I had the good fortune of being invited to Flagstar Bank’s corporate headquarters to talk with their staff and tour the facilities. For someone who talks about the benefits of paperless processing and embracing full e-mortgages, I was a kid in a candy store. The industry doesn’t need paper. It’s inefficient, environmentally unsound and opens the lender up to error. Flagstar doesn’t just get that message, they have acted on it.
Initially Flagstar made headlines late last year when they sold their first e-mortgage to Fannie Mae. Since that point the number of e-mortgages the lender has produced hasn’t been overwhelming, but they’re prepared to do big numbers now. Why? Flagstar has become the first lender to be approved to sell e-mortgages to both GSEs. They’ve sold three e-mortgages to Freddie Mac as well.
This is important because now the GSEs make up over 60% of the market. So, the conventional argument that there aren’t enough investors accepting e-mortgages goes out the door when over 60% of loans originated could be e-mortgages. That’s a staggering number.
Historically, lenders have searched long and hard for the return on investment associated with doing an e-mortgage. Now the ROI is survival. And lenders like Flagstar that are in first will get to dictate to the industry and their correspondents the rules of the game. It pays to be first.
As I walked through the halls of the corporate headquarters at Flagstar I smiled inside. I was shown file room after file room that once held paper after paper that are now empty. No, I’m not exaggerating. The only thing left in some of these rooms were the tracks on the floor that used to hold large cabinets to house all that paper. There’s a freight elevator situated between the file room and underwriting that used to be used to get all that paper upstairs to be processed. That freight elevator is no longer used.
Interestingly enough, I saw other storage rooms there that were being used, but not to store paper. The sign outside the door read “Underwriting Storage Room,” but what was inside didn’t gel with the sign. Those old storage rooms now house FHA underwriters actively underwriting files using only two flat screen computer monitors. There were other rooms marked for scanning and faxing that too are now housing FHA underwriters at Flagstar.
Sure the remnants of the old paper process are still there. The room labels still exist, but the process has changed for the better. I even saw mobile file cabinets on wheels that underwriters used to use to transport the files back to their desks still floating around the office, but they were just decoration I guess because they were all empty.
When I was asked to talk by Flagstar I thought, “What do I tell a lender that’s already doing e-mortgages?” After the tour I knew there was nothing I could tell them that they didn’t already know. However, I was happy for the invite. They may not have learned anything from me, but I certainly learned a lot from them. E-mortgages are real, they’re being done and those that are doing them are seeing the rewards.
