At the Mortgage Bankers Association’s annual technology conference in Fort Lauderdale, Fla., we gathered a panel of industry participants to discuss the latest trends and issues facing the sector and the role of technology in the business.
They included, besides myself and Mortgage Technology managing editor Austin Kilgore, Vladimir Bien-Aime, president and CEO of appraisal technology firm Global DMS, John Coester, president, Coester Appraisal Group, an appraisal management company that’s developed its own mobile app., Steve DeBlasio, national sales manager of e-doc management vendor Axacore and Dain Ehring, co-founder and senior vice president of the recently acquired loan origination system provider CoreLogic Dorado.
Mortgage Technology: What’s the hottest thing in mortgage tech right now?
Dain Ehring: I think the biggest thing right now is loan quality. I think that’s on everybody’s mind right now. But it’s more than quality control. It’s actually maintaining the value of that asset, that loan, and actually being able to trade it with somebody besides the government.
We’re meeting with Wall Street and we talk to the top originators and the correspondents, who are also our customers. And every single one talks about loan quality.
Vladimir Bien-Aime: Where I see a lot of people dealing with compliance, it’s really about Dodd-Frank. It’s really still unclear to people how to address it, but all the solutions that help address it really are helping move lending forward.
I think there’s a lot of doubt around the entire process itself and I think Dodd-Frank goes a long way in helping ease people’s minds. Because if there’s distrust in the system, then the system will collapse.
I think what we do for them on the collateralization side helps, too—making sure the values are there, that there’s an asset so if things go bad, the bank is covered. Also, I think we’ll see a lot more due diligence process that we haven’t seen in the past. I think we’ve gotten here because of the lack of oversight, the lack of standards. You look at the initiative that Fannie Mae’s doing in September to actually collect the appraisal data; that’s a big part of that.
I was under the assumption at one point that they were always doing these things that made sure the system actually held together. But we’ve all come to find out that, “Oh, we don’t really check collateral, we don’t have that data to make a decision on it.”
And so these little steps—I think that are long overdue—are now going to be driving the process to bring it back. Wall Street’s, if they were facing the GSEs, who’s going to buy these loans? I know I wouldn’t buy these loans.
Steve DeBlasio: The questions about quality are both the quality of underwriting and the quality of data. For claims, how clean is the data? Are you losing clarity in the data as it’s passing from one system to another?
There’s a need for synergy so all these systems out there play nice together to meet the need for quality.
There’s also a lot less money to do it with in the market. So where are those efficiencies and how do you pick them up? Quality comes at a cost, whether it’s additional staff or new technology.
But how can technology bridge that gap without adding head count to satisfy these additional requirements that we know exist today, what we think might exist next month and what may fall out of the sky a year from now? You just don’t know. And it’s not something you can prepare for with people all the time. If you have technology that’s malleable, then you can make it work. It’s flexible and you can turn it around pretty quick.
Mortgage Technology: John, in your role at Coester, monitoring quality assurance and ensuring your clients are getting accurate, sound data, how does technology help you?
John Coester: Technology plays a huge role because of the fact that a lot of clients right now are asking for us to guarantee appraisal values. And that goes into doing AVMs, then going to other sources, other appraisers in the market area to make sure our current appraisal that we’re running a loan on, is accurate 100%. And that’s when we rely on technology, like what Global DMS offers, to support that effort and make it a smooth transition that’s easy for us and the client.
Mortgage Technology: When we talk about all the different pieces of technology that are needed in mortgage lending, everything has to communicate with each other and people need flexibility. Dorado puts an emphasis on development in the cloud computing space, but what’s the adoption rate of cloud computing and how is that changing?
Dain Ehring: If you look at enterprise computing, I think you’re seeing the transformation from data processing to information processing. And that information is outside the four walls of the enterprise. So it really becomes all about your access to information, the network.
No one single vendor is going to do everything for you, and no one enterprise can either. I don’t care, you can be a Fortune five, and they still won’t be able to do everything.
