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Protecting Borrowers Through Tech

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Editor's note: This story originally appeared in the July issue of DS News, out now.

Mortgage servicing technology has taken some giant leaps in the last year. Tech and mortgage experts have been joining forces to push past the current boundaries of doing business with the aim of strengthening in-house efficiencies, providing faster and more seamless connections for customers to make payments on their mortgage, or staying compliant with the Bureau of Consumer Financial Protection rules.

Some of these technology transitions have been made by other industries many years ago, but for one reason or another, have not transitioned into the mortgage sphere. “Mortgage servicing has been based on outdated technology like mainframes, COBOL, etc., it has been slow to enter the millennial footprint,” Bryce Elliott, Chief Technology Officer for SunTrust Mortgage shared. The company is servicing approximately 900,000 loans.

“The primary origination and servicing platforms have been around for a number of years and continue to provide a huge value to the market,” Steve Comer, Financial Services Sales Director at Hyland added. “Updates to platforms of this scale don’t come without a significant investment in both time and cost, and when the market is moving as fast as it is currently, it’s challenging for these platforms to make changes on a global level. So while many core technologies are updating parts and pieces of the platform, it still leaves large portions of the application operating on technology that is quickly becoming outdated. This current state is forcing servicing vendors to evaluate whether to buy, build, or partner with third-party providers to advance the capabilities of their platform and remain competitive.”

“A combination of accumulated technology debt at banks, the shift of focus towards the customer experience, open APIs, mobile, and fintech have all combined to disrupt the traditional mortgage business model recently,” Tyrone Canaday, a Managing Director with Protiviti added. “Today, the ability for mortgage fintechs to leverage alternative data sources to do underwriting and create lending services that are user-friendly, quick and efficient is gaining new momentum with customers."

Though many of the technologies that mortgage services companies are using have been around for a while, much of their implementation in the industry has been relatively recent, with many firms upgrading their technology, particularly in the last year, according to several experts.

“Mortgage technology for servicing has become digital, user-friendly, and available,” Brent Rasmussen, EVP and CIO for Carrington Mortgage Holdings said. “Consumers are much more comfortable with digital self-service items.”

Below is a look at the digital and other technologies that mortgage servicing experts say are making positive impacts on their businesses and their customers.

Digital Documentation

The move to digital documentation has been progressing for many years, but in the last couple, the evolution has taken a quantum leap, according to Rasmussen. Now rather than just scanning documents as they come into the enterprise, the servicers are receiving digitized files from lenders, which is critical not only for speed and efficiency but also for compliance.

“Mortgage technology has come a long way in providing more consistency and transparency through the lending process,” Hyland’s Comer adds. “Much of the advancements made in this area have been done out of necessity because of the impact of compliance requirements over the last several years. Lenders now have more data than ever at their disposal from the very start of the origination process, allowing them to make better lending decisions. The accessible data allows them to review a wealth of metrics related to their consumer pool—from at-risk DI ratios, at-risk credit levels, consumer metrics in certain regions, key LTV ratios, etc.—that ultimately result in a stronger loan portfolio, thereby reducing the potential for past-due loans or defaults.”

With digital documentation, mortgage servicers have been able to incorporate digital onboarding of accounts, which wasn’t possible before because servicers didn’t have electronic documentation for prior payments to other servicers, updated appraisal, escrow, title, and other information, according to Rasmussen. “Now that everything is digital, we can do that, making things more seamless for the borrower. The consumer has benefitted from a lot of these changes.”

Automation/Machine Learning

While servicers have used digital processes as they became available, there were still many manual processes, which have given away to more comprehensive automation only relatively recently, Rasmussen says. “A bot does the same thing every single time, so it eliminates errors. When used properly, it changes the efficiency and the accuracy of the industry. We have them in production now. This is a tool that can be used in numerous instances. It’s a rules-driven process. Robots in process automation will be a game-changer in our industry.”

Since the bots handle many processes, there is no need to have human staff after “business hours,” yet customers can still receive most of the services they need, Rasmussen adds.

“Automation is allowing loan officers, buyers, sellers and title companies to interact at lightning speed,” Lynn Black, Marketing Manager for LiquidVZN Group, LLC said. “The acceptance of mobile notaries by mortgage companies is making the closing process even easier for buyers and sellers, especially when the parties are in different states. Portals can now notify all parties involved within seconds of a new submission, limiting human error and making the sale efficient. This same automation can make payment processing a breeze for both the borrow and the accounting department.”

“From the lender’s point of view, the largest contributor to the cost of loan production is still personnel,” Comer said. “Technologies that effectively cut down on the number of people required to interact with the loan process, duplication of data, ‘stare and compare,’ etc. are going to have an enormous impact on the bottom line to generate a loan. Much of the cost involved still revolves around the gathering of documents and validation of data to ensure the loans are meeting all requirements. Technologies that allow automation of gathering, extracting and validating all of the necessary data will provide a rapid ROI.”

With everything, from coupon rates to loan performance information to payment characteristics all readily available, a servicer can now better predict delinquencies and be more proactive when pursuing loss mitigation strategies, Rasmussen says.

Easily Accessible Tools

It used to be that to do almost anything data analytics; a servicer had to have expensive hardware and software and technically adept staff that knew how to run algorithms, queries and could understand complex readouts, according to Rasmussen. Now, however, there are some easy, inexpensive tools from Microsoft, Google, and others that someone can use with almost no technical or data background.

