Discussing True 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 Ninth 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?

JERI YOSHIDA:Innovation is filling an unmet need with a solution that people prefer over their previous options. I don’t think that sweeping versus incremental change is a major factor in determining innovation.

STEVE VIARENGO:We define innovation as the transformation of the way a company or a process works. Disruptive, sweeping change is exciting, but unless you’re a start up, it’s rarely practical. Most companies need to protect their core business while driving change, so incremental change is necessary for success. At Capsilon, we provide disruptive technology that fundamentally changes how companies work. Over the years, we’ve learned how to implement innovative new processes in incremental ways that help companies realize an immediate, positive business impact while marching toward broader, more sweeping changes that add up over time.

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SARA NAKAE:You can’t put innovation in a box or on a timeline, innovation happens through thought, focus, and excellence. Innovation can be either sweeping or incremental, it’s not an all or nothing process. In fact, the definition of innovation does not contemplate “how” a new product or service is introduced, innovation is taking a great idea and turning it into a valued product or service that customers will buy. From a business standpoint, incremental innovation is the more popular approach because it comes with less financial risk to the organization. But sweeping, or radical, innovation is something that shouldn’t be ignored either. Both exist and both have their merits. But the key to innovation is to focus on the impact to the customer, did you improve their user experience? Innovation can happen incrementally or sweeping, as long as the product or service creates value from the customer’s perspective.

MATT HANSEN:I like to think of innovation as something that changes the status quo. It can be organizing and making sense of other’s ideas. Innovation can also be something that is more self-created. Either way, I believe innovation requires execution.

SHAIMAA ELK:Innovation comes in all forms and should not be limited to being seen as a sweeping change. Innovation can be defined as simply as the application of ideas to remain relevant.

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BOB BRANDT:To Optimal Blue, innovation is not a tsunami that happens, and everyone then reacts to that moment in time. Innovation is not something you revisit only when you have the time. At Optimal Blue, innovation is a pillar in our corporate DNA. We view innovation as a constant, as something that drives our approach each and every day.

ELIZABETH KARWOWSKI:Save once in a generation discoveries, I don’t think sweeping change is possible without being preceded by smaller, incremental changes. In other words, small changes to procedures or products over a period of months or years often have the effect of completely transforming them into something that’s never been done or seen before. It’s often not until we look back to where we started that we fully grasp the gravity of those seemingly small changes made along the way.

DAVE SIMS:I would define innovation as anything that has the potential to dramatically change a market. In terms of the mortgage industry – an industry where processes have mostly remained unchanged for more than 80 years – the introduction of digital automation and point-of-sale solutions have caused massive disruptions by simplifying the once-complex and non-secure process of originating a mortgage loan, thus setting a new standard in borrower expectations. Floify was one of the first of its kind to market in 2013. Since then, we have seen our user base grow to nearly 700,000 lenders, borrowers, and other loan stakeholders. Every day, more and more lending operations are transitioning to digital solutions, which is helping them remain competitive in this highly-competitive industry and allowing them to effectively fight margin compression. To me, the recent changes in the mortgage industry have been the epitome of innovation.

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BOB DOUGHERTY:Innovation can be incremental or sweeping, depending on your business objectives and strategy. Both sweeping and incremental innovation promise great benefits—improved accuracy, speed and profits. However, incremental innovation lacks many of the challenges that come with radical change, such as significant disruption of day-to-day business or heavy time and resource investments in new technology that may or may not work.

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

SHAIMAA ELK:The state of innovation in the mortgage industry is modest at the moment. If innovation is the application of ideas to remain relevant than a key element in the equation is the degree of underlying change in regulations, processes and expectations that drive that relevance equation. The mortgage industry is currently heavily regulated, which impacts its speed of change. In this current environment, industry change is still slow and limited, which has put a reduced demand on the need for innovation.

MATT HANSEN:Organization of ideas is happening in the mortgage space. There’s rarely a new idea, but execution of ideas is getting a lot more attention. Some companies are able to execute, and some are not. We’re also seeing vendors open the doors between each other, which previously didn’t happen on the same scale. This is bringing new products to the market. For this reason, I would say we are in a state of growth and innovation.

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STEVE VIARENGO:It is an exciting time to be in the mortgage industry. There has been a significant influx of capital invested in technologies that enable a better way of doing business, legacy technology companies are recognizing the need to create more open environments and work with other tech providers, and companies in the space are embracing change. We’ve been working closely in partnership with our lender, investor, and servicing partners to build innovative solutions that solve the biggest pain points for companies in the space.

BOB BRANDT:We are in the midst of an innovation renaissance period in the mortgage industry. There are more technology vendors developing more interesting approaches to automation and problem-solving than ever before. Optimal Blue believes that the state of innovation is thriving! However, the challenge that industry innovators face is to think beyond technology silos. For this very reason, Optimal Blue has developed robust and highly unique RESTful API interfaces that +50 leading mortgage vendor partners leverage to break down the integration barriers between mortgage technology systems that have historically held back the industry.

