Digital transformation is rapidly changing borrower behaviors and expectations, necessitating a shift in engagement strategies. Join NewRez and CoreLogic as they explore ways to leverage this digital transformation to enhance your borrower's mortgage experience and drive success. Key takeaways will include:
• How adopting a customer-centric approach can build trust, speed, and satisfaction
• The technology investments needed to meet modern borrower expectations
• Best practices for transitioning to a digital-forward lending mindset
SPONSORED BY: Corelogic
Transcription:
Bob Jennings (00:06):
Good morning, good afternoon. What are we at right now? Still? Morning. Got 10 minutes, seven minutes. So good morning everybody.
Nelson DeLuz (00:13):
Few more minutes.
Bob Jennings (00:13):
Yeah, thanks for joining us today. Nelson and I are going to go through a little presentation and have a conversation that he and I kind of normally have on the side, but we figured we'd share this conversation with all of you today talking about the future of a Borrower Centric Lending Environment. So with that, I think I'll jump in. There we go.
Bob Jennings (00:46):
So understanding today's borrower, right? If we're going to be talking about the future of a Borrower Centric Lending Environment, we need to understand a little more about what makes today's borrower unique. What is it about them that is so different, so challenging that we need to think about how to do things differently and how to organize our processes and technology differently?
Nelson DeLuz (01:15):
When I think of the borrower, and I'm going to actually explain this, with two generations thinking of Gen X, which is us, right? We were really the first ones to get introduced to the internet and inputting our credit card information on Amazon and wondering, wow, wonder if they're going to use it for something else. And being excited where we could print out our directions on MapQuest. I remember being at a friend's house and him being all excited that he was able to send his directions to his phone and they actually just showed up on his phone. And now I know where my kids are at any given point. I watch them drive. I see how fast they're going. So when I think of our generation and think of technology, I think that we have accepted it and embraced it, right? And we're taking advantage to different degrees, but we've taken advantage of it because a lot's changed. And when I think of the millennials, especially the younger ones, and Gen Z, which this morning's presentation, 26 million of them will be homeowners or in the home buying market by 26.
(02:34)
And they've grown up completely different. They've expected technology and required it. So if you don't have a good experience, they're not going to use it. They want something that they can get in there that they can answer questions. They don't want to have to call Bob Jennings and say, Hey, can you help me with this? And I think knowing that there's this different generation that just is very tech savvy, it's just what they expect, that we have to build a process that thinks about them and the customer. And how do we build something that's transparent, that provides information for them, easy, but yet still gives them paths that they can pick up the phone and call someone and get information.
Bob Jennings (03:28):
Being connected to the borrower in a way that easily delivers information, easily delivers data. It's so different than where we were even 10, 15 years ago. And so you think about that exponential change and everything that we need to do to embrace that change it significant. The mortgage industry is not a speedboat.
Nelson DeLuz (03:57):
It's more like an oil tanker.
Bob Jennings (03:58):
Yeah, it's an oil tanker that's going to move and change very slowly, but eventually it needs to move or else it's going to run into the iceberg. So I think I'm mixing my metaphors there, but you see where I'm going with that. So moving on then and talking about how the mortgage process was handled in the past versus what we need to do to support it going forward. I would say that the mortgage origination process is very process centric in the past. I like to talk about it in terms of conveyor belts, that there is essentially one conveyor belt that has been built for all loans. And it doesn't matter about the complexity of the property, it doesn't matter about the uniqueness of the borrower. All loans have been put on this one conveyor belt to be originated. And that has led to tremendous amounts of inefficiency, tremendous amounts of borrower dissatisfaction. How do we get ourselves off of the conveyor belt and start thinking about a dynamic where we're thinking more around the borrower, more around the property, more around creating unique experiences that deliver the same end result, but in a much more efficient manner.
