BLOG VIEW: As the mortgage industry moves into 2022, the primary goal for the vast majority of lenders is maintaining momentum. The growth lenders have achieved over the past 20 months or so has been nothing short of astounding – but like running down a steep hill, slowing down may be difficult and potentially painful.
Already, some lenders are scaling back their teams, in the face of lower refinance loan volume. With the business mix changing from refinance to purchase money loans, and overall volume expected to fall, this trend will likely continue.
But some lenders will continue to grow in this environment. Originators that have the technology and trained staff to make the mortgage process satisfying for borrowers – and real estate agents – will still have opportunities to increase purchase volume in 2022.
While a refinance borrower might wait patiently to lock in the lowest interest rate, a purchase borrower does not have that flexibility. A failure to close on time can make things difficult for a new home buyer and will annoy the real estate agent, a critically important business referral partner in a purchase market.
Consequently, one key metric that every lender will track this year is time-to-close. Shorter timelines and a more satisfying experience for borrowers and their agents will set leading lenders apart.
Some will accomplish this with expert staff who have experience in originating purchase money loans. Others will fall back on new technologies that have been specifically designed to deliver efficiencies for all users. Given the difficulty lenders are having recruiting top loan origination talent, the latter is likely to be the preferred path for most lenders.
That makes choosing the right origination technology critically important. How can a mortgage lender know if it has the right tech stack to succeed in a purchase money market? It won’t be the bells and whistles that some technology developers have bolted onto their loan origination systems that will deliver the results lenders need this year.
What follows are three key functionalities mortgage lenders must have to succeed in 2022.
1. A modern set of APIs
Application programming interfaces (APIs) were a huge step forward for every industry that required companies to share data between disparate systems. In the mortgage industry, it finally made the delivery of a seamless borrower experience possible.
Today, modern loan origination systems are built on open architectures to make full use of APIs, thus creating an environment where lenders can create seamless connections with the partners required to close loans faster and with less chance of error.
This is particularly important for purchase money lenders, where more data is required to underwrite, process and close a new loan. APIs allow that data to flow into the lender’s LOS electronically, speeding up the process significantly.
The first requirement, then, for purchase money lenders is a system that has a modern set of APIs built in and the ability to add additional connections as the lender’s needs change. This includes any vendor the lender wants to use, not just those with whom the LOS provider has partnered.
2. Built in Configurability
Having an open architecture doesn’t count for much if it’s not quick and easy to configure to the lender’s specific needs. While most refinance loans were largely the same, there exists a wide variety of purchase money loans to better meet the needs of more home buyers. This means purchase money lenders have the ability – and the competitive mandate – to create their own niche. Their origination technology must be flexible enough to conform to their specific needs.
Flexibility and customization options must be built into the loan origination system from the beginning. It is not possible to bolt these functionalities onto an outdated LOS.
This is less about borrower-facing capabilities and much more about back-office efficiencies. From the borrower’s perspective, the process is just a conversation where a great deal of information is transferred back and forth. The process looks very different from inside the institution.
The lender’s origination technology must be capable of seamlessly putting different loans on different paths, so they can move as efficiently as possible through to the closing table. These workflows must be lender-defined and auditable; however, the inclusion of basic workflows is important so smaller lenders can succeed with the system right out of the box.
3. A Clear Path to e-Close
During the pandemic, it became clear that consumers were ready to embrace e-closings and many lenders have adopted the technologies required to close electronically over the past two years. More recently, remote online notarization (RON) has been approved in states across the country, such that now many more states have approved RON than have not.
Even though all the pieces are in place, many lenders still don’t have predefined workflows that make e-closings a standard part of the process, preferring to shift to e-close when circumstances allow. This costs lenders efficiencies that borrowers and their agents are happy to offer them.
While it’s not yet possible to have a completely electronic process in every jurisdiction, there are enough that are now ready to add significant efficiency gains for the lender and increase the borrower’s satisfaction at the same time.
This means every institution should have an e-closing team on staff that knows when the closing can be electronic and then steps in to make that happen when possible.
Joe Camerieri is executive vice president and client account management executive at Accenture Mortgage Cadence.