So you need to go past that, you need to leverage the network and processing and information transaction management software on top of that. And you need to do it in a way that is also accessible, scalable, agile. So you need to be very agile in this market where nobody knows what’s going to go on.
I think the network is everything, that’s kind of the key. It’s like having an iPad—so what, unless you have 3G connectivity with it, right? Then you can walk around and you have the network associated with it. It’s the same thing.
Mortgage Technology: Dorado recently had a big piece of news in getting acquired by CoreLogic. How is that going to affect you and the things you do at Dorado as you guys move forward?
Dain Ehring: When you talk about information processing, you’re talking about technology. And CoreLogic, what they’re looking at is needing the third leg of the stool.
They recognize that for data, as well as information services, they need a technology offering, the third leg. And they’re very, very excited about this.
At the same time, we as a technology provider, we’re looking at what we want to do and I see this as this a combination of the two companies as a way to enable the vision.
The vision is actually to influence one of every two loans in the next couple of years. We want to actually make them better. We want a higher quality in these loans, and we want to have an impact.
So information and technology is just a very natural marriage for us. And CoreLogic’s been on our board for a long time, so they’re a known quantity and we’re excited.
Mortgage Technology: With all of this data that’s being generated and the emphasis on quality, how does technology improve document management and find ways where that process can be more paperless.
Steve DeBlasio: A lot of data and information still resides—and for the near future, it’s going to continue to reside—in some type of paper form.
Yes, a lot of mortgage data is created electronically and that can all stay in that electronic format. But collaborating with that data during the process, how are you doing it? That is the data and document collaboration that’s needed in the industry.
With additional quality initiatives, you’re going to have external QC companies potentially, or it might just be a newly created QC department within your organization. Obviously, the days of “first you have the file, then let’s pass the file here and let’s pass the file there,” isn’t going to work because you have too many hands touching it.
The underwriter doesn’t need to have the same authority that they potentially had in the past. You’ve got to get into a QC department and send the file out to a reviewer.
They might just review a portion of the appraisal. Or it might be some type of data cleansing where we’re delivering data and information on this side, and you’re delivering paper documents over here, and the QC reviewer compares the data and the paper documents to make sure they’re accurate.
Mortgage Technology: And how does that get played out in the valuation space, the collaboration and data gathering, and being able to transmit data from lender to AMC and then on to the appraiser?
Vladimir Bien-Aime: One of the key things that has evolved over time is the method that we distribute this information. MISMO’s really made a lot of penetration in that regard in the last couple of years. Previously, it was this adoption of proprietary formats out there had really had a dominance in the market. You look at a AI Ready or a Lighthouse file format that’s controlled by several companies. It sticks with an open standard environment, but a lot of people don’t want to adopt it, which makes it vendor-centric for a specific lender.
With the MISMO format, it opens the standards up and everybody can be a part of it and we’re all speaking the same language. Data can flow freely, whether you’re doing appraisals, or flood, or title. And all this information, it’s data-centric now, and you can do analytics.
By using MISMO standards, we’ve seen a 40% drop in our integration time because we’re speaking the same language now. So now we’re saving money and that’s why we invested in MISMO for such a long time, because ultimately we knew the payback would be exponential. I think with the GSE’s adoption this fall, I think it’ll take that even further.
Mortgage Technology: As a company that both uses and develops mortgage technology, what has been Coester’s experience in these collaborative and time-saving measures? Can you give us some examples of how you guys have used technology to improve your turn times and other metrics?
John Coester: Right now, we actually just came out with a mobile app for appraisal management. And it’s obviously not groundbreaking, but I do think it’s groundbreaking in the sense that we are now actually keeping up with what people expect faster.
The Web’s dead to a certain degree and everything’s going mobile—and that’s where we’re going too. As of now, I also feel that e-mails are going out.
How many times you’ve got an e-mail that bounces back? Or how many times have you got an e-mail and you accidentally delete it? We can get the information now where, instead of lenders sending us an e-mail or us e-mailing the appraiser, we can actually send something to your mobile app to give you instant notification. You update our system automatically, and we’re out of the picture. And that’s where we’re relying on technology to handle this for us in the future.
