What Mortgage Lenders Need to Succeed in the New Buyer Market
BLOG VIEW: As the mortgage industry approaches 2022, the main focus for the vast majority of lenders is to maintain momentum. The growth that lenders have achieved over the past 20 or so months has been nothing short of staggering – but like running down a steep hill, slowing down can be difficult and potentially painful.
Already, some lenders are reducing their teams, in the face of the drop in the volume of refinancing loans. With the shift in business mix from refinancing to buy money lending and overall volume expected to decline, this trend is likely to continue.
But some lenders will continue to grow in this environment. Originators who have the technology and trained staff to make the mortgage process satisfying for borrowers – and real estate agents – will still have the opportunity to increase purchase volume in 2022.
While a refinance borrower can wait patiently to lock in the lowest interest rate, a purchase borrower doesn’t have that flexibility. Failure to close on time can make things difficult for a new homebuyer and annoy the real estate agent, a critically important business referral partner in a buying market.
Therefore, a key metric that every lender will track this year is time to close. Shorter lead times and a more satisfying experience for borrowers and their agents will set major lenders apart.
Some will do this with expert staff who have experience in lending purchase funds. Others will fall back on new technologies specifically designed to deliver efficiencies to all users. Given how difficult it is for lenders to recruit top loan origination talent, the latter is likely to be the preferred route for most lenders.
This makes choosing the right origination technology extremely important. How can a mortgage lender know if they have the right technology stack to succeed in a buying money market? It won’t be the bells and whistles that some tech developers have baked into their loan origination systems that will deliver the results lenders need this year.
Here are three key features mortgage lenders must have to be successful in 2022.
1. A modern set of APIs
Application Programming Interfaces (APIs) were a huge leap forward for any industry that required businesses to share data between disparate systems. In the mortgage industry, this has finally made it possible to deliver a seamless borrower experience.
Today, modern loan origination systems are built on open architectures to take full advantage of APIs, creating an environment where lenders can create seamless connections with the partners needed to close loans faster and with less. risk of error.
This is especially important for purchase fund lenders, where more data is needed to underwrite, process and close a new loan. APIs allow this data to flow electronically into the lender’s LOS, which greatly speeds up the process.
The first requirement, therefore, for buy-money lenders is a system with a modern set of built-in APIs and the ability to add additional connections as the lender’s needs change. This includes any provider the lender wants to use, not just those the LOS provider has partnered with.
2. Built-in configurability
Having an open architecture doesn’t matter much if it’s not quick and easy to configure to the lender’s specific needs. While most refinance loans were largely the same, there is a wide variety of purchase money loans to better meet the needs of more homebuyers. This means purchase lenders have the ability – and the competitive mandate – to create their own niche. Their origination technology must be flexible enough to conform to their specific needs.
Flexibility and customization options should be built into the loan origination system from the start. It is not possible to lock these features to an outdated LOS.
It’s less about borrower contact capabilities and more about back-office efficiency. From the borrower’s perspective, the process is just a conversation where a large amount of information is transferred back and forth. The process is very different from inside the institution.
The lender’s origination technology must be able to put different loans on different tracks, so that they can move as efficiently as possible to the closing table. These workflows must be defined by the lender and verifiable; however, including basic workflows is important for small lenders to be successful with the system right out of the box.
3. A Clear Path to Electronic Fence
During the pandemic, it became clear that consumers were ready to embrace electronic closings, and many lenders have adopted the technologies needed to close electronically over the past two years. More recently, Remote Online Notarization (RON) has been approved in states across the country, so now many more states have approved RON than have not.
Even with all the pieces in place, many lenders still lack predefined workflows that make electronic closings a standard part of the process, preferring to move to electronic closing when circumstances permit. This costs lenders efficiencies that borrowers and their agents are happy to provide.
While it may not yet be possible to have a fully electronic process in every jurisdiction, there are enough that are now poised to add significant efficiencies for the lender and increase borrower satisfaction by same time.
This means that each institution should have an electronic closure team on staff who know when closure can be electronic and then intervene to make it happen when possible.
Joe Camerieri is Executive Vice President and Head of Client Account Management at Accenture Mortgage Cadence.