Opinion

Three hurdles between originators and true digital lending

Mortgage lenders are coming to terms with the reality of operating in a fast-changing landscape. Lenders that leverage new technologies to improve service levels, streamline operations and reduce costs are better able to respond to this rapid pace of change.

Borrowers are looking for, and in many cases, expect, a smooth process and unified experience that can be accessed wherever they are, whenever they want. This has fueled the digital transformation of the lending industry.

Digitization presents opportunities for lenders to streamline the mortgage process in ways that benefit them and their borrowers. The digital mortgage eliminates paper and enhances collaboration while reducing data errors, leading to higher quality loans at lower costs.

But adoption is lagging and to get there, lenders must overcome three hurdles that currently stand between them and the true digital mortgage.

The challenges

1) System integration. When lenders partner with third-party providers to complete the mortgage origination process, the data moving through third-party systems must be able to flow into the lender's loan origination software. These system integrations can be difficult, expensive and time-consuming to implement and maintain.

Disparate systems are often poorly connected, negatively impacting data quality and increasing the risk of security breaches.

In many cases, connections that do exist only provide for the automated placement of orders, leaving loan processors to key in the data from the reports their partners send back.

Rekeying errors are one of the leading causes of poor loan quality and can result in loans disclosed incorrectly or reaching the closing table in a manner that makes it impossible for transaction participants to execute. Errors can also create post-closing audit issues or prohibit delivery to a third-party investor.

In an environment where application programming interfaces (APIs) make it easier than ever for third parties to gain access to the data in industry systems, embedding security and data integrity best practices into the process is essential.

2) Lack of automation. Failure to provide accurate loan status information to applicants is one of the leading causes of poor borrower satisfaction. Disparate systems often prevent applicants from quickly and easily obtaining accurate, real-time loan status information. When loan status automation is lacking, staff may be unable to confirm precisely where the loan is in the process when a borrower contacts the lender directly.

Frequent requests for information previously submitted can make applicants feel like the lender is not taking adequate care of their personal information. Recent research from Fiserv shows that one of the top reasons consumers may not be highly satisfied with the home loan application process is that they had to submit the same document more than once.

As even more technologies are added to lenders' processes, risk increases, and problems can become even more pronounced. In an age when federal regulators actively gather information from consumers about the financial services companies they patronize, lenders can ill-afford borrower complaints hitting the government’s public databases. The risk to the lender's reputation is simply too high for issues created by lack of automation.

3) Outdated processes. An especially serious concern lenders face when implementing new technology is that it will simply speed up — but not fix — a flawed process. This often happens because staff trained on existing workflows are slow to give up a familiar process, perhaps because they are not trained on the new process or, for whatever reason, they do not trust it.

Because staff members are responsible for the work that lands on their desks, they will often gravitate toward the approach they are most familiar with, even if a new process offers the promise of great improvement.

In addition to comfort with existing systems, lenders often resist automating a broken process because re-engineering carries unknown risks that may be associated with past failures. Many lenders recall spending too much and receiving too little benefit from previous attempts, and this inhibits their desire and ability to re-engineer processes now.

However, re-envisioning processes allows lenders to meet expectations from a variety of stakeholders in today's environment — regulators encourage it, borrowers demand it and competitors are already doing it. The most successful lenders are willing to make the time and increase resources to re-engineer processes in order to win market share. New technologies enable this, but only when they power effective processes.

Overcoming the hurdles

Satisfying borrowers is largely a matter of providing an experience that meets or exceeds their expectations while still enabling the lender to originate the loan efficiently. To do this, more lenders are turning to partners who can provide all of the required functionality in a single ecosystem. Depending upon a single partner is the best way to ensure that a unified experience can be provided to borrowers.

System integration challenges can be overcome with a well-constructed mortgage lending ecosystem built with well-written APIs that allow the lender to have easy access to the partners and products they need to originate loans.

And increased automation can facilitate the move away from paper documents and speed up collaboration while reducing data errors, leading to higher-quality loans at lower costs.

With the right partner, making best use of the latest technologies is a challenge easily overcome.

Once these hurdles are cleared, the pathway to the true digital mortgage will be far easier for lenders to follow, allowing them to reach that goal.

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