Nelson DeLuz (05:31):
I always think about it like a relay race. The first person runs and in our case, may take five days to do something, then they pass it to the next person. They take five days. So that's really what adds time to it, is you have all these different silos that are doing work on a loan instead of how do we do this at the time? How do we bring this stuff sooner in the process and how do we think of it differently? I mean, the process that we have is very clunky, and when we look at it today, we always look at things from, okay, here's how we do it today, and if I make this little tweak, I'll get a little bit better. Instead of looking at the whole thing and saying, alright, I really need to do this differently. I need to use technology in a way that involves the borrower, because what we do is too much work.
(06:36)
Our people are doing the work instead of, Hey, how do we put these tools in front of a borrower, whether it be, Hey, upload all these documents, complete your whole application online when there's conditions, they can see the conditions, they can understand what they need to provide on that loan where there's an engagement now, and we can communicate that way with them too as we're going through the process. But you also have to look at it. There's a lot of different loan scenarios, and I think we sometimes complicate it, which it is complicated, but we have a lot of regulations that we have to stay within. And I think as I look at these processes, and I know we'll talk more about this in changes later, we got to think more about the borrow and how do we expect the borrower to want to see this instead of, we always look at it from, okay, this is how I can do it, so I'm going to make the borrower experience this.
(07:43)
And we're trying to look at it differently now and thinking, okay, what kind of experience does the borrower want? And we actually ask that question now every time we're looking to make a change is what's the bar experience going to be in this? If we make this change and we're going to have the bar do 1, 2, 3, 4, I'm like, okay, but what's that going to do for them? If they do it, is it really going to engage the bar? Are they going to understand what they're doing? How do we communicate with them? And I think it's kind of a step-by-step that you figure out this process today, which I think the first thing we have to realize, okay, the process is broke and how do we do it different, but thinking of the borrower first and not our processes first. Yeah.
Bob Jennings (08:28):
Well, and we get into the borrower, efficiency, transparency, trust. These are the things that we hear over and over and over again around this is what the borrower's looking for from their lender. And it's an area where we've fallen flat as an industry over the last 10 years, 10 years plus. I mean, I've been coming to the digital mortgage conference since I believe its inception in 2016, and there's been enormous amounts of technology that has been introduced yet it still takes longer to close a loan than it did back then. It costs way more money to close a loan than it did back then, and the borrower satisfaction is completely plummeted in that amount of time. And to me, so much of that comes down to the transparency and trust aspect. The efficiency is important. Obviously, they want move through. Nobody's here to buy a mortgage, they want to buy a home.
(09:37)
The mortgage is kind of the necessary evil to get them there, and so they want that to move through as quickly and as seamlessly as possible. But that transparency and that trust is the part that we seem to have fallen down on, and I think a lot of that has to do with the inability for technology to introduce data into these workflow enabled platforms to create that transparency and that seamlessness and remove some of the esoteric nature of what we do in originating a loan. It shouldn't be that confusing and that difficult for a borrower. One of the other things that I like to get up on stage and pound my fist about is the second largest purchase that a consumer is going to make in their lifetime in the United States is buying a car.
(10:37)
And we could go down to a local car dealer and buy a car for $150,000 and be in out of there in 90 minutes and 85 of those 90 minutes is the salesperson trying to upsell us on some service that we're probably not going to need at a later point in time. But you take that same experience and move it over to homeownership and it's 51 days and it's incredibly confusing. You're chasing around documents all over the place. You're taking wild guesses at filling out the application as a consumer. Those experiences are just so radically different, and there's such a disconnect in efficiency, transparency, and trust between that and what we experience in the mortgage market. So thoughts on that. How do we engage the consumer to improve the trust and improve the transparency?
Nelson DeLuz (11:49):
I think it comes down to better communication channels too.
