It's time to stop the loan officer swivel
Loan officers' jobs are harder than they need to be, and it's costing everyone money.
The best evidence of this is that, in the last decade or so, we've found ways to revolutionize the front end of the mortgage lending process — that is, the application the borrower fills out — but haven't really touched anything else. Now, even though borrowers can complete an application in just a few minutes, it still takes an average of 42 days to close a mortgage loan.
In that time, loan officers who want their loans to close have to be on a constant swivel, checking in with colleagues on disclosure generation, e-signing, appraisal orders and processing. They have to swivel back to the customer to work on approval conditions. They have to spend their time walking over to people’s desks to make sure things get done correctly and in the right order.
Not only is this process inefficient, it also comes at a high opportunity cost: when loan officers are following up on paperwork, they're not able to be at open houses or in consultations with customers. They're not able to have that second coffee with a real estate agent who might turn into a major source of leads.
It doesn't have to be this way.
The reason today's mortgage lending process takes so painfully long is that the many systems loan officers rely on to structure and close a loan, in most cases, work independently.
In practice, that means loan officers have to hop between the loan origination system and the CRM, make sure they're signed into the product and pricing engine, make sure the customer can access the document storage system. They have to log in to systems that handle credit reporting and verifications for assets, employment and income.
Today, all this inefficiency costs lenders about $8,600 per loan, which, in 4Q 2018 meant that the average mortgage actually cost lenders about $200 to issue.
Clearly, we need to do better. And we can.
In addition to the seamless customer-facing digital application, we need a seamless back-end experience that integrates the data sources required to underwrite a mortgage — the CRM, pricing engine, cloud document storage system, verification systems and everything else.
When we have that, we create something almost unheard-of in mortgage lending: a true digital platform.
Picture this: a borrower submits a digital application. The LO receives it, calls the borrower, and while on that phone call is able to run credit, qualify the borrower, check DTI, structure and share a few loan scenarios, get the borrower's e-consent, deliver disclosures, order a home appraisal, and have the borrower post payment for it.
Again, that's all on the initial phone call.
In other words, the LO can get a commitment from the borrower during an initial conversation, when the borrower is motivated to move things forward. That means the borrower doesn't have much incentive to shop around — after all, they've already paid for the appraisal. It means the originator can focus on actually selling instead of chasing down paperwork in a mad dash with the clock.
The integrated back end makes origination faster, easier, and less expensive. It eliminates the needlessly difficult part of the LO's job so they can focus on the parts that matter.
So why haven't we gotten there yet? Two reasons: first, the front end of the mortgage — that is, the application that the borrower fills out — is far more visible than the back end. Making the application better seems like a big win and isn’t all that complex technologically.
Second, the back end is incredibly complex. To make integration of the kind outlined above possible, you have to combine not just technical savvy but also deep mortgage industry expertise and familiarity with regulations. To make it actually work in the real world, you have to establish partnerships with legacy players in the mortgage lending space.
As more and more lenders adopt technology that actually solves back office problems at the same time giving borrowers a pleasant experience, originators will be empowered to be more efficient, borrowers will get mortgages more quickly, and lenders will increase their margins. Everyone wins.