When asked to name a significant theme in automation, executives participating in a roundtable discussion at the SourceMedia Mortgage Technology Conference in Miami Beach singled out the need to keep up with regulatory demands.
Automation has helped the industry keep up with Consumer Financial Protection Bureau regulations, good-faith estimate fee disclosures and single point of contact requirements that have challenged the industry, the executives said.
They noted that the concerns which various forms of automation aim to help the industry address include efforts to get GFE fee estimates in line with required tolerances in an effort to avoid monetary penalties for breaches, and the need to securely document operations and communications in order to mitigate the rising risk of an audit in today’s market.
Also of note in that context during the group’s discussion was one executive’s caution about the need to address the possibility of insufficient security in email communications and the growing role of electronically signed disclosures.
Participating in the roundtable discussion moderated by editorial director Mark Fogarty and Mortgage Technology managing editor Austin Kilgore were Kelli Himebaugh, vice president, Mortgage Builder; John Guzzo, managing director, Berkery Noyse; Tim Armbruster, chief technology officer, ClosingCorp; and Lisa Binkley, senior vice president, Platinum Data Solutions. (Second of two parts.)
KILGORE: Tim, where do you see things—all the activity that's going on in the term of mergers and acquisitions?
ARMBRUSTER: The mergers and acquisitions doesn't impact us as much. But, the mergers and acquisitions that I've seen over the past few years seem to be more strategic. What I've really seen is consolidation—it's really along the themes of—you really need everything consolidated in one platform. Specifically, if the LOS is a system of record, you really need the other services associated with that integrated into that LOS. Zillow, the mergers and acquisitions that they made over the past couple of years—they are becoming a powerhouse, beyond just listings. They are going heavily into the real estate agent space as well as the lending space. It would be interesting to see how that plays out, but again that's one integrated, consolidated system that's becoming a central hub. The LOS is becoming more and more of a central hub with acquisitions as well as integrations.
John also mentioned education. One of the things I'm seeing is really is definitely a shift to the B2C model where there's online shopping for homes, online shopping for mortgages, online applications, electronic disclosures being sent out—automation of that whole process. Really, that means all integrated technology. So, Zillow could be hub of that type of activity in the future, for sure. The LOS can also be a hub of the type of activity, but for that you really need one consolidated integrated system. But I definitely see a shift to the B2C model and they are going to expect data upfront, accurate fees up front, for example, from our service—all the way through to automated disclosure. So definitely it's a different model, different expectations out there and there will be different demands, but for sure—specially, with the B2C model—you are going to have to have one integrated end-to-end platform.
KILGORE: So you are guys concerned about Zillow getting deeper into mortgage from a vendor perspective? Or do you see it more as an opportunity to partner with them?
ARMBRUSTER: For me it's more interesting. And it would definitely be a partnership. We've had discussions with them, that's definitely a partnership opportunity. They are not in our space so we are not threatened by them at all. I'm sort of exited to see that happen. I think really that B2C model is something that I'm definitely interested to see in the mortgage space. To be able to go online, apply for a loan, shop for different mortgages, have the fees from a pricing engine, for example...it can be accurate up front and see that all the way to the closing table—be accurate. And that's definitely a change in the industry. I see it happening, a lot of it has been triggered, frankly, because of the rest of the changes that happened a couple years ago.
FOGARTY: What about education of mortgage lenders and brokers? Is that an opportunity as well, it would be the B-side of education?
GUZZO: Absolutely, I think if the education comes from both the loan officers to the consumers, and providers that have training courses in the area seem to have more activity these days then they had in the past. Not surprising with more regulations, the more complicated things get, those services become more important. On the B2C front, although I think it's certainly an area that we see more growth and a bit of a shift, I think the one issue that you'll have in that is that it's not for every consumer. And many consumers would prefer to have the professional deal with the loan and at least having a sounding board and someone they can speak to. Whereas being the loan wolf and doing it on your own, a small percentage of borrowers actually feel comfortable to do that. They may shop online; they may use Google and other sources to look for different loan rates. Certainly use Bankrate and others. But ultimately, they use that as an education tool and the go and use the professional at the bank or the credit union. So that B2C model will be a very slow thing to adopt. And my opinion would be that I am not sure if it will ever really fully replace what's out there today.
KILGORE: I think part of the challenge with all of that is you have—when you look at mortgage technology or technology in general, social media seems like the hardest area for lenders to really get a grasp on: How to use social media? When to do it? Is it something to build their brand? It is something to actually generate business volume? So I'm curious on your perspective on social media and how lenders should be using social media and how you as mortgage technology providers can participate in that migration to the social web 2.0?
ARMBRUSTER: Social media is definitely a different animal and something that needs to be used carefully. I haven't seen a lot adoption from lenders using social media. If I were a lender I would approach that carefully, obviously. It's not something that is easily controlled by nature; it's viral type of communication. Lenders, from my experience are very careful about their impression and presence in the industry and their ability to control that. That would be interesting to see develop.