(11:54)
And it starts early. It starts during that, whether bar is searching for a loan, but let's take it from the application. They're taking the application and you mentioned, Hey, they go through the application, not know what they're filling out. Well, are we giving them that information? Why we're asking these questions? It could be a matter of, and I don't think we do this enough when you get to a certain section that maybe there's a one minute video that you explain to the borrower, Hey, here's why we do this. Here's what you need to understand about this process. Could be a little pop-ups that come along, not a hundred page disclosure today when we disclose a loan, just to go back to that for a sec, it's a hundred page document. They don't know what they're looking at, right? They'll click through it or they'll sign it, but how do we explain that information in a way that they understand it?
(12:49)
Because a lot of rules that we have to do along the way, but if they don't understand that each step of the way, then they get confused and they don't understand. They get frustrated and then they're calling people and complaining. But if we present that stuff early during the application process where they're getting that information, where we're asking during that application process that they validate their income, so we can identify right there if there's an issue, we're asking them to upload bank statements where we can do OAR OCR and look at that data, and I want to talk more about that later. But if we're getting that information early and we're explaining to the borrower just completing that application, understanding, I understand every part of this. Now, what's the next phase? So usually it's thank you for submitting your application. Someone will reach out to you, but there should be something at that point that explains the bar. Again, I like the idea of a quick video. I know that it's not high tech, but it's easy, but we don't do it enough. Some companies do a good job with it, but hey, here's what's going to happen in the next week or two. Here's what you should expect during a loan process, and then every stage of the loan process as that loan moves, there's a same kind of explanation. Hey, you're now in this status. Here's what's going to happen here.
Nelson DeLuz (14:18):
Here's what you can expect. Your loan is conditionally approved. You'll find your conditions here and take them to the conditions, and here's what you need to do in each step. And bars have to figure that out. And it's okay, I got to upload. And sometimes the verbiage we put on that is not clear. Either we use our jargon and put it on there. Your DTI is too high, so we need additional income. Okay, so what does that mean? Again, and I see this because we actually just went through an exercise the other day, and this was internal, but we're looking at messages that we pop to loan officers. I'm like, how is a loan officer supposed to understand this? Then I think of, well, what are we presenting the borrowers in some of these cases? Are we showing something that's clear where they understand? And if you're not doing that along the way, then guess what? You're not going to get that trust. Then if there is an issue, there will be issues that come up. Then they're going to feel less likely to feel comfortable with you, right? They're going to question you more, and I think that becomes a big part of it, but it's also catching that stuff early. If we catch that stuff early, then we're not going to see that later.
Bob Jennings (15:35):
Yeah, for sure. Well, that expectation setting, communicating with the generation of borrowers in a way that they want to be communicated with. I mean, you bring up the video and you talk about how simple and easy that is. I think about my daughter who's 15, granted, she's not buying a house just yet, but in the next 15 years, she's going to be in the housing market. She taught herself how to play guitar from YouTube. That's how that generation learns, and that's how we need to interact with these consumers as we go forward. Presenting them with complicated disclosure documents and using jargon like DTI. It's not going to get us anywhere.
Nelson DeLuz (16:19):
I mean, I think about, great example is the LA right, which is simple to read, but at the same time, if you've never looked at one, you don't know what that means. But that's probably one of the most important documents for someone if you're going to do a purchase, because that's going to tell you your costs and what you need to bring to the table. But yet we just send it out to a borrower instead of, alright, how do I pull this out now in a, again, short instruction video, maybe it's some popups that says, Hey, this section here is third party fees. Here's what that means. This is what title's for, this is what your homeowner's insurance is. This is what your taxes are. Simple breakdowns. Where now someone says, okay, I understand this section. I understand this section, and by the way, this one's important. This is how much money you're going to need to close. But we don't do that. We just send it out to the bar and then we get to the end and figure out, oh, we may be short to close and what do we do? Right?
Bob Jennings (17:13):
Yeah, this comment is probably going to get me in trouble, but I don't think I can bite my tongue on it. I don't know if the title industry wants us explaining what title is to borrowers, so maybe we should just pass that on. We've talked about what it means to shift from a process centric view to a borrower centric view, and we've talked about it conceptually. Let's talk a little bit more specifically about changes that you're making within New Res to address this new generation of borrowers and some of the technology changes. But I think more importantly, some of the process and people changes that you need to make in order to be successful.
