I remember when Bank of America bought Framework in the hope that other lending institutions would believe that technology was not a differentiator and take their business to BofA. That didn't happen because every lender knows that the systems they use are an extension of their business and critical to their long-term success.
I remember learning this lesson from my father (hear my podcast on this). I knew when we started Mortgage Cadence that if we could automate the process and eliminate human touches, at the end of the day, we would drive cost out of the process and improve quality. Those are the keys to success in today's market.
In fact, these are the things that are always critical when the industry recovers from a downturn. That's where I expect to see lenders putting their tech spend this year, where it will drive down costs and improve loan quality.
Where do you see lenders investing in technology this year?
I agree. During a down turn, lenders are better able to select and implement new software to prepare for an economic recovery. With GSE reform coming, albeit slowly, the cost of mortgages to consumers will inevitably increase. To stay competitive, lenders will need to minimize their costs that potentially can be passed on as savings to the consumers. Lenders must also adopt more efficient front-end processes that cut down on QC time and resources by implementing systems that enforce quality and tracks exceptions such as automatically identifying Qualified Mortgages and proposing “what-if” scenarios to turn non-conforming loans into a qualified mortgage. Automated underwriting guidelines within the system will ensure that the required verification of income and employment are enforced and Debt-to-Income Ratios take into account adjustable rates and balloons to ensure the borrower’s ability to repay.
ReplyDeleteAs HOEPA Fee thresholds decrease and the actual fee amounts increase greater loan product innovation will be forthcoming and software vendors will need to be nimble enough to turn on a dime and deploy solutions to trigger these events and track exceptions. Even with future private sector funding there will always be a market for FHA loans and HPML’s so tools such as fully integrated and easy to use Escrow Calculators also add value.
While we’ve been focused this week on the Treasury’s vision offering 3 potential options for revamping the GSE’s, some form of government insurance, and private sector funding, it is still incumbent on lenders to predict how examiners will perform their audits as it relates to LO Compensation, new appraisal guidelines, pre-payment guidelines, TILA, RESPA, HPML and whatever the Consumer Protection Bureau installs over the next 12-18 months. While selecting software that automates and enforces these regulations adds significant value, it is also important to use software that integrates the Early Disclosures and Closing Documents rather than feed data to an unattached Doc Prep system so that the LOS is the system of record and examiners only need to gather evidence from a single source.