Perhaps it all started with the eCommerce revolution in the last decade. Americans were seeing a seismic shift away from bricks and mortar toward online shopping experiences that brought economy and immediacy to an ever-greater number of their routine transactions. Need a shirt? Find it online and have it delivered in a day or two. Want the latest book? Head to Amazon and pick between a hard copy or an eReader version that can be enjoyed instantly. Need to find exactly the right car? Search online and pick it up at a local dealership at a fleet price.
eCommerce’s assault on the status quo not only disrupted the bulk of our transactions, it permanently changed the expectations of multi-generational consumers around the world. Convenience reigns today to the extent that the customer point-of-sale experience has become the most important thing. In the mortgage industry, it may well be on its way to becoming the only thing.
Mortgages, of course, must operate within a tightly matrixed regulatory environment, but that environment is focused on consumer satisfaction and ease of use–as exemplified by the CFPB’s motivation behind TRID. Make it simple for consumers to understand and access, make it economical and transparent, and the future is yours. The problem, as we all know, is that this has all been terribly difficult to bring about.
Fortunately, momentum is on our side, particularly with a number of industry initiatives that are well under way. Just as the autonomous automobile is expected to become commonplace within ten years or less, the truly streamlined mortgage is on its way to being fully realized.
Numerous steps remain to be taken, but it is undeniable that consumer front-end expectations, particularly those of Millennials, are demanding that the industry becomes digital as soon as possible. As noted on the May 1, 2016 broadcast of 60 Minutes, financial technology is moving very fast to suit the requirements of a generation that was raised on immediacy rather than bureaucracy. Ireland’s Collison Brothers, John and Patrick, described a frustratingly outdated experience trying to establish a billing account in a traditional bank. It was so cumbersome and maddening that it led them to create Stripe, which streamlines online payments. Like Paypal before it, Stripe and its innovative apps are challenging the status quo and currently handle billions in payments for major and minor corporate users around the world.
In the interview with Lesley Stahl, Patrick Collison, 27, said, "In a world where people can send a Facebook message or ... upload an Instagram photo and have it available to anyone anywhere in the world like that (snapping his fingers), I think that the fact that that doesn't work for money is something that seems increasingly, honestly, unacceptable to people.”
He has a very compelling point, which is why so many in the mortgage origination space believe that significant change is on the horizon. The current mortgage point-of-sale paradigm can be painful for experienced borrowers and even more so for a huge generation that is accustomed to doing everything via mobile devices. Creating positive borrower experiences has never been more important for mortgage companies than it is now–particularly with companies like Quicken already touting origination-simplifying technologies like the Rocket app and Wells Fargo’s newly announced mobile foray. We know that things like inspections, appraisals and various approvals take time, but we also are fast realizing that the more digital our transactions, the better our chances to craft positive, shareable experiences among borrowers.
Achieving such a digital experience also has a second and equally important benefit beyond the consumer experience. When you have a mortgage in which all steps in the process are conducted in a digital format, it isn’t only the consumer that benefits. This makes important mortgage data and metadata accessible and useable by any mortgage workflow participant who needs to leverage that information during the loan process. This has huge ramifications for enhancing loan quality, compliance and investor transparency. At eLynx, we have termed such a mortgage a “Data-Validated Mortgage” because of its ability to use such data to verify that regulatory and operational standards have been met.
It has taken years of industry effort to assemble the needed components, but the Data-Validated Mortgage is now a reality, thanks in no small part to the efforts of MISMO, the MBA’s Mortgage Industry Standards Maintenance Organization. MISMO has spent over a decade developing electronic mortgage documents that carry data and metadata enabling users to evaluate, analyze, slice and dice virtually every data element in the loan file. Countless hours have gone into this effort, and its benefits are just now becoming understood by people outside the lending industry, notably the investors we need to bring back into the fold.
Up to now, digitized information being conveyed from lenders to servicers lacked a key element–data standardization–and that meant that inconsistent data point formats, inaccurate field mapping and content disparities caused all manner of expensive glitches. The widespread adoption of MISMO standards should make all that go away, saving significant time and expense. On the front end, it means precision, speed and cost savings for originators.
The FHFA and the GSEs understand the importance of the Data-Validated Mortgage quite well–and they are requiring more and more information to be submitted in MISMO format electronically every year as part of the Uniform Mortgage Data Program (UMDP). Eventually all aspects of the loan will be electronic, increasing safety for investors, borrowers and lenders alike. Many industry observers believe this sort of transparency is the single most basic requirement for securities investors to once again consider mortgage bonds.
Some time ago we arrived at the point in loan processing where most loans are “papered out” only towards the end of the cycle when it comes time to sign on the dotted line at closing. With the true Data-Validated Mortgage, that step is no longer necessary. This moves us closer to a full eMortgage which is far more in line with emerging borrower preferences. As evidence, the early step most associated with paper–the disclosure phase–is already seeing fast adoption of electronic processes, mainly because of the convenience factor. After all, it is both easier and faster to deliver a link to a secure virtual “room” where initial disclosures await eSignatures than it is to wrangle paper from Point A to Point B.
Our experience indicates an acceptance rate of about 85 percent on these electronic processes among borrowers if the processes are well designed and executed. This follows the trend general consumers have set in driving the eCommerce revolution and moving the status quo away from brick and mortar shopping. When electronic processes move broadly into the closing phase–and we anticipate this will start to happen soon—we can expect those who offer eClosings will be judged more charitably by customers than those who remain paperbound.
One thing is clear: Data-Validated Mortgages fit the needs of up-and-coming borrowers who prefer online and electronic processes over paper-based ones. Does this mean any less direct customer contact by mortgage originators? Certainly not. Mortgages remain mysterious to virtually everyone outside of the industry as to their economic scenarios, ratios, requirements and supporting documentation. As such, borrowers need guidance during the selection phase and throughout the process. But the simple shift from paper to electronic files is an enormous leap forward over the industry’s position of just a few years ago.
Today, originators are accustomed to dealing with screens, not papers, and the modern LOS handles most of the digitization part of the process. With the Data-Validated Mortgage, warehousing and shipping are kept digital, as is boarding the loan onto the servicing platform for its long-term care and feeding. The standardized MISMO format means that the incompatibilities of various proprietary systems no longer compromise data integrity or process fluidity, as in the past.
Most importantly, the fully electronic, Data-Validated Mortgage allows the industry to provide the level of service and convenience at the point-of-sale that customers are coming to demand. With up to 12,000 Millennials coming of age every day, ignoring their preferences in favor of the status quo is hazardous. It is far safer to embrace the new processes and technologies that are already available and create the experiences that meet their expectations.
If we have learned anything during the last decade, it is that most institutions that refuse to change are replaced with disruptors focused on upending the status quo in every industry, including ours. The customer experience is no longer the most important thing–it is the only thing we can count on to guide our future innovations.
Alec Cheung oversees product management, marketing communications and public relations for Cincinnati-based eLynx. He can be reached by e-mail at [email protected].
This article originally appeared in the May 2016 print edition of National Mortgage Professional Magazine.
