Mortgage technology

Representatives of both Ellie Mae and PHH Mortgage Corp. used similar words about their teaming up in the Encompass360 Select program, that the technology involved provides seamless synergies to users.

Thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Acts, the federal government is making it virtually impossible to be a mortgage broker. By extending the application of the Truth in Lending Act to include mortgage brokers (formerly limited to "creditors") and clearly defining, and otherwise limiting, how brokers can be compensated (YSP is dead), the act is forcing brokers to rethink the way that they do business.

Customer loyalty. lofty goal, but what does it mean? And who are our customers? Is it just borrowers, or is it everyone we do business with? In today's tough mortgage market, with dramatically decreased origination volume, and consumer confidence in the mortgage industry at an all-time low, attracting new business has never been more competitive. Establishing and maintaining loyalty with borrowers, referral sources, vendors-all are paramount to long-term success.

It is no understatement to comment that the Internet has transformed the mortgage lending industry in many ways. The point-of-sale has been influenced tremendously, with borrowers quickly becoming accustomed to rate shopping during the refinance boom and lenders providing an ever-increasing number of online tools to cement relationships. That lenders are rarely able to replace the human element entirely is really not a surprise. With financial decisions of great magnitude, consumers feel better about things when there is a live, knowledgeable person to help them. But technology has taken lending a long way in making the loan experience better for consumers, and more improvements are on the way.

The new Internet generation of online-only customers and readers, along with businesses eager to explore their information technology options, is growing.Up to 70% of adults who use the Internet also use online banking, and only 7% of those who have signed up do not use it. Findings from Mintel Comperemedia also show that 30% of online bankers log on to pay their mortgages or credit cards.

As pure-play mortgage lenders continue to scramble to get warehouse lines, technologists say automation can help.Rob Katz, president at LOS Del Mar Database, contends, "The entity giving a warehouse line has to be confident that their partners are doing sound lending. How do you prove that if you don't have technology in place? Because there are so few sources for lines and they're restrictive, being able to demonstrate that you have the technology to move a loan through the pipeline quickly and efficiently is an advantage.

It is perplexing that something everybody agrees on can be slow to actually take place.

Mortgagebot, a Mequon, Wis., seller of electronic loan application technology, has reported some interesting results from a survey it commissioned. It found that just 18% of commercial banks are able to accept apps online, according to an article in our sister publication American Banker.

Lender Processing Services Inc., Jacksonville, Fla., earned $80 million in the second quarter, a 7% increase from the same period last year.

To enhance its loan origination process, Carnegie Mortgage LLC, a subsidiary of Grand Bank NA of Hamilton, N.J., is relying on a new partnership that has helped bring up to date its mortgage lending and document management technology platform.

The partnership brings together the private and consumer centric banking environment of Carnegie Mortgage with state-of-the-art platforms and service offerings of Mortgage Cadence that helps reduce manual processes, enforces compliant business policies, decreases risk and "allows for the relocation of employees to areas within the business that require a personal touch," says Michael Detwiler, CEO of Mortgage Cadence.

Carnegie Mortgage originates approximately $200 million in mortgages on a monthly basis through both its retail and wholesale channels, Ovation Home Loans and Icon Residential Lenders.

Every servicer and lender has an in-house servicing platform that measures major compliance milestones. But in today's environment that's not enough to tackle the ever-changing legislation that is constantly coming their way, according to Chris Saitta, president of Equator.

"It's really that granularity of the day-to-day decisions and day-to-day process bifurcated by which portfolio the property is in and which investor and which [mortgage insurance] company. It's a very complex decision process so you need a technology that can get into the granularity of automation."

Equator is an infrastructure Software as a Service provider based in Los Angeles. Currently, the company has 60 servicers on its technology platform, including seven of the top 10.

Regulatory changes continue to be what largely drives automation for those on the production side, especially when it comes to the documentation necessary, according to executives at DocMagic Inc., Carson, Calif., which does business as Document Systems Inc.

The StoneHill Group Inc. is seeing a downtick in errors under the new RESPA rules although the company still has some clients who are struggling with the total implementation of these regulations, which have been in effect since the beginning of January.

The Atlanta-based quality control provider has helped lenders who suffered procedural problems go back and implement changes in the way they process information for proper disclosure with the Good Faith Estimate.

"That has been a help as we begin to audit these loans and report the findings to our clients," said Doug Parker, quality assurance manager.

As Fannie Mae and Freddie Mac look to standardize the mortgage process at the request of their regulator, it has brought about new appraisal and data delivery standards requiring lenders to lean on technology vendors to ensure they are compliant at a time when vendors are already strained.

Elizabeth Green, chair of the property and valuation services workgroup within MISMO, says this move by the GSEs will enable the industry to achieve, among other benefits, high-definition comparables. "We as an industry will have access to granular appraisal data. We have the ability to name a data source on a per-data point basis. This gives both the appraiser and his client a clear view of every bit of information that went into the appraisal and where the appraiser got that information.

"If you think about it, most lawsuits today come from invalid information or a lack of information reported on the appraisal. This new approach-given that the GSEs have chosen to standardize around MISMO Version 3.0-makes it clear from the appraiser's perspective how to delineate factual information from their own analysis. Today that is all mish-mashed together. We've moved beyond that. We need more. We need more verification sources. The appraiser needs to feel confident delineating his data from his analysis. That allows us to further support the goal of getting to a credible valuation report."

Mortgage vendor CoreLogic, Santa Ana, Calif., on Wednesday unveiled its WillCap product, a decisioning system that can predict a distressed borrower's willingness and capacity to make mortgage payments.

FIS, Jacksonville, Fla., has closed on a private offering of $1.1 billion of unsecured notes.

In total, 82% of respondents to this publication believe that e-disclosures can keep a lender more compliant. While no one technology can solve all of the problems that lenders face, electronic upfront disclosures does have its benefits.

What are the best options available to lenders to deal with today's ever-changing loan volumes while maintaining loan performance?

Regulatory compliance remains a priority for mortgage companies large and small. And integration remains one of the best ways to reduce related risk and improve process efficiencies that result in more robust product offerings.

Internet retail lender Total Mortgage Services, Milford, Conn., said the TMS Funding wholesale division it has formally opened up to select brokers in 17 states plans to slowly and carefully expand to all but a handful of others in this country over a period of more than a year.

While other regulatory, compliance and legal issues such as the new RESPA changes have been the focal point within the primary and secondary mortgage industry over the last year, one issue flying under the radar for many lenders is privacy and data security. Financial institutions are being forced to confront a host of actual and prospective new privacy requirements as a result of new regulations adopted on the federal and state level as well as pending privacy legislation in Congress.