SARA NAKAE:With today’s economy and the advances in technology and data availability, innovation in the mortgage industry is moving from stagnant to thriving. There’s been a lot new capital infusion through various FinTech companies over the past 24 months. Financial institutions are becoming more competitive every day, each one trying to produce a better product and borrowing experience. Reducing costs and turn-time are big factors for lenders who want to compete, and they are putting their focus on innovative ways to improve their product and their process.

BOB DOUGHERTY:Innovation is thriving in the mortgage industry. Technology providers are constantly launching new solutions; enhancing their existing products; and integrating with other technology providers to streamline and accelerate the mortgage origination process for everyone involved. From a broker perspective, all of this technology is empowering because it lets them focus more on their borrowers and less on manual processes or maintaining software or hardware.

DAVE SIMS:I believe the state of innovation in the current mortgage industry is neither thriving nor in a state of decay; rather, it is now in a mode of stabilization. When Floify’s automation technology was introduced to lenders in 2013, there were only a few players in the space, all vying for a piece of the mortgage tech market. Since then, dozens of hopeful competitors have come and gone. Only a few have withstood the test of time. What has set Floify apart from our competition is our ability to continue our pace of innovation and partnering with like-minded leaders in complementary spaces, including VOE/VOA/VOI, credit reporting, eSignature, and productivity vendors. This strategy has allowed us to develop a single solution that integrates with our customers’ favorite solutions, further simplifying their lending operations.

JERI YOSHIDA:I wouldn’t call innovation in our space thriving, but the work I do with NEXT has shown me that there are a lot of new technologies entering the mortgage industry. How many of them are truly innovative? That’s the question. A lot of companies want to be the one that takes the mortgage industry out of its old school, manual, paper-based processes. And a lot of them are working really hard to stake that claim by conceptualizing new technologies and bringing them to market. That in itself refutes the notion that our industry is in a state of decay.

ELIZABETH KARWOWSKI:The mortgage industry is fiercely competitive, and competition almost always breeds innovation. There is no better teacher than past experience and, as mortgage professionals learn from past missteps and accomplishments, we are seeing new ways in which technology is leveraged to increase efficiency and streamline processes. In this industry it is almost impossible to be successful without constantly tweaking and tinkering to get an edge on the competition.

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?

SARA NAKAE:Focus on their customer, how can lenders create a better experience for their borrower? It’s a combination of cost and time. Lenders need to focus on reducing the cost for customer’s to get a loan and the time it takes to close. Innovation that focuses on those deliverables will be winning over the next 12 months.

SHAIMAA ELK:The industry could use a fresh approach to mortgages, a re-imagining of the entire process. This would require a joint effort with lenders, investors, regulators and vendors. But in the meantime, the more pressing issue is not what type of innovation the industry needs, but how quickly can we adopt the innovation that is readily available today, like digital portals, robotic process automation (RPA), data analytics, and blockchain. Furthermore, beyond adoption, there’s the notion of packaged solutions that deliver integrated solutions from “best-of-breed” providers. This is a different perspective on innovation that could prove to be equally as fruitful.

BOB BRANDT:As an industry, we are beyond the desperate need for “the ONE innovation” that we hope will make the key difference. We believe that the industry is at a point where the most significant difference will be made by a series of incremental innovations by a host of companies. Optimal Blue has already automated the secondary marketing process, and now our focus has turned toward a series of even more granular functionalities and automation that will pave the road for an entirely new way of conducting originations in the industry. A good example of that is our “lights-out” lock desk and trading platform automations.

BOB DOUGHERTY:Since origination volume is expected to remain flat this year, more brokers and lenders are turning to non-agency/non-QM products to reach underserved borrowers. Originating these loans is typically a manual process. In order for the non-agency/non-QM market to scale, the mortgage industry needs technology that allows originators to quickly and confidently qualify these borrowers.

STEVE VIARENGO:The absence of good data is one of the most significant barriers to innovation in the mortgage industry. Having clean, accurate information you can trust is a critical element needed for automation, risk reduction, and cost reduction. Companies can now solve this problem with technology like Capsilon¹s doc and data audit tools that enable them to build a complete, accurate record for every loan. Companies who don¹t adopt these types of technologies over the next twelve months are going to find it hard to take advantage of a wave of innovative technologies coming that require clean data to be effective. The massive impact these technologies will have on the mortgage industry is now undeniable. Companies who lag will be left behind.

MATT HANSEN:Twelve months is a very short period of time. It seems most likely this idea has already been conceived and mostly built if it’s to come to market in the next 12 months. That being said, the cost of human capital has been difficult for lenders in lean times. In order to solve this, it would need to be an innovation that cuts into the biggest expenses lenders incur on a per loan basis.

