PERSON OF THE WEEK: Hans Rusli is CEO for IndiSoft, a provider a compliance, vendor management and valuation software to the mortgage industry. MortgageOrb recently interviewed Rusli to learn more about how software is revolutionizing the mortgage industry and which regulations will have the most impact on technology use over the next few years.
Q: Tell us a little about what you have seen in the evolution of mortgage technology and what it has meant to the industry.
Rusli: Of course the biggest advancement is in automation or the digital mortgage revolution. While the mortgage banking industry generally has been at the rearguard and not the vanguard of technology innovation, many companies have committed and gone full throttle with technology that radically improves efficiency in the origination process.
Also, there is rapid innovation with components of the business like asset and employment validation; valuation services; credit; digital documents and electronic closing platforms which then allow various players to aggregate these individual progressive moves onto a single platform. There are many industry actors who are streaking toward this technology coalescence to reach a unified offering.
With no shortage of stakeholders to integrate into an end-to-end system, whoever gets there first will dominate the mortgage banking landscape.
Q: What is a key differentiator between technology solutions for regulatory compliance?
Rusli: When differentiating technology solutions for compliance, you must begin with the architectural framework – workflow, usability, scalability, flexibility and automation.
Each company has its own DNA when it comes to this fundamental aspect of a technology solution for compliance. What separates the wheat from the chaff is the content or integration of applicable regulations into the workflow and test scripts that are critical to ensure proper compliance and governance. Here is where the technology solution becomes more of an art than a science since the judgement of business experts must review, interpret and implant an expression of the regulation into the compliance test scripts. There is a large degree of subjectivity inherent in this process not only in deciding the syntax for the expression but risk-ranking the pass/fail result of the test script question, which dictates next steps in the workflow.
For instance, the recent controversy over originators Loan Interest Rate Lock Expiration (LIRLE) practices has triggered a jolting reaction among compliance personnel in residential mortgage lending. Every company is reviewing not only its policy and process but its internal audit, escalation and QC mechanisms. Compliance technology must therefore be adroit enough to interpret this event and build an audit script quickly into its workflow.
And, in the case of the LIRLE, the business experts at the technology vendor must first have a strong understanding of the business and then be able to articulate their changes and collaborate with clients who may or may not make the same assessment. This is where product flexibility becomes crucial so that each client may deploy a business solution within the workflow and scripts that reflects its viewpoint and risk rank of the results.
Q: Why do you think it has taken the mortgage industry so long to completely embrace technology?
Rusli: Cost and the inherent complexity of the mortgage process is always a component but I really believe that it is primarily the result of legacy leadership in mortgage banking that struggles to adopt radical change.
Q: What regulations will have the most widely felt effect on technology use in the industry in the next few years?
Rusli: While there has been a philosophical change in how the new administration views the regulatory scheme and measures are being taken to pull back to some degree, the cost of compliance is still a large portion of the $9,000 it costs to originate a loan in today’s market. And despite this shift in the federal government’s emphasis on the volume and intrusiveness of lending regulations, the recent Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) consent orders totaling $1 billion for imposing improper interest rate lock extension fees belies any softening of penalties when consumers are affected by unfair practices.
This, in and of itself, will spur mortgage bankers to not only re-evaluate policy and processes but to adopt smarter QA and QC technologies that can detect a localized but devastating pattern of behavior that took a whistleblower to expose.
Related to my observation concerning component innovation, I believe the that the CFPB requirements for third-party vendor management will be challenging, especially if a lender keeps adding component vendors/service providers to incrementally adopt and integrate innovative components. Therefore any unifying solution that presents itself to a lender as one entity will have an irresistible offering just from the ease of compliance perspective.
Q: How can mortgage companies capitalize on the use of technology now compared to five years ago?
Rusli: In order to capitalize on the use of technology now, a company must have long-term vision that not only incorporates a technology strategy for good and bad times, but one that enhances their business model. There are so many companies that have given the industry a chance to innovate. Technology companies such as Roostify and bsmartee do not have a legacy in the mortgage industry and therefore can approach existing issues with a fresh perspective. They have caused other companies to reconsider how they regard and incorporate technology. Mortgage industry companies should continue to look at technology as a means to improve processes and reduce overall costs.