Switching from an older cell phone to another brand with all the latest additions may seem like the right decision — until someone finds the new phone difficult to use, learn and sync. The buyer may conclude that the frustration and wasted time wasn’t worth the upgrade, especially if it was done purely to stay ahead.
There is a lesson here for mortgage lenders that are attracted to new technologies billed as disruptive. Disruption is a bad word in mortgage operations. Improvement is everyone’s goal. Even if a tech tool, in theory, will help meet key objectives, it cannot be considered in a vacuum.
A mortgage company must consider how its implementation will impact staff productivity and morale along with client service. What are its risks and benefits in the current regulatory environment? What happens if a merger, acquisition or reorganization is planned soon? Will the technology ever get adopted after the lender has put countless IT, security and compliance resources into its installation?
These questions are especially important in the mortgage industry. Indeed, lenders, originators and other mortgage professionals sorely need technologies to reduce the frictions inherent to lending, servicing and investing, but these resources must be evaluated in context.
Many new technologies have helped lenders perform better. During the recent refinance wave, for example, new decision engines that deliver instant title results enabled lenders and their title agent partners to handle more transactions and scale their operations. They streamlined a process that would normally take days or even weeks.
Another example: With an appraiser shortage delaying the completion of valuation reports, appraisal management companies have offered new remote appraisal solutions that have helped to reduce backlogs. But lenders are advised to choose wisely by identifying the improvements that could truly make a business difference and by weighing the benefits of potential solutions against the risks. Consider digital closing solutions, which offer both top-line and bottom-line benefits if executed well. Among these is the removal of paper, which can save lenders significant costs in the origination process.
The use of remote online notarization, for instance, increased by 547% from 2019 to 2020, according to the American Land Title Association, as this technology saw widespread adoption due to the COVID-19 pandemic. Many lenders, however, have struggled to implement this solution for various reasons.
Lenders should carefully select the right solution versus the newest or most popular one by assessing its impact on themselves, their partners and individual borrowers. Among the considerations and complexities:
- Proper video storage and security, along with worst-case scenario risk analysis of the compromise of their video and/or storage facility
- Integration with their loan origination system or document preparation platform
- Ease of use of digital signature technologies, and the similarity (or lack thereof) between electronic signatures and handwritten ones
- The ability to insert minor changes or corrections on the fly
- Consumer technical capabilities and post-closing functions and support
- Originator and investor e-note acceptance and readiness
These are just some of the variables to consider, especially if a technology will ultimately be borrower facing. The digital solutions that will be easier to implement also should be considered. How much training will be required? Will staff make the time to master the systems or continue with earlier processes? Are the solutions intuitive for those less comfortable with technology? Will borrowers find them easy to use or will the tools complicate the process?
A borrower’s potential reaction should be of utmost interest. As the mortgage lending industry migrates to a purchase-oriented market, every interaction with a borrower is an opportunity to strengthen their loyalty so that they will return for their next mortgage, home equity loan or even to refinance their private student loans. Lenders should be pursuing client “stickiness,” a concept that requires a consistently exceptional borrower experience, however it is delivered.
Borrower-centric technologies are well positioned to provide this. For example, remote valuation technology will forever change how appraisers inspect properties. There are new digital closing solutions that enable borrowers to provide forensically verifiable, handwritten document signatures in person, on a tablet using enhanced stylus pens. These remove the need to video record the signing process and offer a seamless experience, all while saving lending institutions time and money. Robotic process automation systems that enable more efficient loan processing are another example. Not only do they enable staff to do more with less at the back end, but borrowers also feel the difference as they free up time for processors to communicate with them more effectively.
Another example involves student loan refinancing — a service that mortgage bankers are now able to offer without keeping these loans on their books. This kind of technology empowers mortgage lenders to capture the loyalty of younger borrowers well before they are ready for their first home by making their college education possible. With nearly 40% of first-time homebuyers — and a quarter of all homebuyers — having student debt, the upselling, cross-selling and client-retention value of these refinancing technologies is significant.
Many people in the mortgage industry envision future national standard-setting initiatives that would reduce friction for borrowers in loan processing. There has been some blue-sky discussion of end-to-end technology solutions, based on universally adopted standards, that would let systems easily “talk to” each other during the loan origination, title processing, credit search or property data-base search. Borrowers would feel this, too, as this mysterious process filled with roadblocks and delays gets simplified.
Even if this vision became reality, however, technology could only do so much. The latest technologies will never supersede the importance of an excellent lender, originator and title team that is dedicated to ensuring a smooth road from application to closing. It’s their actions that determine whether these solutions will disrupt or improve the lending experience, build stronger client relationships and bolster the long-term performance of their organizations.