ELIZABETH KARWOWSKI:I think it’s time to turn our attention to potential borrowers who don’t fall within traditional lending parameters. Specifically, Millennials and younger generations are entering the work force with priorities and values that often differ greatly from Baby Boomers and Generation X. Many of them have never had a credit card, and don’t have any credit history or credit profile at all. It is imperative that the industry begins implementing  educational programs and providing resources in order to ensure that these young people, (who will eventually make up the majority of the population) see the value in home ownership and will actually qualify for a mortgage.

DAVE SIMS:The mortgage industry would greatly benefit from an innovation that improves the accuracy of real estate appraisals. In fact, more than one in three appraisals contain inconsistencies in property ratings and values. Additionally, conflicting property condition and quality ratings can result from numerous factors, including human error, appraiser subjectivity, physical changes in property condition or quality, or even possible fraud, which has been cited by the GSEs as the top origination fraud scheme trend in recent years. Developing an innovation that would create consistencies across the appraiser network would be the perfect way to combat this troubling trend.

JERI YOSHIDA:The mortgage industry desperately needs innovative change in the way it thinks and interacts as an industry. There is no shortage of sharp minds and great ideas, but in order to fully capitalize on them, the industry needs a shift in its thinking. Day in and day out, I work with more brilliant executives through NEXT than I have at any other time during my decades-long career in this industry. If these particular executives were leveraged in C-suite positions, or if they were given a more visible platform, I suspect we’d see the start of a massive push forward—in innovation, creative ideas, opportunity, and so much more. This would in turn produce other measurable results from higher client and employee satisfaction to higher recruitment of top talent. This could set the tone for not one or two innovations, but rather a culture of innovation that yields a decade or more of brilliant, truly innovative advances in the mortgage industry.

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.

A Time To Reflect


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

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

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

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





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

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

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

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

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

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





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

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

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

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

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

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

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

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

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

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

About The Author

Keep Improving


In this market, or in any market really, you can’t rest on your laurels. You have to keep improving. For example, Equifax just launched its Equifax Ignite application to challenge the traditional “one size fits all approach” with an this suite of solutions that provides fast, configurable and actionable data to solve critical challenges and help drive growth strategies. Offering insights through three distinct delivery channels, this “tailored for you” approach was designed with various key users in mind – from marketing senior executives to data scientists.

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The driving force behind Equifax Ignite is the company’s established leadership in providing insights through powerful data and analytics solutions that help propel critical business decisions. Equifax Ignite embodies the company’s deep expertise in big data, specialized risk, fraud and marketing analytics, as well as its vast portfolio of directly sourced, directly measured data from the credit, finance, and telecommunications industries. Equifax Ignite delivers deep insights through an extensive data portfolio including trended data, risk scoring models and the linking and keying of disparate sets of data.

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“Harnessing the power of big data poses a tremendous challenge for businesses,” said Trey Loughran, Chief Marketing Officer at Equifax. “Whether it’s providing the latest in data visualization through an app or access to our differentiated data, advanced analytical tools, and technology, Equifax Ignite brings data to life and helps drive businesses forward by helping the end user become a data-driven organization.”

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As an example, with Equifax Ignite, a bank could leverage key insights to help assess risk at various decision points relevant to their unique goals. From more accurately targeting and screening new customers through market intelligence and alternative data, to creating risk models and monitoring risk scores over time, the user is able to access the vast array of insights available, using leading-edge analytic techniques.

“Equifax Ignite redefines access to data and speed to market,” said Prasanna Dhore, Chief Data and Analytics Officer at Equifax. “There is a paradigm shift happening: the market needs more tailored data solutions that don’t take months to deliver. Generic models aren’t relevant to many businesses’ needs and custom models and diagnostics simply take too long.  Equifax Ignite meets market demand through a frictionless process that reduces building, testing and deployment from months to days.”

About The Author

Let’s Change The Conversation


There’s a lot of negativity out there. If you look at the story of the year, the Presidential Election, you have one candidate that became his party’s nominee by insulting his opponents’ looks, mannerisms, etc. That’s all fine and good, but instead of name calling, we should be lifting people up. It’s not enough to insult or even to diagnose a problem if you are not willing to put forth a solution. So, in this issue we at PROGRESS in Lending have decided to change the conversation. We are not going to focus on the negative, we are going to focus on providing solutions.

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For example, there’s a lot of talk about the burden of new regulations. We talk a lot about how those rules are impacting originators, but they are impacting mortgage servicers just as much. So, what should servicers do? Complain about their lot in life? No sir. In this issue, Nickie Badalamenti-Kalas, the President of Five Brothers, courageously points out, “As a servicer and asset manager, you should be focused on maximizing your assets, rather than constantly worrying about these ever-changing compliance requirements. You can’t afford to go it alone, that’s why selecting the right asset management provider is critical to your long-term sustainability.” I encourage you to read what else she said on this topic.

