The Human Face on the Digital Revolution

For many, technology has become the knight in shining armor destined to save the mortgage industry from margin compression and disjointed processes. We’ve spent the past two or three years researching and investing in major technological upgrades designed to do just that. However, it turns out that just implementing a new LOS or online application process isn’t an instant panacea. It still takes well over 40 days to close most loans, and most lenders are only reporting moderate improvement at the margin. From the real estate agent to the mortgage originator to the closing agent, all can still provide numerous recent examples of unnecessary delay or error over the course of the daily mortgage process.

It turns out that adoption and implementation are only a part of a much larger strategy needed to turn technology into a true “solution.” The challenge continues to be age-old, and the true answer to the problem is something that’s been before us for decades.

 

Ours has always been an industry of partnership and collaboration, even if the pieces haven’t always fit perfectly. Today, too many of the service providers charged with stewarding the close of a mortgage loan still don’t easily mesh on the virtual production line of the typical loan—in terms of technology or general process. Thus, even if every actor has a shiny new solution, the result remains delay, confusion and frustration if and when each provider’s solutions don’t work well with those of others. As a result, even in the aftermath of the eMortgage revolution, there are still real estate agents residing in voice mail hell. There are still loan officers struggling to communicate with underwriting. And there are still closers waiting endlessly on the “clear-to-close” without real insight into where the process really is.

 

To truly make the homebuying process as close to seamless as we can, we should take a look at how some of the transactions smallest providers make things work from a strategic outlook. In the coming months and years, the small business especially—be it mini-correspondent, community bank or independent originator—will have a huge role to play in making the new tech work. The following are a few elements that will be necessary for all parts of the mortgage equation (broker, lender, closer) to make fundamental for the process to truly advance.

 

And all are things that virtually every successful small mortgage-related business has already incorporated as a matter of survival.

Flexibility is an easy, catch-all “strategy” that can be recommended for virtually anything. It can mean a lot of different things. But it’s still definitely something the mortgage industry could use a lot more of. Too often, the technologies or systems we adopt have been designed with only one function in mind. Lenders have their LOS. Title insurance firms have their own production systems. Wholesale lenders and brokers have their own solutions. But when they all come together—as is wont to happen in a typical mortgage loan transaction—they all seem to vie for “control” of the overall process. As a result, where touchpoints and handoffs turn into chokepoints and traffic jams, we see countless, inefficient “work-arounds” used at the front line simply to make the process work any way possible. We need to see more of (and are starting to see) a recognition that there isn’t “one solution” to the mortgage process. That kind of thinking creates silos.

 

Similarly, we all need to be more flexible in how we work with our clients as well as their vendors and partners. Too many times, the prescribed processes of each partner to the transaction fail to meet. As we design (and redesign) our workflows and processes, we as an industry need to show even more of an ability to adapt and adjust quickly and without pain. That understanding alone can inform the developers making the technology advances happen.

 

This is where the small business will play a huge role. Although tech investment costs can be a huge burden for the smaller firm, it’s generally the small business (like the individual broker) which needs to show the most flexibility. After all, it often falls to the trusted advisor in a transaction, such as an LO or broker, to be the “fixer” where the process breaks down between two different firms. A lot of the larger players in the industry could benefit from observing some of that inherent flexibility. While this is not to say a large cap firm can be as fleet of foot as the three-person shop, there are characteristics, starting with strategic outlook and willingness to adapt, that any firm of any size can study and emulate.

This is another symptom of an industry that, while acknowledging its segmentation, continues to cling to a “throw it over the fence” mentality once its own respective part of the job is done. There are a lot of great new (and great existing) technological products in our space, with more coming. And while we are seeing more of the tech developers show a willingness to build in integrations and flexibility, there’s still often a lack of understanding or even some misperception as to how our partners and their systems work. To truly make the mortgage origination process more seamless, more firms of all sizes and in all segments need to better understand how all of the parts fit together. This will inform our own processes and serve the ultimate customer—the borrower—in the end.

 

The small firm, such as the mini-correspondent, has to understand a multitude of systems used by its various clients. Some are proprietary, some are widely used. That mini-correspondent simply doesn’t have the luxury of turning down a wholesale partner simply because their respective technologies aren’t compatible. The mini-correspondent has to make itself compatible, or find a way to make the marriage work. A broker may work with dozens or even hundreds of different solutions deployed by his or her wholesale partners. Similarly, the very best wholesale lending partners are flexible enough to work with brokers who may not have the latest technology. Simply having a better understanding of how the different parts of the transaction tick, and how each part of the product is made and delivered, could greatly serve virtually any business in the mortgage industry and go a long way towards ending the severe segmentation we still see today.

The mortgage industry has long understood, more or less, that it needs to improve the way its various producers collaborate. The mortgage transaction, at its heart, is a complex collaborative process. While more and more technology providers are finally starting to incorporate that understanding into their systems, we still have a long way to go on the whole. Again, a great example of this can be found at the small loan originator’s level. Out of necessity, independent originators tend to think at a level that puts the borrower first. To do that successfully, that small business must think globally: “Where can I go to get the best solution for this borrower? What is the fastest and best way to deliver the product?” In other words, to serve at a granular level, the mortgage broker has no choice but to think at the highest of levels. To insist on taking a siloed or inwardly-focused strategic outlook will bring a swift death to all but the hardiest (or luckiest) of brokerages.

 

We can learn from this. In fact, we’re already showing signs that we are. But from the GSEs to the largest lenders to the mid-sized wholesale lenders right down to the single loan officer, our thinking when it comes to collaboration and process needs to consider the reality of what the other parts of the transaction need to serve their purposes effectively. Our strategic thinking has to evolve beyond “how can I do my part in the transaction as best I can?” toward an approach that asks “given the realities facing me, how can my firm improve the transaction as a whole?” More and more, the most successful mortgage-related businesses are incorporating and accommodating the realities of their partners and vendors. We need to start doing this universally.

 

It’s been said again and again that technology is only a tool. That concept is being proven before our very eyes. Perhaps some firms purchased systems in the hopes that they’d serve as some kind of keystone, bringing all of the disparate processes into order with the flip of a switch. There’s no doubt that technology can and should be an integral part of speeding the pace and reducing the cost of the transaction. But it’s going to take sweat and collaboration on the part of all the players to truly make it work.

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PULL QUOTE:
“… even in the aftermath of the eMortgage revolution, there are still real estate agents residing in voice mail hell. There are still loan officers struggling to communicate with underwriting. And there are still closers waiting endlessly on the ‘clear-to-close’ without real insight into where the process really is.”