Old Idea, New Industry: ERP and Mortgage Lending Automation

Old Idea, New Industry: ERP and Mortgage Lending Automation

December 5, 2004

Bundled services gaining traction in the marketplaceSteve Grant bundled services, credit information, customer service
Bundled services are a growing trend in the credit information
industry as providers seek to gain a business advantage by
assembling essential services into easy-to-use packages that can
help brokers serve clients faster and more effectively. The
benefits they provide in terms of speed, convenience and cost will
help mortgage professionals differentiate themselves in today's
highly competitive market. Clearly, bundled services are the way of
the future. However, before we continue, let's define what the term
means. It includes the following:
•Full title products
•A full range of settlement services
•Automated valuation models (AVMs)
•A full range of appraisal services
•Credit reports
•Flood reports and other services
"This approach offers clients a one-stop solution that will be
cost-effective and offer great flexibility in terms of the services
lenders can offer their customers," said Michael Cohan, president
of Unisource Information Services, a Pittsburgh-based title
information company. "These packages will allow clientsbanks,
credit unions, mortgage brokers, mortgage lendersto close more
loans faster. They also will dramatically reduce clients' 'turn
time' and ultimately improve their bottom-line performance."
Technology and service critical
Another key benefit involves meeting consumer demands for greater
simplicity in all financial transactions. That includes simplifying
compliance with the Fair and Accurate Credit Transactions (FACT)
Act by offering automatic delivery of credit score disclosure and
Notice to Home Loan Applicant to lenders or borrowers. In addition,
technology-driven bundled services can shorten loan processing
times and give lenders the ability to handle multiple requests for
information quickly and seamlessly. The message is clear: Mortgage
companies that use credit information firms that offer one-stop
solutions will be able to serve clients more effectivelyand
profitablyand emerge as market leaders.
"Information services are becoming more sophisticated as
borrowers demand greater speed in loan processing," said Randall
Nachman of Broker's Home Mortgage Services & Support, a
Metairie, La.-based mortgage lending company. "As lenders, we are
finding that we must evolve technologically if we are to meet our
customers' needs. That's why we look for advanced technological
solutions in the products and services we purchase."
Windy White of Atlantic National Mortgage in Westport, Conn.,
agreed. White said her firm requires services "that can help us
expedite our processes, whether that's through credit reports,
flood services or other technology-based products. The key is to
reduce turnaround time and improve productivity, which is what we
believe bundled services will deliver."
Product functions important
Web-based technology has made it possible to offer a range of
products that perform multiple functions such as:
Mortgage loan reports (MLRs)
MLRs gather credit-based data on equity lending and refinancing,
identify mortgage-secured liens and allow loans to close in a
matter of hoursnot days. They have proved to be an economical
alternative to the traditional title search.
Equity report
This tool combines the MLR with elements such as credit worthiness,
property value and flood data, and provides a 30-second decision at
half the price of similar vehicles.
Flood reports
As databases have become more thorough and extensive, brokers can
get these reports almost instantly as part of credit ordering and
other packaged services.
Tax verification reports (TVRs)
TVRs help reduce fraud by comparing income-related data on a
borrowers tax returns with Internal Revenue Service files,
presenting any discrepancies in a detailed report.
Mortgage Credit Link (MCL) and Settlement Services
worksheet
MCL is a Web-based product that combines key settlement services,
including TVRs, flood zone determinations, AVMs and identity
verification, as well as the worksheet, which provides a unique
method of ordering and managing bundled mortgage service
products.
Multi-faceted or bundled?
Credit information companies can provide these services
instantaneously, either individually or in some combination,
depending on the customers needs. The benefits are clear:
•Title searches have been cut in half
•Mortgage loan reports are now generated in about 30
seconds
•Tax return information can be verified with the Internal
Revenue Service in less than 72 hours
As a result, brokers can dramatically reduce closing times on
most loans while ensuring that all applicable standards and
government regulations are met. Still, some in the industry
consider these as multi-faceted products and not truly bundled
services.
"To my way of thinking, you achieve bundling when a vendor can
submit a set of services for one fixed price," said Daniel Jacobs
of Charlotte, N.C.-based 1st Metropolitan Mortgage. "That will
streamline the process and ultimately cut costs. Im pleased to see
that some credit information companies are taking steps to provide
a range of technology-based products such as credit reports, AVMs,
floods and others in a unified package."
Simplification a key driver
Jacobs believes that the mortgage industry is definitely headed
toward bundled services. He said that what's driving this trend is
consumers desire to simplify financial transactions and other
aspects of their lives, and technology's ability to meet those
demands. In turn, he believes that those companies with the best
and most adaptable technology will be the ones best able to succeed
in this new environment.
Innovation, responsiveness seen as
essential
That is a sentiment echoed by Cheryl Parish of Pine State Mortgage,
who said that her company is trying to move vendors in the one-stop
direction as a way to serve borrowers more effectively.
"We rely on companies that can combine leading-edge technology
with great flexibility and customer service," said Parish. "Looking
ahead, we want our vendors to develop technology that we can share
seamlessly without having to do a lot of swapping of paper back and
forth. That is the promise that bundled services hold for the
mortgage lending industry."
Partnering builds competitiveness
Credit information companies are working collaboratively with
mortgage professionals to integrate packaged solutions by expanding
the use of existing technologies and developing new products and
systems. Customer support, therefore, will play an important role
in making bundled services viable.
"While technology is extremely important, an intense customer
focus is absolutely essential to a strong client-vendor
relationship," said Kathy Lovece of Continental Capital
Corporation, New Yorks largest independent mortgage banker.
Lovece said that bundled solutions should provide her company
with the speed and flexibility it needs to serve borrowers
efficiently and cost effectively, and added, "Right now, we order
credit reports, floods and social security verification reports
individually. In the future, we will want the ability to have those
services conveniently packaged and competitively priced. That's
extremely important to a competitive business like ours."
What it takes to succeed
1st Metropolitan Mortgage also puts a premium on technology,
flexibility, strong customer focus as well as the ability to
customize services to meet client needs.
"There is no question that bundled services will improve our
ability to service clients," said 1st Metropolitan's Jacobs. "They
will reduce costs, streamline our processing abilities and help us
close loans more quickly. That said, we are seeking solutions that
will require not only technical capabilities but also strong
operations support. We expect our vendors to have departments that
talk to each other so they can serve us effectively."
It is clear that most customers want the convenience, speed and
flexibility that bundled solutions offer. The key for mortgage
brokers will be to find a credit information company that meets the
bundled service challenge and remains squarely focused on serving
customers' needs. In today's highly competitive world, such actions
are vital to prosperity and survival.
Steve Grant is president and CEO of Credit Plus Inc. He can
be reached at (800) 258-3488 or e-mail
steve@creditplus.com.

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