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Also, we don’t think about marketing as a point of contention. However, regulators want to regulate marketing, as well. So, should lenders stop marketing their businesses? Of course not. In this issue, Brandon Perry, the President at The Turning Point, clearly states, “In today’s market with intense competition, mortgage companies cannot afford to stop marketing to prospective borrowers. The key is having the right tools and partner to deliver compliance and control in their mortgage marketing efforts.” To that comment I say: Bravo!

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All throughout this issue you’ll read stories whereby industry visionaries don’t just sulk and moan about tough situations, they roll up their sleeves and look for solutions. If everyone in the industry followed their lead I think the industry would be much better off.

About The Author

The Rules Of Innovation


We always talk about how the mortgage industry is in need of innovating. Progress In Lending hosts the Innovation Awards each year to reward those companies that are moving the ball forward. But when it comes down to it, I think a lot of companies may struggle with how to innovate and how to move their clients forward in an environment that is becoming increasingly regulated.

In an article entitled “The 9 Rules of Innovation” by Greg Satell, he says that the truth is that there are many paths to innovation. Here are nine of them:

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Rule 1: Innovation is Never a Single Event

Alexander Fleming discovered penicillin in 1928, but it wasn’t until 15 years later, in 1943, that the miracle drug came into widespread use. Alan Turing came up with the idea of a universal computer in 1936, but it wasn’t until 1946 that one was actually built and not until the 1990’s that computers began to impact productivity statistics.

We tend to think of innovation as arising from a single brilliant flash of insight, but the truth is that it is a drawn out process involving the discovery of an insight, the engineering a solution and then the transformation of an industry or field. That’s almost never achieved by one person or even within one organization.

Rule 2: Innovation is Combination

The reason that Fleming was unable to bring Penicillin to market was that, as a biologist, he lacked many of the requisite skills. It wasn’t until a decade later that two chemists, Howard Florey and Ernst Boris Chain, picked up the problem and were able to synthesize penicillin. Even then, it took people with additional expertise in fermentation and manufacturing to turn it into the miracle cure we know today. Great innovation almost never occurs within one field of expertise, but is almost invariably the product of synthesis across domains.

Rule 3: First, Ask the Right Questions

Too often, we treat innovation as a monolith, as if every problem was the same, but that’s clearly not the case. In laboratories and factory floors, universities and coffee shops, or even over a beer after work, people are flushing out better ways to do things. There is no monopoly on creative thought.

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But that leads us to a problem: How should we go about innovation? Should we hand it over to the guys with white lab coats? An external partner? A specialist in the field? Crowdsource it? What we need is a clear framework for making decisions.

As Satell wrote in Harvard Business Review, the best way to start is by asking the right questions: (1) How well is the problem defined? and (2) How well is the domain defined? Once you’ve asked those framing questions, you can start defining a sensible way to approach the problem.

Clearly, no one method can suffice. Look at any great innovator, whether it is Apple, Tesla or Google, and you’ll find a portfolio of strategies. So the first step toward solving a difficult problem is asking the questions you need to define your approach. To paraphrase Voltaire, if you need to solve a problem, first define your terms.

Rule 4: There is No Optimal Size for Innovation

When most people think about innovation, they think about startups. And certainly, new firms like Uber, Airbnb and Space X can transform markets. But others such as IBM, Procter and Gamble and 3M have managed to stay on top for decades, even as competitors rise up to challenge them and then, when markets shift, disappear just as quickly into oblivion.

While it’s true that small, agile firms can move fast, larger enterprises have the luxury of going slow. They have loyal customers and an abundance of resources. They can see past the next hot trend and invest for the long term. There’s a big difference between hitting on the next big thing and developing it consistently, generation after generation.

Rule 5: Leverage Open Innovation to Expand your Capabilities

When Microsoft launched Kinect for the Xbox in 2010, it quickly became the hottest consumer device ever, selling 8 million units in just the first two months. Almost immediately, hackers began altering its capabilities to do things that Microsoft never intended. Yet instead of asking them to stop, it embraced the hackers, quickly releasing a software development kit to help them along.

Like Microsoft, many firms today are embracing open innovation to expand capabilities. Cisco outfoxed Lucent not by developing technology itself, but by smartly acquiring startups. Procter & Gamble has found great success with its Connect and Develop program and platforms like Innocentive allow firms to expose thorny problems to a more diverse skill set.

As was the case with Alexander Fleming and penicillin, most firms will find that solving their most important problems will require skills and expertise they don’t have. That means that, at some point, they will need to utilize partners and platforms to go beyond their own internal capabilities of technology and talent.

Rule 6: Disruptive Innovations Require New Business Models

When Chester Carlson perfected his invention in 1938, he tried to market it to more than 20 companies, but had no takers. It was simply far too expensive for the market. Finally, in 1946, Joe Wilson, President of the Haloid Company, came up with the idea of leasing the machines instead of selling them outright. The idea was a rousing success and in 1948 the firm changed its name to Xerox.