Nelson DeLuz (18:00):
And this is something that's near and dear to my heart right now because we are in the process of looking at every way we do everything. We are breaking down every role. We're breaking down every single task. We're looking at each of those tasks painfully and asking the question, why does someone do this? Do they have to do it? Can we automate it? Can we utilize a vendor for it? Can we move it offshore? We literally are looking at every single, every role, and we're not only looking at that from, okay, what does an Underwriter do? And I'm just going to change what the Underwriter does. But I think we always look at stuff and say, alright, we're just going to improve it, but we're going to keep everything pretty much the same way. We're going to get the process the same, but we're going to make processing a little bit more efficient.
(18:57)
We're going to make underwriting a little bit more efficient. And I'll give you just a quick story. We had a round table of one of our channels in, and we had three Underwriters in there, and a question came up on OCR and when they get a loan submitted where they file the documents, and three different Underwriters did things three completely different ways. They're like, I go this way and I do it. I go this way and I do it. And then my CEO is there and he's holding his head. I'm like, this is why we do 1.6 loans per day.
(19:31)
And then we had a conversation after and I'm like, this is why we have to break the process. I'm like, how could we train to that? We only had three. If we bring the 300 we have, we're probably going to get 280 ways of doing things. And he said, well, ask them and they'll tell you how they want to do it. I said, that's the problem. That's what we always do. We ask people, Hey, show me how to make your job less needed. And if you go there and say, I want to make your job. I want you to do a lot less every day, that means you're going to need less of me.
(20:06)
So while you have to understand the roles and what people do and why they do it, you also have to look at it bigger as a company and look at it. Channel agnostic, which is what we're doing. Why am I doing things in four different channels? How do I bring it down and maybe do this function one way for every channel, gain efficiency, reduce costs, which means I can improve pricing as well, be more competitive. So it's a painful process. It's going to take us a while. But the way we're looking at it, and I want to throw in the tech piece here just slightly, that I think what we've done over the last several years, we've all thrown a lot of technology out there, and we thought, well, this technology's going to save us this OCR, this Underwriting Engine. And what we realized, we've increased our costs, we're actually less efficient.
(21:05)
And it doesn't really work in our process. So we're looking at things now, and what I've driven to my team is I want to think about and build the process that we think we should have as a company. How do we want to be? Let's not think about all our restraints. Because when I go through those roles, people said, well, I have to do this because I have to go to five pages on the LOS to make this work. I'm like, okay, you shouldn't have to do that. And that burns time. So looking at it where, how should we do this process? How do we run everything at once, right? Instead of waiting in stages to do things. I think that's important because when a customer submits it, I want to run everything at that point. I want to run the OCR. I want to run income calculations. I want to run validations. I want to be able to have a title search that matches property types, vesting know all that stuff upfront. So within hours or that same day, we've identified all the red flags for that borrower. That can happen. And then that means we can take it from a, I think we're at 42 day turn time overall as an average down to maybe a week or two.
(22:24)
And I got to give an example. I think it's important to talk about examples. This does happen. We get to day before closing of a purchase and Underwriters doing a final clear to close and realizes that I forgot to source the deposit, and now it's a five alarm fire. And we've had these bank statements for a months, sometimes longer.
(22:51)
And here we are. We have both realtors. We have the loan officer and miss. We got a bar that's all packed. Movers are ready to come, and they're wondering, how am I going to prove where I got this money from? And now they're calling their parents asking for canceled check. It is a mess. And that happens more times than not. If there was a ton of operators and salespeople in here, you'd hear it, but I see something like that. I'm like, that should be caught through OCR data recognition trending on the bank statements that shows that, Hey, there's a large deposit here and Mr. Underwriter, you need to look at this. And it's conditioned and it's on there. Because what happened to that Underwriter? They were in the middle of reviewing that file, they got interrupted with the call, then they came back 10 later, they flipped to the next page and they never looked at that page. And that happens all the time because we're counting on humans to do stay and compare.
