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Another Mortgage Lesson from College Admissions

APR 30, 2014 6:19pm ET
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Last week I wrote about how the college application process compares to the mortgage industry, and I got a lot of commentary on that, more than anything else I have written in the past few months.

I guess there are a lot of parents that have experienced the joy of the college application process and have stories to share. I also have more of my own, some of which are sort of humorous, and will be sharing some of those this week.

But more importantly, I'll tell you about "The Decision," wherein my daughter (who is perfect, by the way) reveals her college selection decision, similar to the way Lebron James (the perfect basketball specimen) announced his decision, except with not quite as much money at stake.

First, let me address some of the mortgage-related comments I received from the last column. Several folks commented that we already had automated decisioning in the form of the agencies' automated underwriting engines (DU and LP) and therefore that my concept was not that radical. While it is true that we have a standard data set that we use for automated decisions through DU, what we don't do is allow consumers (with or without help) to fill out one data package and submit it to multiple lenders.

So, the shopping experience is very fragmented, with consumers being forced to use a different interface for each lender, who then creates a single data file to submit to the AUS for a decision.

Contrast with the college experience, where you create a common application that can be easily submitted to all the colleges that participate. Now, this concept may seem terrible for lenders—after all, this would seem to create a way that is easy for consumers to double app (eeh, that horrible word!) and get multiple offers. But I would like to point out that each application submitted to each college involves a fee, and that fee is collected by the college.

So, perhaps the revenue model would be different, but may actually enable lenders to receive fees for review and consideration of a loan application, which is certainly not a revenue stream that is available now.

What if the mortgage industry worked the same way—a clear way for consumers to create a lot of the data that is needed for the decision and each lender can get selected and receive a fee for the approval review? What if the brokers of old were entry points for this multilender option for consumers who need more help in completing the application?

Now, part of my purpose with the column is to create some aspirational concepts—how to see the mortgage world in a different way, sort of like how you want your kids to think about college. Not just a few more years of high school, but the beginning of a new future with unlimited possibilities. Of course, that is what I hope it is—since it sure is expensive enough.

I also got a great comment from Brad Yzermans, a loan officer from California. He wondered if creating such a system was possible in our new regulatory climate and asked, "how different the college application process would be if they too had 8 different regulating authorities, all with overlapping rules/guidelines, lying in wait to throw the hammer down with financial penalties/fines or even to shut the college down if they made an error in approving a student's application?" Wow Brad, that is a great point, and obviously we have come too far with the regulations, but at some point the pendulum will swing back and we need to be looking ahead.

Brad also had a funny comment when he introduced the concept of "explanation" letters (which I have also written about previously) and how they could fit into the college application process: "Can you imagine how much slower and frustrating the college application process would be if the student had to explain why they got anything less than an 'A' in a class, why they were tardy or missed a school day?" Wow, great points from Brad about how far we would have to go to create such a system.

So, the common application method used by colleges is not their only impressive use of technology.  Most colleges use a wide range of techniques, including many automated ones, to communicate with the potential student once the application is received. First off, every school uses email and text to communicate status, and encourages you to create an online account to monitor your status. I am still amazed at how many mortgage companies still don't do this, or when they do they use mortgage jargon instead of real worlds to describe your status.

Of course, many of these colleges are competing for the attention of a different generation of users, so they use email, text and social media to communicate. And guess what happens when this generation graduates, gets jobs, saves up money and wants to buy a house? They are going to expect that lenders are going to communicate with them this way, too. In fact, I recently had a conversation with my daughter about needing to check if her current bank has branches at her selected college. Her response: "What do I need the branch for?" I have a feeling she may be saying the same thing when she applies for her first mortgage loan.

I was also encouraged by how many schools had "eco-friendly" communication, supplying information via email while giving you an option to receive it in writing. This leads to one funny moment, when my daughter received a nicely worded rejection email from an Ivy League school with a button at the bottom of the email that said, "Click here if you want a written copy of this correspondence." She laughed at that, asking "who would want to get rejected twice? Am I supposed to frame it?" The fact that she found humor in everyday business correspondence made me proud, since her daddy does that nearly every day.

So finally, where did my daughter end up? Well, now a final story to show how I have come full circle. I worked at ABN Amro in Ann Arbor Michigan for seven years before starting at Stratmor Group. In one of my more unusual speaking engagements, I spoke at the Michigan Union at our national sales meeting, after making an entrance on a blue scooter while wearing leather chaps. You see, our theme that year was "riding to success" with a whole motorcycle metaphor. I'm not a Harley guy, so I opted to enter with a small electric scooter, which I ended up giving to my young daughter after the sales meeting. Good corporate swag! So last month, I sat in the exact same room at the Michigan Union building where that event occurred as the University of Michigan welcomed my daughter for new student day. I just hope she does not come home from college next year on the back of a motorcycle with a guy wearing leather chaps.

So, my daughter will be at the University of Michigan next year, and I'll be joining many of my former colleagues in Ann Arbor on a regular basis. And this fall, I'll be writing stories about being an empty nester while stalking my child on campus, as I pretend to be there for business purposes. But she doesn't know about those articles yet.

Garth Graham is a partner with Stratmor Group.

Comments (4)
Well done! Personally, I came out of the tech field and am astounded at the state of mortgage marketing, communication, and loan processing technology. I would like to move the mortgage world about 10 years forward as far as these things are concerned. I need investors for an all in one web based LOS that provides for consumer data entry, digital signatures, electronic decisioning and pre-approval, paperless file management, and works from mortgage loan lead generation through marketing, pre-approval, application, document submission, processing, underwriting, and closing. Anybody want in?
Posted by Lonn D | Thursday, May 01 2014 at 1:23PM ET
Lonn...your ideas are wonderfully simplistic, however, not new. These ideas have been talked about since the 1981-82 crash. Some are presently being utilized. Going paperless has been talked about since 1985 and having less paper work since 1970, maybe even before. A form of scoring was done back in the 1960's. Some of the reasons it takes so long to advance is: high risk, people lying, criminals cut and paste with ease, need for alternative documents, still have to read loe's, decide weather a 2nd income can be counted, verifying source of funds if not already in bank account, reviewing the appraisal for accuracy, making sure the title is clean and transferable. Safe guarding personal information from hackers and other thieves. For those who are not in our business the application is not easy to understand or it takes forever to complete. There is so much more and we haven't even touched on the secondary market where most of these loans are bought and sold or the laws or government regulations. How about the back in of the business where servicing the loan takes place. They require additional documents and do not need all of the documents that were created in the front end of the business. I can go on and on but I'm sure you get the point. We all want the same thing as you do, ease and quickness throughout the process. With the amount of money that is involved and the risk of not knowing the future, it's highly unlikely that either you or I will see all of the wonderful changes you suggest take place. Some are in the making, however. I look forward to seeing you as one of our future innovators of our industry.
Posted by Gary R | Thursday, May 01 2014 at 2:49PM ET
Yep, you're right on target in most aspects of your point in putting the consumer in control on the front end.I have most what you speak of mapped out. Been in lending for 22 years at a pretty high level. Keep you posted and feel free to reach out to me and my linkedin profile. It's not, it's when and WHO builds it best.
Posted by kevin m | Thursday, May 01 2014 at 3:34PM ET
Do you need a loan apply now via accesspennyfn@gmail.com for
more information okay.
Dr. Benson
loan finance companies
CEO ... / MD
Posted by | Sunday, May 04 2014 at 6:55AM ET
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