Why a Better Services Strategy Solves a Lender’s Inefficiency Problem
The resounding message from the Mortgage Bankers Association (MBA) secondary marketing conference echoed what we heard loud and clear at this spring’s MBA Tech conference: Lenders are feeling the market shift – and it’s has an impact on their activities.
With the current decline in loan volumes, some of the inefficiencies that were masked by heavy workloads turn out to be wastes of time and money. They make it harder for lenders to exploit profitability, which is a problem.
The Big Challenges Facing Lenders Today
In our discussions with lenders at spring conferences, we heard three main points more frequently than anything else.
Business is changing and lenders are feeling it. MBA Chief Economist Michael Fratantoni has done an excellent job at MBA Tech showing us the impacts that changing market conditions have had on the lender’s business. Most people in the audience were already feeling the effects.
Lenders are more concerned than ever about high costs. The cost of granting loans does not decrease. The lenders we spoke to know that the key to reducing costs is increasing productivity. Even one more loan closed per month, per LO, can have a marked impact on the lender’s bottom line.
Many are frustrated that their bloated tech stacks aren’t delivering the efficiencies promised. The new tools that lenders have put in place over the past few years have failed to deliver the promised additional efficiencies, and lenders are ready and willing to make changes.
Successful mortgage lenders operate with maximum efficiency. Efficiency reduces costs and cycle time because it opens the door to increased productivity and higher borrower satisfaction scores. But how will they get there?
Solve the right problems to ensure efficiency
Effective problem solvers begin by defining the problem. It’s the only way to be sure that you’re not wasting time and money fixing something that won’t yield the results you want. When it comes to inefficiencies in the mortgage origination process, finding the real problem isn’t necessarily straightforward.
Some would say it’s technology. It’s easy to point fingers at the tech stack, especially after years of investing in expensive point-of-sale software that hasn’t lived up to the hype. The truth is, today’s mortgage technology is better than it’s ever been. The tools lenders have access to today are exponentially better than what was available even just a few years ago.
Some people will say that it is the salespeople who cause the problem of inefficiency. The truth is that most companies working in this space today have been here for years. They understand the business and know what lenders problems their products and services can solve.
The real problem facing the industry today is not specific to any given technology stack or particular set of vendors; it’s about how the lender’s core system, the Loan Origination System (LOS), links these products and services together to enable the lender to create an innovative process that their staff can master for the benefit of the borrower.
This is the strategy that the lender employs to acquire the services needed to close the loans.
Solve the problem of lender inefficiency
Lenders want a solution that will give them the power to innovate and the ability to create a better process with less friction. They must therefore have the ability to connect to any provider of their choice and integrate the resulting products and services directly into the LOS. This saves their loan processors from having to leave the system to complete their work. Lenders need to be able to change their process at any time, easily and have it running within one business day.
How could this be achieved? Here is what the ideal solution should include:
1. An API-based architecture
The first requirement must be an LOS built on an open architecture that allows for a robust API layer that allows any provider to connect. This means opening up the platform to vendor logins and releasing an API that will allow them to accept orders and return data.
2. A technology- and vendor-neutral approach
By now, it’s clear to everyone in the industry that allowing the LOS developer to direct lenders to “preferred” vendors or technology stacks doesn’t serve the industry well. Lenders should be in control of their own business processes and should not be restricted in developing their own steps to achieve them.
3. An easily configurable user interface
Even the most powerful functionality built into a technology solution will yield no benefit if the user cannot find, understand and use it. This means providing a highly configurable and dynamic user interface (UI) that will allow lenders to customize the screen flow based on roles and users within their organization, so the user only sees what is needed. , when necessary.
4. A method for Day One transactions
Considering what we have already discussed regarding modern APIs, this seems impossible, but now let’s just focus on the ideal solution. This should allow any lender to create a new process, link the LOS with the providers of their choice and test it within one business day.
This may sound idealistic to many lenders, but it can all be achieved – it just takes time, testing and the know-how of a trusted technology partner.
What we know for sure is that lenders shouldn’t settle for less. Unless they solve their inefficiency problem now, they cannot expect to remain an industry leader for long.
Jim Rosen is Executive Vice President of Services at Mortgage rate. He has over 20 years of experience in the mortgage software and services industry.