You can get almost anything you want on the Internet these days, from precisely customized clothing to any obscure part needed to restore your junker car. You can also find many useful answers to your business challenges and have them delivered through the cloud. Even the most skeptical and technology-averse can’t avoid the reality that we are in a new age.
In the past, new technology has sometimes brought complexity along with its benefits. Today it brings simplicity and holistic functionality that stands to reinvent the lending business.
We call it “FE-3” for short, a convenient contraction of “Front end-to-end-to-end.” It refers to integrating each step of the loan process, from pre-origination activities all the way through servicing to lien satisfaction, in a unified suite of software running on a common platform.
Lead management, customer relationship management, and product eligibility and pricing engine are at the very front end of the process, with loan origination and closing representing the middle part. The last part, the final “E” in FE-3, is the one that lenders are taking increasing interest in latelythe servicing end.
Servicing is once again shaping up to be a profit center for lenders, helping pick up the revenue slack between production lulls by offering up 30 to 50 basis points in income over the life of the loan. At the same time, servicing one’s own loans provides confidence that borrowers are being cared for at the desired service levels down the road, minimizing lender exposure for suits and complaints later. The key is having loan servicing software available that works for the size and scope of your servicing department, and one that harmonizes with the origination system for easier adoption.
Today, most loans in America are serviced on very large systems by very large servicers with extremely large information technology staffs and budgets. With more lenders looking at retaining servicing these days, there has been a resurgence of interest in reasonably sized servicing packages that are more affordable and designed for non-mega shops.
The next trend is already upon us to some degree, and that is having all the systems designed to work together seamlessly on a common platform, the FE-3 concept. The benefit of this approach, rather than bolting together a series of components, is harmony. When the systems harmonize properly, workarounds and general clunky-ness is avoided, saving significant time and money.
Additionally, FE-3 harmony via cloud delivery means that all of the technology infrastructure can be redundant and backed up with compliance and confidence by SSAE-16 Type II audit validation, cyber liability insurance and technology sophistication, without requiring lenders to do it all themselves. Big servicers spend tens of millions of dollars each year to obtain the results now available to new servicers at a cost that is completely manageable.
The all-integrated approach to lending technology is gaining more attention, even though very few are truly FE-3. More technology and large consulting firms are jumping on the bandwagon, as recent headlines have indicated, but only a small number are really there yet.
A decade from now, the mortgage industry may more closely resemble the lending business the way it was before subservicing became the norm, with virtually all lenders handling their own loans over the entire lifecycle. FE-3 will likely be the norm thenbut modern mortgage technology is making it available today for lenders to reap a competitive advantage.
For originators, every advantage is an important one as the industry consolidates. More efficiency in one aspect of the business means greater resources in another to help generate additional business and improve profitability. That is the ultimate goal of FE-3 (and of mortgage technology in general) as it continues its evolution to serve clients in this new age.