Simplicity was also the idea behind the redesign and renaming of Quicken Loans’ website previously called MyQL, now branded Rocket Mortgage, to build on the marketing campaign around that brand for origination and use it for servicing as well, Nicole Beattie, Quicken Loans VP of Servicing shared.

“Now customers never feel a handoff when they move from origination to servicing,” Beattie explained. “We did a complete overhaul of our website to provide the servicing information that is important from a customer perspective. We’re constantly looking at things through a client lens. We’ve added a nice interface, using a ‘tile’ approach.”

One tile is estimated value, which shows the property’s estimated current value. The key here is that the borrower can see if the property is rising in value over time, declining or holding its own.

Another tile offers escrow information, including detailed information about how escrow is calculated, disbursed, etc.

An easy-to-use mortgage calculator is another feature. Though mortgage amortization calculators are far from new, the Quicken Loans one shows not just simple loan amortization schedules and payment differences for different loan amounts and varying interest rates, Beattie says. “It takes someone step-by-step through the process. They can see how much they can save if they make additional payments, they see how much they can save if they make bi-weekly payments rather than monthly payments.

As with other technologies the company uses, the website redesign was handled in-house Beattie says.

By making the servicing side simple for the customer, Quicken Mortgage expects to help encourage borrowers to return to the company for loans for subsequent homes, Beattie explains. “We want to provide our clients with the best possible web experience. This is where we can earn a client for life.”

Similarly, simplicity for the servicer and borrowers was behind the combination of four different systems into the single SunTrust mobile app, Elliott says. Beyond basic mortgage information, borrowers can obtain escrow information, private mortgage insurance details, appraisal reports, as well as other related information.

“We wanted to make what was complex very simple,” Elliott said.

Additionally, many of the borrowers also have other SunTrust banking relationships, and now they can access them all from one source.

“This provides them with a single version of the truth,” Elliott said.

Tools that are changing the way mortgage professionals approach servicing, include those targeted in the following areas:

  • Digital Connectivity: Servicers want to make it as easy as possible for borrowers to make payments, whether it be through a mobile app, via a desktop connection or through the traditional mailed check. Quicken Loans has taken that idea one step further. Borrowers with mortgages from Quicken Loans can now tell Amazon’s Alexa to make a mortgage payment, Beattie says. The company is working on similar capabilities with Google Home, Siri, and others.
  • Improved Pricing Transparency: Fannie Mae and Freddie Mac for some time had been providing the largest secondary market companies full details about specified portfolio pools online, but now is offering that same information to mid-tier companies, such as Churchill Mortgage, says Tom Gillen, the company’s SVP of capital markets. “This is giving the smaller guys a boost.” It also provides them with the detail they need to compete on an even playing field for these loans. Yet many in the secondary market don’t take advantage of this new capability, according to Gillen. “A lot of people get into a rut working with the same aggregator all of the time.”
  • Digital Marketing: In an area where other industries have led the way, secondary market firms are now turning to more digital marketing efforts, leveraging tools like Google AdWords, retargeting and Analytics to pinpoint the best prospects, Whitney Blessington, Churchill VP of Marketing, said. Investors and other partners are moving into the digital realm much like consumers, so servicers and others in the mortgage business need to market to them the same way they do to consumers.

Tech Never Sleeps

Though mortgage servicing technology has evolved rapidly, particularly in the last couple of years, there’s still more technology that will come into play in the next few years, according to Rasmussen. Some closings documents, loan servicing files, ancillary payment information, property liens and some other details still come into a servicing organization or loan originator as paper documents. Getting the providers of those documents to deliver them electronically “is like wrestling in the mud,” according to Rasmussen. “When that changes, everything will become more accurate and available. It’s something everyone [in the mortgage industry] is chasing.”

Quicken Loans is working on a technology with the working title “Rocket Mod” that would help consumers at risk of foreclosure to reach out for help more quickly so that they can work out the best solution, be it a modification, short sale or something else.

Similarly, SunTrust Mortgage is developing its online modification program to help the servicer as well as borrowers to attempt to quickly address any shocks like those that occurred in 2007-2008, Elliott commented. “When it happened, all of the lenders and the servicers were very reactionary. We had to act quickly. From a technology standpoint, we were working with very complex software stacks. It’s been important to improve our processes.”

“Mortgage technology can only go so far in resolving a problem after the problem has reared its ugly head,” Hyland’s Comer says. “But getting and staying ahead of the issue will allow companies to better manage their portfolios and reduce the potential bad debt.”

“Technology can make communication with borrowers easier than ever, and this should be the case with past due loans,” Black recommended. “Mortgage companies can reach out to past due loans via direct email with reminders and even automated emails to suggest refinancing or other options to assist the borrower through the algorithm, versus reach out by phone and other options. The world revolves around smartphones, and the mortgage industry should be embracing this as well.”

About Author: Phil Britt

Phil Britt started covering mortgages and other financial services matters for a suburban Chicago newspaper in the mid-1980s before joining Savings Institutions magazine in 1992. When the publication moved its offices to Washington, D.C. in 1993, he started his own editorial services firm and continued to cover mortgages, other financial services subjects, and technology for a variety of websites and publications.
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