The tricky thing about disruptive innovations is that they rarely fit into existing business models and so the value they create isn’t immediately clear. It’s not just products that we have to innovate, but business models as well

Rule 7: Innovate The Core – The 70/20/10 Rule

Many people think of innovation as discarding the old to make room for the new, but as Bain & Co.’s Chris Zook points out in Profit From The Core, smart companies realize that the bulk of their profits will come from current lines of business.

Take Google for example. Yes, it pursues radical innovation, like self-driving cars, at its Google X unit, but its continual improvement of its core search business is what made it the world’s most valuable company. That’s why Google, as well as many other innovative companies, follow the 70/20/10 rule.


The premise of the rule is simple. Focus 70% of your resources in improving existing technology (i.e. search), 20% toward adjacent markets (i.e. Gmail, Google Drive, etc.) and 10% on completely new markets (i.e. self-driving cars).

Rule 8: In the Digital Age, We Need to use Platforms to Access Ecosystems

It’s no accident that the people who would make the vision Engelbart presented at “The Mother of All Demos” a reality actually attended the event and knew Engelbart personally. In those days, it was difficult, if not impossible, to actively collaborate across time and space. Today, however, we can use platforms to access ecosystems of technology, talent and information. In a networked world, the surest path to success is not acquiring and controlling assets, but widening and deepening connections.

Rule 9: Collaboration is the New Competitive Advantage

When we look back to the great innovations of the past, it is hard not to wonder how it could’ve gone differently. And now, the problems we seek to solve are significantly more complex than in earlier generations. That’s one reason why the journal Nature recently noted that the average scientific paper today has four times as many authors as one did in 1950. At the same time, knowledge has been democratized. A teenager with a smartphone today has more access to information than a highly trained specialist a generation ago.

We need to work harder to integrate people with diverse talents.

About The Author

How Do We Change The Mortgage Process For The Better?

A lot has been made of complying with this rule or that rule, but in the rush to comply I think the big picture is sometimes lost. The big picture should include changing the whole mortgage process for the better instead of just trying to stay ahead of this rule or that regulator.

So, how do you do that? “We focus on the backend processes,” answered David Sohm, COO at Capsilon. “We want to speed that up and keep the communication open. Things change all the time. The most recent change was TRID. TRID was supposed to speed up the process and make the process easier to understand, but it has actually extended the process.”

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Capsilon is provider of cloud-based document management solutions for mortgage lenders and investors. Sohm is responsible for managing the company’s growth plans and overseeing alliances and corporate development.

Sohm has more than 15 years of successful president/chief operating officer experience in software and Software-as-a-Service (SaaS) markets, in both public and private companies. He has been directly responsible for the evaluation, selection and integration of multiple acquisitions and mergers (both buy and sell). He has developed and executed worldwide product support, sales, distributor and marketing plans to achieve company growth and profit goals.

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“In the end, if the number of touches can be reduced, that speeds things up. For example, knowing which documents are required and which docs are missing is important. Also, there needs to be a secure place to exchange information so you’re not just exchanging important info through the air,” noted Sohm.

A lot of the heavy lifting required to change the process for the better is done by the LOS because it’s the system of record. So, what contributions are LOS vendors making to improve the space? “There are a lot of ways that people are trying to simplify the process, but beyond that you also have to engage at the right times,” answered Abhinav Asthana, a senior product manager and global head of mortgage consulting at Wipro Gallagher Solutions (WGS), a Wipro Ltd. Company, which is a provider of end-to-end technology products and services for mortgage, consumer, and commercial lenders in the United States and abroad. WGS’ technology products include its flagship NetOxygen Loan Origination Systems (LOS) and mobile lending technologies.

“We at WGS are manufacturing a loan for the borrower so the customer has all the input. So, the touch points should be more skewed toward the borrowers vs. the backend of the process. Today when a borrower starts an application, the loan officer is in constant communication with the borrower, asking for more and more items. While the LO is working the loan, or when the loan is being worked by the underwriter, the borrower is in the dark. The borrower doesn’t know what’s going on. The back office is working the loan, but the borrower doesn’t know what’s going on. You need to inform the borrower upfront and let them know what’s going on and what comes next.”

As vendors talk about advancement and what they are doing to propel mortgage lending into this century, the rubber really hits the road with the lender. If the lender doesn’t adopt new technologies, nothing changes.

“I got in the mortgage industry in 2003 and there was a lot of talk about e-mortgages,” remembered Dan Jones, vice president, technology at Churchill Mortgage Corporation. “Look at where we are today. The industry moves slow. Also there was a lot of talk about younger borrowers wanting everything electronic, but we are finding that they also want to speak to you on the phone.”

Jones has been with Churchill since July of 2003 and has previously worked as a small business technology consultant, Systems Analyst for a national manufacturing company and Data Specialist for an international computer manufacturer. Jones’ experience in customizing and installing Churchill’s multi-branch loan origination platform and integrating their pricing engine, lead management, database marketing, imaging workflow and e-commerce efforts has provided a unique holistic perspective and hands on knowledge of every aspect of the mortgage banking process. In these efforts, he helped spearhead an LOS implementation during Churchill’s transition from Broker to Correspondent Lending in 2003, and played a key role in Churchill’s implementation of a newer LOS.

