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The Digital Mortgage Revolution: Servicing Challenges to Implementation

With all the advancements in AI, machine learning, and similar developments taking place, it seems our industry is on the verge of a real digital mortgage revolution. On the other hand, it can also feel as though adoption isn’t happening quickly enough. Why is this?

Certain obstacles to implementing technology are beyond a lender or servicer's control. For example, the IRS does not yet provide instant turnaround on tax transcript requests, and some states still require pen-and-ink signatures on closing documents.

On the other hand, most lenders and servicers face their own challenges when it comes to implementing new technologies. Here are several reasons why, and some quick thoughts on how they can be addressed.

A Complex Financial Challenge

The most obvious challenge to implementing new technology is financial—but there’s more to it than numbers alone. Many lenders and servicers are experiencing shrinking profit margins and consecutive quarterly losses. It’s not just the cost of buying or building technology that matters, either. There is the additional cost of running dual systems during the time that new technologies are being implemented and tested.

As just one example, more lenders are adopting hybrid eClosings, where the note is signed in ink and submitted electronically for recording. However, fully electronic eNotes are clearly the better option—they’re more convenient for borrowers and make it much easier to perform automated reviews on loan files. However, relatively few lenders have adopted them.

Until eNotes are more widely embraced, lenders, servicers, and their warehouse partners will need to accommodate both eNotes and hybrid eNotes, which adds costs to the equation. It’s an investment that will ultimately pay off, but can be difficult to justify at this time.

The Investment in Vendor Selection

Evaluating technology vendors properly is absolutely essential at a time when profits are already tight. But the evaluation process also requires its own investment.

The objective behind evaluating vendors is to get to the truth behind the technology being offered to you and to avoid vaporware at all costs. It’s critical to get references from other clients, even competitors, to determine whether you’ll get what you’re paying for. If a new technology provider has no track record of results, that could be an obvious red flag.

Lenders and servicers must carefully examine, quantify, and ensure the ROI behind a technology before selecting a vendor. They should also consider the time and effort required to implement the technology, including the amount of training required of staff, as well as any potential hidden obstacles or capability gaps.

Planning for Change

Implementing technology inevitably demands a change in business processes. To make this transition successfully, it takes a strong buy-in and a commitment from the entire organization, as well as a willingness to invest the proper time into training. Lenders and servicers must also plan for successful cutovers to ensure their business operations and customer-service levels will not be disrupted or compromised during the implementation stage

Implementing any new platform, system, or software takes a great deal of coordination. If the project manager leading the implementation is consumed with existing work priorities, the process will take longer, which adds even more expense. Even after implementation, the benefits of new technology must be constantly tested and demonstrated to your team.

None of this is to say that implementing new technology isn’t worth the effort. In the short term, it may seem that way, but if pursued wisely and for the right reasons, it will pay off. It just takes real commitment, a well-defined implementation strategy, an effective training plan—and, usually, having the right partner by your side.

About Author: Stanley Street

Stanley Street
Stanley Street is a leader in the mortgage warehouse lending industry and a frequently cited expert on mortgage banking finance. He currently manages the strategic vision of Street Resource Group, Inc., a provider of information systems and business process consulting to the financial services industry. The company’s flagship technology product, the SRG Warehouse Loan System (WLS), completely automates the entire mortgage warehousing process and improves efficiency and profits for both warehouse lenders and mortgage originators. Street can be reached at sstreet@streetresource.com.
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