We’re living through a very interesting time in the U.S. housing industry. The global pandemic hit our industry like a pair of defibrillator paddles, bringing mortgage industry CFOs to life and sending millions of dollars into new technology investment and implementation.
The old debate over the primacy of best-of-breed tech stacks versus an all-in-one platform was resurrected and taken to new heights. With volumes at historic highs and escalating competition from new fintech lenders, choosing the wrong option could have major ramifications for a lender. These industry factors have brought this debate to the forefront of lenders’ minds.
But how can we differentiate between a true end-to-end platform versus a tightly integrated collection of disparate tools? Actually, it’s never been easier. All we have to do is look at performance.
Start at the beginning with the point of sale
Over the past few years, we’ve been watching a boom in point-of-sale (POS) and consumer portal technology, where the consumer’s borrowing journey really begins. Development of this technology was slow initially compared to other markets, but COVID has accelerated it into high gear. Today, a great many lenders are focused on enhancing and improving the front end of the business.
This is not a bad thing. The POS is an important part of the overall process of originating a loan, more so in a world where the vast majority of borrowers are interacting with lenders online. The POS is a fantastic tool for dealing with prospective borrowers and guiding them into the loan origination process. Once there, the consumer portal on the front end can be a powerful communication tool to keep the borrower engaged through underwriting and processing.
But that work is futile if the lender ignores the back end of the process. The loan manufacturing or fulfillment part of the process is where the promises made to the borrower during the application process are paid off.
Sure, consumers love it when they can complete an application for a new loan in just a few minutes. But when it then takes another 45 days — or longer — to close the loan, are you truly providing a better customer experience?
When we look at some of the new POS technologies that have been connected to legacy origination systems, we see that uneven experience that mortgage borrowers just don’t like. It may be poor integrations or otherwise disjointed connections, but it always leads to problems with the overall process and experience.
One glaring example of this is asking the borrower for the same information multiple times through the lending process — a key contributor to low net promoter scores.
On the other hand, all-in-one solutions don’t have to share important borrower information with outside systems. Therefore they provide the lender with the opportunity to offer the borrower that full service and high level of customer satisfaction on both the front and back ends of the transaction.
This is especially true of all-in-one solutions that offer dynamic tasking. A platform that serves as the lender’s single system of record with a contiguous back end can use dynamic tasking to track the exact data requirements throughout the process, making it possible for the lender to request the correct information only once.
Fast and furious in the lending world
Lenders are under constant pressure to move faster. When they don’t, consumers become unhappy. This is particularly true for the newest group of homebuyers.
Millennials, in particular, have high service expectations. It can be very hard to satisfy these borrowers without a streamlined and automated process, with the ability to close very rapidly. Remember, these borrowers have grown in the age of robust technology, online banking, and the Amazon Effect. Instant delivery of data and products is expected.
Lenders can leverage everything they need with the technology we have available to close loans in a very short time frame. Of course, you have to work with your third-party service providers such as Verification of Assets (VOA), Verification of Income (VOI), and the tools the GSEs provide and make sure that things like the property appraisal arrives in a timely manner.
When you can process data in an event and data driven system instead of a form-based system, everything moves faster. A data-centric approach utilizing a single system of record is the way to accomplish this.
Lending done right…end to end
To meet the demands of today’s mortgage borrowers you have to rely on the best technologies available. Loan origination system developers, for the most part, have focused their efforts on loan processing through the post-closing process. They know this space quite well and no fintech firm has, as of yet, been able to displace traditional LOS providers in the mortgage space.
But because so many lenders have been focused on the front end of the process for so many years, many product teams and developers have fallen behind when it comes to streamlining these back-end processes. The act of sending a loan through the system and on to post-close was becoming an overlooked part of the process. Despite this, achieving back-office efficiencies is a real opportunity for lenders right now.
The POS boom gave lenders some new efficiencies on the front end, but poor integrations and the inherent problems associated with connecting disparate information systems did not extend those same benefits to the back office. As a result, borrower expectations still have not been met.
A better solution will have a fully integrated POS built into the LOS, creating a single system for end-to-end loan origination. It’s far easier for an LOS developer to add these front-end tools than it is for a POS developer to launch a new LOS.
Ultimately, the future belongs to lenders who have the tech stack to meet the changing demands of the borrowers they serve. More lenders are realizing that this means choosing an end-to-end, all-in-one mortgage lending origination solution. Fortunately, the technology exists and can meet this critical lender need.
Michael Farris is vice president of strategic solutions at Origence.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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