“If you have to boil the mortgage process down, you have to automate the experience,” Jones pointed out. “Its not just about how you interact with the borrower, it’s about total transparency. Getting a mortgage can be an intimidating process that consumers don’t understand. Going forward we at Churchill are working on automating the collection of information so the need for the borrower to provide and share documents like bank statements, W2s, etc. goes away. The need to traffic in these documents is going away. As this becomes electronic it will streamline the whole process. That’s where every lender should be going.”

About The Author

Inspiration Leads To Action

Summer is in the air; it’s the time of the year when many people make the leap to homeownership. Combine this with the fact that rates are still sitting at comfortable lows, and you can see that it is now more important than ever to inspire potential borrowers to reach out to you for their home buying needs. However, it is equally important to make sure your current borrowers get their next mortgage through you. Similar, yet distinct, approaches should be taken with each group.

We recently held our annual user conference, which draws hundreds of the industry’s premiere lenders and technology providers together to talk about all things mortgage. I have participated in this conference for many years, listening to our myriad of speakers and networking with our customers and partners. The conference always reenergizes participants and sparks new ideas.

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This year, I honed in on one message in particular: Now, more than ever, lenders want to get borrowers excited about homeownership. This sounds obvious; after all, lenders are always seeking to attract borrowers. Marketing lays the groundwork, sales makes the pitch, and operations manufactures the loans. Together, they close deals.

So where does this process go awry, and why are lenders seeking to get borrowers excited? To put it simply, borrowers are not interested in the lender’s sales pitch.

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The stark truth is that the vast majority of current mortgage holders will take out their next mortgage from a new lender. There are lots of reasons for that, including referrals from friends or real estate agents, or the pull of timely advertising. Brand loyalty is rare in housing finance, in part because lenders have little interaction with borrowers once their loan closes.

With the shift to a purchase market — one ripe for the biggest crop of first-time buyers in history — keeping in touch with your current borrowers throughout the life of their loan lays the foundation for increased brand-loyalty. There are many ways to approach relationship-building. Surveys can give you great insight into your current standing with customers, but you must then act on those responses. Borrowers (especially those who are unhappy or indifferent) must know that their voice has been heard. It also helps to stay in front of them with your current rates and programs; you want to be top of mind when the time comes for them to buy their next home.

Reaching those who are not already customers takes inspiration and differentiation. Lenders should experiment with new approaches to advertising, different types of conversations with potential customers, and new ways to cultivate and motivate referrals. The idea is to stand out in a crowded market with a combination of value and service that leads the prospective customer to action.

It’s never dull in our industry. Inspiring current borrowers and attracting new ones is more important today than ever before. Market research methods let us know who is likely to be looking for homes and financing. Other technologies — like online tools lenders make available to borrowers and potential borrowers — can also help. These are all great steps in the right direction, yet, as mentioned, today’s borrowers are often not brand-loyal. Address this by building loyalty with your current customers and by inspiring potential customers. After all, inspiration often leads to action. These are key ingredients in the recipe for continued success.

About The Author

The State Of Innovation


Over 100 mortgage executives came together to attend PROGRESS in Lending Association’s Sixth 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 innovation? 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?

JEFF BRADFORD: Innovation can be incremental or sweeping. The key is that it is an improvement. It can be a small change to a process that improves efficiency or costs, or it can be disruptive and eliminate an entire category of services or processes.

DOMINIC IANNITTI: In order to gain significant traction and adoption in the mortgage industry, things generally happen in increments, mostly because so many parties have to weigh in and agree on how and when to effectuate change. A good example of that is the slow but sure industry adoption of eSignatures, eNotes and eClosings.

However, universal change and innovation can occur when a major compliance regulation is put into effect. The CFPB’s drive to implement the TRID rule created a fundamental shift of seismic proportions in both business processes as well as relationships. This affected so many entities across the mortgage supply chain. The CFPB essentially became a change agent that facilitated never-before collaboration between lenders and title companies. This not only helped the borrower but it also helped develop far greater transparency, much more efficient workflows, and better communication.

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So depending on the impetus, innovation can be swift or incremental. But I really define innovation as a process — the process of arriving at new ideas, concepts and approaches to doing things differently — and then bringing all the necessary parties together to execute on and attain adoption.

PAUL CLIFFORD: I don’t think it is either. Innovation isn’t tossing out the old paradigm completely, nor is it tweaking the old paradigm for incremental change. Innovation is taking what we “know,” our collective industry experience, and solving for old problems in new ways. We can’t forget our history, nor can we simply amend it.

MARC RICCIO: There is no definite explanation on how to create innovation, which is what also makes it so difficult to define. Considering something as being innovative means that it is one of a kind regardless of how it was achieved. What matters most in today’s industry, especially in the software world, is that creating innovation is mandatory in order to stay relevant and competitive. Without the ability to think outside of the box, there is little hope for survival.