Nelson DeLuz (23:52):
Instead of utilizing that data and matching up and then showing us the exceptions, then people are doing what they should be doing. They're using their skillsets to say, okay, here's my issues on these loans that I have to solve, instead of how do I find stuff for the next three hours on this file?
Bob Jennings (24:12):
Yeah, I talk to lenders a lot about the pursuit of the idea of a 10 day close. And I guess I look at it a little too simply because I sit there and say, well, if you know everything there is to know about the property, if you understand borrower's credit, you understand borrower's income, and you understand the status of title, what's preventing you from getting closing at that point in time, right? I mean, everything there is to know, and that data is all available. The problem that we have as an industry is that, as you alluded to before, we source that data too late. We put it into, we rely on humans to verify that data as opposed to grabbing it from trusted data sources that are highly accurate, highly complete, and then it just kind of falls apart. Whereas all of this exists today. The data exists today. We have access to it. We have user permissioned, borrower financials at this point that could be layered right into these processes to not only take care of income, but also take care of assets. Yet as an industry, we're still doing things the same way, still operating off of that same conveyor belt that all borrowers are treated the same, all properties are treated the same, and they're just not. And it doesn't mean that every home is going to go through and every borrower's going to go through without a problem because you're going to run into those issues where the home's in a flood zone, there's involuntary liens on it.
Nelson DeLuz (26:00):
There's a path for that.
Bob Jennings (26:01):
Yeah, there's a path for that.
Nelson DeLuz (26:02):
There's path. There's a path. You create the rules that say, okay, these are perfect. They all go through these. Have you got to look at this? These require a government Underwriter. Look at them. Like you create those paths to Get there and try to solve that.
Bob Jennings (26:18):
So what do you think is holding us back as an industry from getting there?
Nelson DeLuz (26:23):
I think one is ourselves, right? Just trying to figure it out and how do we do it? I think it's about finding the right partners from a technology standpoint that roam the work in a true partnership, not one size fits all. And it's figuring out how do we build something that works? But again, I think we're stuck in our old technologies, our old way of doing things and changes are hard which means you have to make organizational changes. You have to change leadership that has the right message. You have to think of, alright, my expenses, how much can I spend? The market's not great right now. I can only spend so much, so I'm going to do 1, 2, 3, 4, all I can afford right now. And that's okay. I think every company needs to look at it and say, how do I get to the next step? And I think sometimes we look at, I want to get to the perfect state, but you kind of get there in stages. It's figuring out, and that's how we are looking at it. How do we get there in stages? What's the first things we want to do? How do we improve this and get a slightly better? And then we get that done and it works. Now let's get to the next phase. How do we introduce something else? We are building out the roadmap for what that ultimate process wants to be. What do we want to look like? And something that's pivotal. You have to be able to move in this market quickly. And then how do we do that in stages where you can actually bite off or you can chew, implement it. Implementation's always painful, and it's figuring out how do we implement this stuff in stages, add the value, show the ROI and continue to get better.
Bob Jennings (28:21):
Yeah. Well, it's progress, not perfection. It's progress. That's what we need to be focused on. And the industry has definitely added an inflection point where we've, for the last decade or so, we've thrown bodies at our problems. Now we're in a environment where we can't afford to throw bodies at our problems. And so taking this hard look at redoing our processes, thinking about it from a borrower centric perspective as opposed to a process central perspective, those are the tough choices and tough changes that we're going to need to make as an industry, for sure. Well, I think that's all we have for you today. We thank you all for sitting in on our little conversation. Again, Nelson and I probably have a conversation like this every couple of weeks.
Nelson DeLuz (29:15):
I was going to say, it's like a coffee conversation.
Bob Jennings (29:17):
So if you're ever interested in joining it, just let us know and we'll be happy to bring you in. But thank you for your time today and enjoy the rest of your conference.
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