Mortgage Technology: How does cloud computing play a role in the implementation of mobile technology?
Dain Ehring: When you have a need for information, the information sources come from everywhere. And the more information you have, the better quality the loan is going to be and the more profit you’re going to make—or the less risk you’re going to take, or make, as a borrower or lender.
So beyond the network connectivity, the cloud provides access, as well as on-time delivery.
Nobody has any investment capital right now, so to be able to manage your investment in technology on a business outcome basis, or a closed loan basis, is crucial. When I get the value out of that technology, I’m actually also paying for that technology.
That’s a hugely powerful concept for this industry and it’s actually really affected the adoption of the cloud.
It’s amazing when you think about these companies that traditionally would build technology in-house and the graveyard of all these CIOs who lost at trying to build in-house. There’s a whole new look to this industry right now where they’re now looking for technology partners.
Vladimir Bien-Aime: I’ve seen a trend and I would agree with that 100%. It’s always been around—before they called it the cloud, it was SaaS computing.
It’s been interesting for us to watch how things have evolved over the last decade because it’s all we’ve ever done.
We did it because we couldn’t figure out another way to do it with the shoestring budget we had when we started. We needed a low staffing and instant deployment delivery. So if you had Internet Explorer, you had our technology.
When I see other vendors in this industry with million-dollar system installs and six-month implementations, that’s a tough pill to swallow these days, now more than ever.
And for us, one of the things that was actually the tipping point was when the CIO said, “You know what, everything doesn’t have to be inside our firewall.” Before, they were scared because they didn’t know the right questions to actually ask. But once we passed that point and now that there’s been a sort of structure around this type of computing, they’re comfortable. They understand SAS 70 security and they know how to audit, so they trust us with their data.
Once these things come into play, there’s no barrier. And the upside is just too big to ignore at this point. For us, it’s a no-brainer. It’ll cost you five times more to build it yourself and maintain.
Steve DeBlasio: And you’ll fail doing it.
Dain Ehring: They say 75% of products are late, and about 30% never get actually finished.
Mortgage Technology: Why is it so difficult to complete IT projects?
Steve DeBlasio: We run into that a lot on the document management side because of our dealings with LOS’s. A lot of folks are attempting to be that “be all to everybody” type technology.
As it has been in the past, you’re starting to see that shift where vendors are saying “Let’s not try to be that one-size, we do it all firm.”
Vlad has great technology on the appraisal piece. We have great document management technology. Dain has a handle on the cloud piece of it. Again, kind of back to the MISMO standards, making it easier for everybody to work together is important. It’s actually a very good makeup when everybody agrees that a set of standards are going to work for everybody.
When you try to be that do-it-all firm, you have a lot of fallout. It could market and sell well, it could demo well and be real sexy technology, but when we actually go in and start using it, six months later, you’re often like, “Wow, it really doesn’t do what we thought it did.” But if you bring those proven technologies together for one common purpose, you’re more successful.
Mortgage Technology: How do you address the issue of whether data is inside or outside the user’s firewall?
Steve DeBlasio: There are obvious cost and resource benefits for not managing data in-house. I personally would trust my data in a proven cloud setup than a mortgage lender who’s storing backup tapes in their trunk of their car because they can’t afford to send them off to Iron Mountain. So I think there’s definitely that benefit to it.
Once you get over that fear of it being out there, you’ve got to look at the positives of it, the security of the data. You know the data’s clean if it is going through a MISMO standard and can be easily verified and collaborated, where data can come in and out in a secure, standardized fashion.
Standardization adds to that security level because no one’s out there trying to jam something in that doesn’t fit, and clogging up the pipe. I think there’s always that huge benefit of that data being managed by somebody who manages data better than you do.
Mortgage Technology: John, there’s a lot of communication that an AMC has to have with lenders and appraisers. How do you maintain security in that process when you have so many participants?
John Coester: We use a third-party system, eTrac, which is what we rely on heavily for our security issues. That’s also where the mobile app comes into play, where instant notifications show what’s actually going on time-by-time with the appraisal process.
