2015: A Whole New World

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TME-TGarritanoWhen you talk to anyone in the mortgage industry about next year, expect to hear about the Consumer Finance Protection Bureau (CFPB) changes to the Good Faith Estimate, Truth in Lending Disclosure and the HUD Settlement Statement. Changes to these tried-and-true forms will be a huge adjustment for sure. But the story for 2015 won’t center around new compliance rules, it’ll be about how the mortgage industry reacts to these new rules.

“In the regulatory space, the biggest mortgage technology trends will continue to be the implementation of CFPB processes, procedures and guidelines that have created a new operating environment for financial institutions. Fundamentally, this paradigm shift is changing basic operational infrastructure and creating challenges with the cost of updating legacy systems, implementing technology solutions for changing operations, and integrating newer technology (cloud storage, mobile devices, tablets, etc.),” noted Joseph Little, President at COVIUS.

“Outside of the regulatory environment, we see an evolution to smarter technology that delivers more confidence in the accuracy of data. Once the market sees congruency between the data in a borrower’s loan file and the information represented in it, the mortgage market should begin to thaw for securitization and build trust back in to alternative avenues of mortgage lending,” Little said.

COVIUS is a provider of real estate advisory and technology services. Since 1996, the company has delivered intelligence-based products and solutions that automate workflow process management, transaction management, document hosting, integrated mobile solutions and communications management.

In the end, many in the industry are hoping that this change will prompt the mortgage industry to finally embrace the concept of Big Data. “In addition to the sweeping technology changes with respect to the RESPA-TILA rule to be enacted upon by August 2015, addressing ‘Big Data’ into 2015 from a technology perspective, will become more prevalent than ever,” pointed out Kathleen Mantych, the Senior Marketing Director at MRG Document Technologies. “Simply put, with regulatory compliance issues driving the demand for improving transparency and time to market, regulators are also pressing hard for the detailed data and all that encompasses the products and processes behind it. Additionally, there are heavy penalties if errors are discovered in the data reported.

“This scenario gives rise to a perfect business case for Big Data products and services to begin their debut into the mortgage market and leveraging their analytics to realize business benefits,” continued Mantych. “The technology can assist in identifying huge gaps and deficiencies in all facets of the loan life cycle from cradle to grave — the elusive true business analytics dream.”

MRG Document Technologies is a provider of legal compliance and dynamic compliant document preparation software technology to lenders nationwide. With more than 26 years of experience in the mortgage industry, Mantych has held executive sales, product and alliance management positions with key mortgage technology providers. MRG is a document preparation practice group within the law firm of Middleberg Riddle Group, putting the company in the unique position of its dynamic document content being created and tested by an in-house team of compliance attorneys. MRG owns its own legal content as well as its own calculation engine and compliance tests, ensuring accuracy for its lender customers.

But if you think this is just about data and forms you are mistaken. New regulatory change has the potential to reshape the entire mortgage process starting at the point-of-sale. Wayne Steagall, Founder and President at Lending Manager, predicts that in 2015, “online loan applications and lead generation will increase as lenders look to find more profitable ways to originate. Mortgage technology platforms will provide more integration options so a lender’s systems all work together instead of working in their own silos. This will help them identify new prospects and sales opportunities that may not have been identified before.”

Steagall adds, “Loan officers will incorporate more technology into their daily processes, as most top producers already do, in order to make themselves more efficient so they can focus their time on building new referral relationships.”

As President of Lending Manager, Steagall works to help mortgage companies take their business online. He works with both customers and partners to help streamline their mortgage processes through automation and technology integrations. Over the last 18 months Lending Manager has expanded to over 3,500 loan officers currently processing over $2 billion in loan applications online per month through their system.

“The most significant change we will observe is compliance-based technology driven by the regulatory landscape,” agrees Vladimir Bien-Aime, CEO at Global DMS. “The penalties for non-compliance range from stiff to completely astronomical due to the enforcement of new regulations issued by the Consumer Financial Protection Bureau. Lenders are going to want compliance technology baked in to all their mortgage applications, so users are locked down and there is transparency throughout the entire process. Monitoring and reporting will be critical for all aspects of the process including TILA, Servicing, and Section 342 the diversity requirements of Dodd-Frank to name a few.”

Global DMS, LLC provides innovative commercial and residential real estate valuation software solutions that meet the needs of the mortgage industry. The company was founded in 1999 to deliver technology for managing the appraisal process to promote compliance, reduce cost and expedite the real estate appraisal process.

The big question in all of this is: How will lenders react? Will they look to just patch the process or will they genuinely look to improve the process? For example, the appetite for correspondent has thawed, but there might be opportunities to resurrect this business channel in 2015 if lenders make smart technology decisions.

“I think that we’re going to have an even stronger demand to support the return of correspondent lending in 2015,” said JP Kelly, President at OpenClose. “There are lenders that are either looking to grow their existing correspondent channel or launch a new one. To successfully do this you need a number of different business components, one of which is a correspondent-facing technology platform. Put simply, we’re going to see technology innovation in correspondent lending.”

Founded in 1999, OpenClose is a provider of an enterprise-class, purely browser-based end-to-end loan origination system (LOS) that delivers its solution on a Software as a Service (SaaS) basis. The company provides a variety of Web-based solutions for lenders, banks and credit unions—from loan origination software to decisioning, reporting, website design and social media marketing. OpenClose’s LOS is also completely engineered by the same company, thus avoiding assembling best-of-breed applications or acquiring technologies in an effort to create an end-to-end platform.

In fact, more and more lenders are understanding the value of being purely Web-based and even mobile. “There are many mortgage technologies that are ‘Web-accessible’ via mobile devices; however, most lenders and vendors are yet to develop native apps for these devices, which makes for much better navigation, speed and efficiency,” said Justin Glass, Chief Digital Officer at United Wholesale Mortgage (UWM). “At UWM, we recently rolled out a native mobile app for our brokers that enables them to easily access various components of our broker portal, LOS and underwriting team, thus making it very easy to do business with us. We believe that a growing need for native apps will drive mortgage companies to significantly enrich the user experience with mobile technology in 2015.”

The work of innovative lenders like UWM demonstrates to me that the big story of 2015 won’t be about the rules, it’ll be about how innovative lenders stepped up and changed the mortgage process for the better.

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