Opinion: The time is right for origination modernization
The industry is buzzing with conversations around appraisal modernization — for good reason. Appraisal modernization reduces origination cycle time, bolsters appraiser capacity and helps lenders deliver a more seamless and transparent borrower experience. It also holds great promise in attracting a new generation of bright, talented appraisers who may have otherwise not given the mortgage valuations industry a second look.
But for all of the extraordinary potential of appraisal modernization, the valuation space is just one area where modernization is at a critical inflection point for the mortgage industry.
Lenders who are modernizing across the entire scope of the origination journey — digitizing processes from application and title through close and post-close — are building unprecedented momentum for their businesses. Origination modernization holds the promise of streamlining operations and reducing costs, serving as a point of differentiation for lenders and redefining the lender – vendor relationship.
How origination modernization benefits lenders
The mortgage application and pre-approval processes have been digitized for some time, to the benefit of borrowers and lenders alike. But the adoption of automation in subsequent steps has been slower to gain traction.
Much of the reason for this is that lenders have been so caught up in the frenzy of market demand the past couple of years that they haven’t had a moment to think about modernizing their processes, let alone implementing them.
Today is a different day. Demand has calmed, so there is not only the time but also the need to digitize processes as lenders face tighter margins and greater competition in today’s low is a different day. Demand has calmed, so there is not only the time but also the need to digitize processes as lenders face tighter margins and greater competition in today’s low volume environment. If you’re a lender facing these challenges, there is no more important time than now to explore automating your processes across the origination spectrum. Here’s a quick rundown of how this modernization can support your success.
Once a borrower is approved for a mortgage loan, the process should run like clockwork. It should keep the consumer happy and minimize the cost of originating the loan. Technology makes this possible as it builds new efficiencies. This is what that process can look like:
- Title – Instant title technology determines clear-to-close readiness in seconds. This enables you to set borrower expectations for the timeline right out of the gate and streamline your workflows by routing loans that qualify into the instant title fast lane, while more complex loans go the curative route.
- Valuations – Hybrid and desktop appraisals allow appraisers to focus on appraisal quality and output rather than losing precious hours in transit. Real estate agents, brokers and other qualified third parties offer inspection support, aided by sophisticated cameras and guided by GSE-mandated standards for data collection.
- Self-scheduling – Digital scheduling technology revolutionizes the valuations and closing processes by empowering consumers to schedule the date and time of their inspection and signing. For appraisals, the automated confirmation can include the inspector’s photo and vehicle type. For signings, borrowers have the option of selecting in-person signing or their choice of eClose services (RON, RIN, hybrid, IPEN or LPOA).
- Closing – Automation speeds the generation of closing documents and reduces errors in post-close review. eClose capabilities streamline signing and free notaries to certify more documents in less time. They also provide one more way to satisfy customer demands for convenience.
Now that the pool of borrowers is so much smaller than during the mortgage boom, lenders need to truly stand out to win the business. Origination modernization can give them the edge.
Simply put, if two lenders offer a borrower the same rate on a loan, will that borrower choose the lender offering a faster, more transparent digitized experience or the one whose traditional manual processes slow the process down?
People have become accustomed to digitization in all aspects of their lives, from online banking and shopping to making restaurant reservations or catching a ride with Uber. All other things being equal, they are likely to choose the lender whose process fits their lifestyle and expectations for convenience and speed.
This isn’t just a theory. We’ve done our own research, asking thousands of consumers what they expect of the mortgage process. Their preference for an efficient, technology-driven process comes through loud and clear. Results documented in the 2022 ServiceLink State of Homebuying Report include 83% of respondents saying that, given the option, they would use an app to self-schedule their closing appointment.
When asked about the benefits they appreciate when using technology in the mortgage process, 72% cited convenience and ease of use. 60% cited speed. As the borrowing base continues to skew younger, lenders who modernize will reap the benefits of being more competitive. Those who don’t will get left behind.
Redefining the lender-vendor relationship
Digital scheduling technology removes the middleman from the equation as it enables lenders to provide borrowers, real estate agents and loan officers with direct access to the nation’s network of appraisers and signing agents.
This direct connection truly changes the game, speeding borrowers to the closing table and providing more transparency into the process than was ever possible before. Thanks to advanced AI-driven scoring engines, the lender’s specific rules, preferences, quality expectations and geographic requirements can all be factored into vendor selection. Then self-schedulers are given exact date and time options.
Where to go from here
We saw all consumers gradually shifting toward a digital mindset prior to the COVID-19 pandemic. Then we watched that shift accelerate exponentially during the COVID-19 pandemic. Today, consumers don’t just appreciate digitized solutions; they expect them. As a lender, you can fulfill their expectations by modernizing your origination process from end to end.
It doesn’t have to be difficult. The right technology partner will bring assets, knowledge and skills to help you assess your current processes and apply new leading-edge solutions. Look for a partner with financial backing, stability, technology and people you know you can rely on.
And think about whether your other vendors, whom you may have brought on to help you manage the volume surge of 2020-21, have the level of sophistication needed to support your new vision.
In your modernized scenario, any partner you work with must be able to keep pace with your digitized processes and support your goal of implementing a consistent, optimal production path. The quiet market offers an ideal opportunity to explore your origination modernization options.
Even small, incremental improvements can help you strengthen your competitive stance, boost your profitability and fuel your growth. And with every lender who takes the modernization plunge, the mortgage industry moves another step forward.
David Howard is the executive vice president of origination services at ServiceLink.
This commentary first appeared in the February/March issue of HousingWire Magazine. To read the full issue, click here.