borrowers with a secure log-in to return to their application and even provide them a easy to use dashboard. There, they can return to the application to look over and edit any information, and also communicate to their loan officer and upload any pertinent documents. The optimal POS is so much more than just a 1003 application. It’s a borrower portal to handle all things mortgage, from getting pre-qualified to signing a closing contract. In order to deliver an advanced point-of-sale, it’s not just strictly about the technology. There has to be someone that actually understands the life-cycle of the loan process for overall improved loan experience.

If you invest in the right POS application, you’re bound to see a return on your investment. If you choose the right POS, it’s like hiring an employee. POS’s done right streamline workflows and automate processes. It does so much for mortgage companies and loan officers, it easily becomes your most valuable employee. Imagine that: An employee that never makes incorrect calculations, automatically maintains compliance, and gets things done in seconds that takes minutes, hours, days, or weeks for others. I think you’d pay up to match that employee’s salary. So, don’t think of investing in a digital POS as an added cost. Think of it as a cost reducer, compliance manager, and business streamliner. In the end, you are not only saving money on origination costs, but you are making more money through closing more loans.

About The Author

Kelcey T. Brown

Kelcey T. Brown is Chief Strategy Officer & Executive Vice President at WebMax, LLC. Brown is responsible for developing, communicating, executing, and sustaining strategic initiatives. He acts as a key advisor to the company’s president on critical changes in the competitive landscape, internal employee development and the external business environment. Brown has worked for nine years in the Real Estate and Mortgage Technology Industry.

Lending In Today’s Digital Era

In today’s mortgage market, you can’t pick up a trade publication or attend an industry event and not see or hear something about digital lending. While there is a great deal of hype about digital lending, instead of adding more fuel to the fire, let’s discuss what borrowers are actually looking for and lenders are actually implementing in their digital lending solution.

Anyone who has gone through the mortgage process knows that it is extremely document driven, including loan files that can sometimes exceed 500 pages. For applicants, successfully navigating the mortgage process takes time and patience, as they struggle to fill out dozens of forms, dig up documents and financial records and then send in the mail, fax or scan them to their lender. Naturally, all this back and forth adds days of extra time, the potential for errors, and confusion to the closing process for the borrower.

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Providing dynamic and easy to use digital lending solutions enhances the borrower experience and provides originators with the chance to clearly explain product options and loan terms to eliminate confusion for the borrower. Lenders are eager improve the borrower’s experience while streamlining the lending process and reducing manual steps and costs. Let’s dive into some of the key components that lenders are seeking in their digital lending solution and how that improves the borrowers lending experience.

One group that is driving this move to digital is the millennial buyer. Lenders understand that the millennial generation represents a significant opportunity for the mortgage industry in the form of first time homebuyers. Studies have proven that millennials are more likely to start their search for homes and the finance of homes online.

By providing a unique digital lending experience, mortgage companies can easily accommodate the digital demands of the millennial buyer. This enables the loan officer to take more applications and spend more time creating and cultivating relationships. One of the main accommodations that millennials are hoping to find throughout their experience is being able to conduct business electronically using a single access point. They are also looking to be able to sign documents electronically and access them on their mobile devices, ensuring the process is as fast and transparent as possible. As part of a tech savvy generation, the last thing millennials are looking for is the inconvenience of sorting through hundreds of documents at the lenders office at a time of day that doesn’t work for them.

According to the Consumer Financial Protection Bureau, technology has helped individuals understand loans better. Because of this, they felt more confident about the digital process. This insight is important because it tells us that digital lending isn’t a service only suitable for millennials but almost any consumer. Increased efficiencies can reduce costs and these savings can be passed on to the borrower further improving their experience. Lenders can see a monetized value in this technology as well as new opportunities for lenders to expand their business and find ways to effectively communicate to the consumer. The right digital lending solution gives the lender control over that borrower experience so that they can continue to exceed expectations.

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Today’s advanced digital lending solutions enable lenders to provide borrowers with an enhanced level of service, one that is more timely, convenient and provides the borrower with the ability to interact with the lender when and how it is most convenient for them. The digital lending experience must bring together numerous data points from multiple sources into one location to deliver a seamless lending experience to the borrower while delivering key business intelligence to the lender. To be able to deliver on this promise, the right digital lending solution delivers the ability to easily integrate multiple systems. More and more companies are publishing application program interfaces (APIs) to accommodate this need for seamless connectivity.

APIs enable third-party developers to create helpful services and tools that customers can utilize. The introduction of API’s provides lenders and borrowers access to all data from all programs in real-time, ultimately providing them more accurate and up-to-date information. Through using this solution, customers are not only able to compare and save but also have access to more personalized resources for making the right decisions regarding their mortgage.

Constant communication is also key in creating a successful digital lending experience. Adding video technology and instant messaging provides informative information to the borrower through a distribution method that they are accustomed to using. Constant access to check loan statuses, upload the necessary documentation, sign documents electronically and maintain a digital system of records are key aspects that can give borrowers the digital experience they are seeking.

When done right, digital lending is a simple and easy to follow process that educates the borrower through each step of the lending journey. This allows the overall process to become more self-guided and enables borrowers to seek out information on their terms. This empowers the borrower and improves their lending experience. While the borrower is doing some of work themselves, the role of the loan officer is not diminished but instead allows them to be more accessible when critical questions arise.

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Loan officers can assist at any point in time and can confirm the accuracy of the borrower’s data. Digital friendly applications streamline the process even more and confirm that information remains secure throughout providing improved levels of accountability. Borrowers can read and sign off through any device to move through it seamlessly. Manual tasks are then reduced and costs are significantly reduced for lending companies because of error reduction while delivering a better lending experience.

The user experience is an important factor as potential borrowers are applying for a loan through different channels. Reducing the time it takes to complete loan processes and enhancing the overall loan experience for the borrower differentiates one lender over another.

Technology is providing borrowers a faster, more transparent, mobile-friendly experience. By leveraging design and directing to source connectivity, applicants can navigate a self-guided experience and be offered real-time assistance from their loan officers.  The right digital lending solution significantly enhances today’s borrowers lending experience.

About The Author

Curt Tegeler

Curt Tegeler is responsible for providing direction for action to all employees and business initiatives. Tegeler’s main responsibilities include communicating and implementing the company’s vision and mission; leading, guiding, directing, and evaluating the work of executive leaders; formulating and implementing the strategic plan; forming, staffing, guiding, leading and managing WebMax; evaluating organizational success; and represents WebMax in civic and professional activities.