HIMEBAUGH: We've got a couple customers that have put their foot in the water in the social media front. But because it's one of the prevalent modules of the CFPB audit that's out there today, they've done things right and slowly by putting in internal marketing people that have legal expertise because there is so much that the CFPB has included in that—in the audit, specifically. And it's probably one of the biggest—probably one of the biggest areas where they will get problems in their audit is from a marketing perspective. So, as Tim said, lenders need to be much more cautious. But in respect, the things that they can use for the heavily web-based consumers that are out there today…the LendingTrees and Zillows of the world have been in the home lending space for a long, long time and I think providers in the technology world haven't recognized that. And I'm learning much more about that as we recently acquisitioned a CRM company that is out there, but those entities really drive a lot of those consumers that are out there today, so our system—our technology systems have to be able to find a way to capture immediately what those borrowers are wanting and getting the information back to them. So it's a really new interesting dynamic and I think we have to recognize it as a technology space.
FOGARTY: Seems to me that going viral could be a good thing as well as a bad thing, right?
GUZZO: I agree with Tim and Kelli, in that although it's a good thing, it's certainly been in more use today in social media whether its LinkedIn or Facebook, the lenders are more risk at first and what we are seeing—if you look at automated marketing systems that have real controls...think of a bank with 100 employees and basically you have the director of marketing has control of it. They are entering certain areas—they have all the loan officers that can see other areas of the system and then the CEO or the president of the bank will have the overall control of what actually gets marketing and what actually gets sent out. That's critical in today's environment…with what's happened today it's certainly with more regulations it will tend to make social media a slower adopter. As Tim brought, vendors who have stronger CRM systems or automated marketing systems are at an advantage, because you do want to market as if you're doing social media and one way of doing it is outside of Facebook, outside of LinkedIn and doing it on your own with control process.
HIMEBAUGH: And I think competitively what the technology with CRM systems brings overall to the whole mortgage space, it brings better recruiting that's out there. For lenders to compete today they're looking for the most talented loan officers, production people, and processing talent that they can find. Typically if you are going find a great loan officer out there, he comes with a great processor. So everyone's out there competing and recruiting for the best talent. So services to be able to, for a loan officer to be able to have mobile origination, to be able to receive leads from the LendingTrees or the Zillows of the world electronically that tells the borrowers they need to call the borrower and they know they are going to be getting a call immediately. So in recruiting the best talent, you have to have these types of tools to be able to get out there and recruit that talent. And that's where we see the biggest change.
KILGORE: Lisa, where do you see social media in the mortgage industry? Are there any examples of lenders or servicers that you have that stand out to you that use social media in a unique way or is still something that's in its infancy?
BINKLEY: You know, speaking from the fraud world, Austin, we see fraud investigators consistently using Facebook and LinkedIn to see connections to people as it pertains to fraud rings, as it pertains to property transactions. So that's an offshoot of a unique way to use the social media. I believe that regardless of how, or when, or why lenders are going to do it - they are going to have to do it, because the generation that is coming up is nothing but LinkedIn and nothing but social media. So they have to start looking at the controls that they need to wrap around those types of mechanisms to get the business. Quicken is out there using a lot of social media and I don't even know if I can say that word, but they're out there like us on Facebook, but they have a huge marketing campaign and their technology is all about simple and fast and being connected. So, I think as an industry we typically are very slow to adopt everything, but the people that are going to win are the ones that adopt it quickly and find a way to keep their controls.
KILGORE: Let's shift gear, and it's somewhat related when you think about social media and you think about mobile technology, specifically from the consumer facing standpoint. Where do you see mobile technology, we've seen some products come out there, what's next? How will mobile technology evolve in mortgage?
BINKLEY: Mobile technology and mortgage - I think we are going to see a lot more loan officers with iPhones and iPods out there at the point of sale. I believe we are probably very close to emerging technology of a borrower wallet. That "here's my wallet" and I am going to hand it to my loan officer and it's got everything in it. If you go through Mint or you go through those types of services you can develop your financial profile. And one of the challenges to that will be the delivery mechanism and the file types. You know, I think some will have their own proprietary file types to keep it under their wraps. But, I do believe it's coming and I think that the borrower being more involved is going to be game changer in technology.
KILGORE: Does mobile technology help or hurt fighting fraud?
KILGORE: What are the two sides of that coin?
BINKLEY: You know very interesting, I started in the fraud industry when I had a telephone book and 411 and we were so excited when Metro Mail Criss Cross Directory came out—that was like the biggest fraud tool ever. And as we progressed throughout the years, the technology that's out there—the linking technology—everything is very good, but at the same side of that coin is that the fraudsters get smarter and quicker, too. And typically they are quicker to adopt newer technology than we are. So it's a double-edge sword, you can't sit on your laurels using Facebook to develop linkage between players in a fraud ring or just constantly using scanning technology in your calling centers or searching for anomalies in your daily data. You have to really stay on it as much as fraudster does. I mean, when you think the bad guys—they're just people who have a lot of time on their hands. They create a living at manipulating technology and manipulating data to suit their needs, so as an organization that's dedicated to fighting fraud—they will find a way to hit our weaknesses. They will find it; we just have to accept that. So what we have to do is just keep ahead of them with controls on our media and our data.