Mortgage Technology: How will does technology help the industry maintain compliance with new appraiser independence rules?
Vladimir Bien-Aime: There have been a few things to come out of this legislation. First, you have the customary and reasonable rule, which we have built measures in our technology to help manage. That’s the way that AMC lenders told us they want to use the technology.
One thing we can do is use technology to manage a fee table. Let’s say currently, each lender has their own idea of what customary and reasonable actually is. So one may think it’s $250 in Utah, but the average may actually be $450. We’ll have to reconcile each lender’s fee table and still be able to manage it easily, instead of manually checking a spreadsheet.
Now it has to be across the board and each one helps with the determination because the guidelines are pretty vague in saying how reasonable and customary is defined.
They still have to come up with that third party study, or use historical data to come out with what the fees are really supposed to be. So the technology to help manage that process helps the AMCs become more efficient, otherwise, the process can be daunting.
Then you have the UCDP delivery piece, which is a requirement with the GSEs; and without this technology, you’ll be forced to manually upload to that portal. So if you’re doing 10,000 files a month, someone’s got to sit there and upload 10,000 files a month—and it’s obviously going to take more than one person. So there’s a serious need to move to a technology, otherwise, it would be very cost prohibitive to move forward and stay compliant.
Mortgage Technology: What are some other big trends or issues that you think are important in this space, and what will be kind of some of the demands that you guys will have to react or respond to soon?
Dain Ehring: I think the biggest trend is that this is a huge inflection point. This market collapsed and is now rebuilding itself. And it’s going to rebuild itself based on the quality of the experience. Whether we talk about loan quality or the quality of dealing with the consumer, it’s all going to be based on quality.
It’s completely different now; there’s a new sheriff in town. And technology, all of a sudden versus being a second cousin to the industry, is now a huge aspect of this market.
I used to say to my board of directors, “What’s your number one competitor?” And I would answer them, “Inertia.”
If you’re a technologist selling into retail banking, that was almost the worst segment you could possibly sell into. Maybe health care. I’m sorry, but it is. There was too much inertia. It’s better to sell social networking, right?
But that inertia’s gone and these banks want to succeed, want to do well and want to sell their loans. They actually want to do well for the shareholders and do well by the borrowers who are buying these loans. So they’re looking to technology.
It’s a great time to get in this market. So from a big trend, I think to be a technologist, it’s that best time to be in this market right now. I can’t that say that emphatically enough.
Steve DeBlasio: I agree. Years ago, you had many lenders who were making a lot of money, but they had broken and cumbersome processes.
They had unlimited resources to hire staff whenever they needed. I personally can recall selling loans and having to rent out conference centers and couriers to shuttle loan files back and forth.
We were spending almost $100,000 a month on conference space, shuttles and hotels so we could put up the diligence firms working for us. But it didn’t matter because everybody was making so much money. They said, “Document management’s cool, the cloud is cool. Maybe a better way to handle our appraisals is cool. But we really don’t need it because we’re making money and it’s all good.”
Well maybe now—for those that are fortunate to have that second chance—they know they need better technology and processes. They could’ve used it before, but didn’t, but they’re not going to screw it up this time.
So like Dain said, those skeptics out there, or those laggards, if you will, are saying, “Hey, this is mainstream now.”
Through those years, you got over a lot of the industry’s reservations about technology and it kind of brought technology into the mainstream for more than a few reasons.
Obviously efficiency, basic dollars and cents; and quality, keeping the investors happy and being able to create a loan that sells—and stays sold—without having any problems creeping up out of nowhere because something was overlooked in the process.
It’s as if the adage of, “We’re doing it this way because that’s the way we’ve always done it,” has finally been broken. It worked for a long time, and if it’s not broken, don’t fix it. But it doesn’t work anymore. It needs fixing.
Even if you were lucky enough not to feel any pain the last couple of years, it’s not going to last with you. You need to adopt.
Yeah, you may be surviving, but the guy that’s changed his ways is doing significantly better, so it doesn’t look so good to you anymore.