BRAD THOMPSON: Innovation must be constant. It’s a given, really, for all technology companies, though especially ours. We’ve built our business around rapidly evolving mortgage platforms to meet the ever-changing needs of lenders and their borrowers. Regulations over the past several years, including TRID, are current examples, though many innovations were less reactionary and more visionary for us, such as the rollout of a true borrower portal in 2001 – it’s the combination of both reactionary and visionary innovations that allows lenders and technology providers to stay ahead of the market.

NICKIE BADALAMENTI-KALAS: Innovation does not have to be mutually exclusive to being either sweeping change or incremental change. It depends on the circumstances and specific market conditions in play. Innovation requires a company’s commitment to delivering dynamic solutions, technology, new processes, that proactively address current and future market conditions in a way that adds value to all interested parties.

SHARON MATTHEWS: Innovation comes in all formats, including small changes and large revolutionary advances. Being innovative simply means doing something differently than what has traditionally been done. It means not accepting the status quo as a given, but rather looking for new ways to do things. For every disruptor like the smartphone, there are many more that have been the result of multiple innovations over time that have improved the state of the art. Mortgage technology is a prime example.

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

BRAD THOMPSON: Innovation is thriving in the mortgage industry! Stronger than ever, in fact. Some of it is, of course, reactionary – TRID for example – yet the most interesting are forward-looking – like the work we’re doing around business intelligence and our next-generation borrower portal. Lenders require partners that are innovative, therefore, the best companies will be taking similar steps to stay ahead of industry trends.

MARC RICCIO: If you asked me this question 12 months ago, I would have replied it’s in a state of decay because of TRID. Although still weighing some vendors and lenders down, the worst part is over…and we have some exciting and innovation capabilities being released in the next 6-18 months. That being said, there are many new opportunities to embrace innovation. The Millennial generation will need housing, which will push lenders to embrace “their type of technology,” including tablets and mobile devices. We haven’t even scratched the surface with e-signature and paperless process capabilities. The future is all about speed, efficiency and economies of scale, and it will be driven by providing a seamless and optimizing loan process that provides personal service. The lenders who find a way to achieve this through innovation will be the winners.

DOMINIC IANNITTI: To use a well-known proverb, “Necessity is the mother of invention.” I cannot recall the last time I have seen so much innovation in the mortgage industry. Dodd-Frank imposed unprecedented regulatory oversight, introducing new processes and procedures, workflows, increasing compliance costs, along with greater risk while reducing bottom line profit and thinning margins. In order to survive, lenders must turn to eliminating old paper-based processes and automating more of the compliance verification and document process to ensure proof of compliance to protect themselves against future regulatory audits.

The increasingly regulatory intensive landscape the industry has faced ended up forcing a major business change from producing a paper trail, to document compliance in a loan file, to implementing a continuous automated, electronic data verification and compliance audit process. This resulted in ensuring that both the data and the documents which contain them are as current, complete and compliant as possible. Even Fannie and Freddie have moved from a post-closing review process to new pre-closing verification systems in order to verify data before final documents are drawn.

The short answer is that regulatory mandates to implement new compliance rules resulted in vendors developing better technology solutions to accommodate them. While it has been painstaking, I believe that the mortgage industry is about to turn a critical corner. We’re going to reach new heights of efficiency and the truly paperless eMortgage will gain critical mass sooner rather than later.

JEFF BRADFORD: I think innovation is thriving in the mortgage industry. The amount of venture capital that is pouring into the FinTech sector is huge. There are a lot of ideas being funded. We’ll see some of these turn into new services and products and enter the market in the next few years. Some may even disrupt the mortgage market. It will be interesting to watch.

NICKIE BADALAMENTI-KALAS: Personally, I know at Five Brothers we view the state of innovation as thriving. The influx of new rules and regulations has forced companies to develop innovation to respond to constantly changing market conditions. The key is developing a culture within the organization that is continually looking for ways to do things better, faster, and more cost effectively.

PAUL CLIFFORD: While it is thriving from a “spot solution” standpoint, I do feel we are still too reactive rather than proactive, preventing us from innovating at a broader, industry level.

SHARON MATTHEWS: Innovation in the mortgage industry is thriving without question. Every phase of the mortgage process is evolving, from the user experience at the point-of-sale, to eClosings, to post-close processes. We see better, faster and more cost efficient approaches coming to market in all these areas. Even data standards – not something typically associated with innovation – are helping to make possible the vision of a data-validated mortgage, in which quality and compliance are more easily assured from beginning to end.

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?

SHARON MATTHEWS: It would be what we have termed the “Data-Validated Mortgage,” which refers to a loan whose individual data elements are in an accepted, standardized format and is made available in a way that is useful by stakeholders in every aspect of the business. The ability to assess loan documentation from pre-close to close and then extending through to post-close, especially in relation to TRID disclosures, is a game-changing capability affecting compliance, loan quality and investor salability. Leveraging the work performed by MISMO, eLynx and others, the Data-Validated Mortgage is an innovation whose time has come and is ready for adoption by the industry.

