Perhaps it is needless to say, but e-mortgage adoption has been slow going in the industry. Although the technologies used to facilitate a true, end-to-end e-mortgage have been around for several years now, traditional lenders have been slow to adopt and assemble the various pieces needed in order to arrive at a fully electronic mortgage process.
Today, pretty much all lenders use e-signature and e-document technologies – and many have adopted e-closings – but the vast majority are several steps short of being able to support a truly end-to-end e-mortgage. That’s because very few have the technology in place to facilitate delivery of mortgage e-notes in the secondary market.
Adoption has been particularly slow among traditional lenders – especially small and midsize lenders that do not have large IT budgets. Meanwhile, marketplace lenders such as Quicken Loans, SoFi and loanDepot, with their strong financial backing, have made huge strides in developing platforms that facilitate a fully electronic, and fully automated, mortgage process. As a result, these firms have been able to rapidly gain market share.
Though adoption of e-mortgage technology has been driven primarily by regulations in recent years, Steve Bisbee, president and CEO of e-mortgage technology firm eOriginal, says the emergence of the marketplace lenders – a.k.a the “fintechs” – and their ability to scoop up market share through improved customer interaction means traditional lenders have another reason to get on the end-to-end e-mortgage ball quickly.
As lenders are learning, adoption of e-mortgage technology isn’t just a matter of compliance – it is a matter of staying competitive and gaining market share.
“Most of the actions taken in the mortgage industry are driven by compliance,” Bisbee tells MortgageOrb. “Some of it is driven by business needs – you don’t want to lose market share – but for the most part, lenders are being reshaped by compliance and not by market factors. So, there is a question as to how much lenders are willing to transform themselves and adopt new business models – and how much that is driven by compliance.”
Bisbee says technology is what gave rise to the marketplace lenders. He points out that there is a distinction to be made between what are known as the “fintech” companies and “tech fin” companies; “The latter puts a greater emphasis on technology and ease of use, and compliance becomes secondary focus,” he explains.
“These firms have done an incredible job of rapidly gaining market share,” Bisbee says. “They build incredible interfaces that are easy to use – and their default ratios are very low. Of course, they’re cherry picking, to some extent. But there was an article recently in Bloomberg News where [Mike Cagney] the CEO of SoFi says he is doing about $50 million in mortgages a month now. He mentions in the article that people keep saying, ‘You can’t do it,’ but, amazingly, he is doing it. We work with a number of marketplace lenders with a lot of different asset types, and all of them are committed to enabling e-mortgages over the next year.”
Bisbee says although the marketplace lenders have the platforms for handling the application process and origination process, most lack the resources and technology needed to handle the traditional processes.
“Getting mortgages executed, recorded, notarized, managed as an asset out in the secondary market or sold to a GSE, if necessary – that’s something that most of them are not familiar with, and we’ve been working with a number of partners to bring those capabilities to them,” Bisbee says. “One of those is VidVerify. We use them to handle the disclosures. Simplifile is also on our platform – they handle the e-recording piece – and DocVerify handles notarization, as does NotaryCam. The platform also integrates with the platforms of the major warehouse lenders in the industry. And the custodians are led by U.S. Bank.
“So, whether you are a marketplace lender that is just entering the mortgage space – or a traditional lender – and you’re wondering, ‘How am I going to do this electronically?’ – we are providing a platform that enables you to do fully electronic mortgages.”