DOMINIC IANNITTI: Director Cordray of the CFPB has gone on record as stating that his number one goal moving forward is to implement a total eClosing and electronic Compliance Management System (CMS) that effectively addresses both compliance and consumer satisfaction. Our participation in the CFPB’s eClosing Pilot provided us with keen insight into helping streamline the overall consumer experience from the initial LE and eDisclosure to delivering the final CD and pre-closing package three days prior to consumption.

In order to ensure a truly consistent and compliant process, however, lenders need to document all consumer interactions. Using paper-based or even imaging-based systems aren’t going to cut it. You must start and end with electronically creating a completely paperless process to document consumer consent and understanding, acknowledgement, intent to proceed, receipt of delivery, etc. throughout the entire mortgage manufacturing process.

In future compliance audits, the CFPB is going to be checking the source and validity of the data so lenders are going to have to keep an electronic audit trail to document that as well. The only way to effectively accomplish that is to implement a true eMortgage process (eSign, eDisclosure, eClosing, eNotary, MERS eRegistry) and retain electronic proof and evidence of compliance (data, documents and electronic audit trail) that resides in an eVault along with reps and warrants to ensure total compliance with regs.

MARC RICCIO: I see the need for providing “picture” documentation that allows a borrower to zoom and click a picture of a borrower document with their cell phone or tablet. They need to be able to securely transmit the document to the lender to automatically be uploaded to the LOS and securely attached to the borrower record. The key is providing a secure delivery that requires no human intervention.

JEFF BRADFORD: Appraisals need to get better. Much better. It’s a big bottleneck for lenders trying to close loans when 50% of the appraisals submitted are returned for corrections. Innovation in the appraisal process, in the analysis and in the reporting are desperately needed. We live in a world, which revolves around technology and appraisers are still filling out forms manually. This has to change.

NICKIE BADALAMENTI-KALAS: With the influx of new rules and regulations, property preservation is not just about securing a lock or boarding up a window; it is about preserving the appearance of neighborhoods and maintaining homes as good as the house next door. The speed and accuracy at which servicers can get information from their property preservation company is a critical factor in making this happen. Mobile technology specifically applied to property preservation significantly speeds up this process while also improving data integrity and therefore will have a major impact on the industry over the next twelve months.

BRAD THOMPSON: The digital mortgage is absolutely crucial. Even a hybrid approach where the front-end process becomes digitized is a step in the right direction. With regulations and an ever-changing industry ahead of us, the ability to be agile is critical to long-term success, and being digital is essential to being agile.

PAUL CLIFFORD: Well, I don’t think it is a secret that we need to drive to data standardization and interoperability. The longer we remain a fragmented industry of stakeholders and systems, the longer our problems persist and multiply.

We Need Some New Ideas

There is a lot of talk about how to attract Millennials. There is a lot of talk about increased efficiency. There is a lot of talk about digital or electronic mortgages. But how do we do any/all of these things? We need some new ideas to attract younger borrowers and digitize the mortgage process. The same-old, same-old won’t work. Here’s what I mean:

I just read that Aspire Performance Improvement Ltd will launch a unique and innovative digital self-service maturity assessment and corporate diagnostic based business model.

Aspire focuses on empowering clients to conduct their own consultancy engagements by training client team members in the ASPIRE performance improvement engagement approach and use of the CXO Diagnostic model range. This is designed to help clients quickly pinpoint problems, issues and challenges and proactively solve them through interventions which help turnaround, stabilize, optimise, transform and drive business growth.

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The company’s vision is to operate as a transparent organisation which shares its intellectual property for the benefit of the majority and not just the privileged few. Aspire has started to publish its public training course schedule, via Eventbrite, and will also be running tailored in-house courses for clients and consultancy organisations who wish to use the Aspire approach and collateral with their clients.

Aspire expects to lower the average cost of a traditional consultancy engagement from the £200k to £500k engagement cost down to an agile technology enabled £35k-£75k cost, significantly increasing the likelihood of a positive return on investment from the interventions recommended.

The Managing Director of Aspire Performance Improvement, Robert Peopall, who has previously worked for leading business and technology consultancy firms HP, CSC and Ernst & Young in business transformation director roles stated, “We are extremely excited about taking a fresh innovative technology enabled approach to market that allows clients to solve their own problems in a standardized and repeatable manner reducing their dependency on expensive third party consultancy services. This is not to say that third party consultancy services are not a worthwhile investment, we are merely offering clients a choice; a different pragmatic and practical option that recognizes the scarce budgets and tough reality of today.”

Why do I bring this up? Because it’s an example of a company putting a new and innovative twist on an old practice to make substantial improvements. Why don’t we do this in mortgage lending?

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