Clos­ing the Gap

Early adopters took dig­i­tal mort­gages from con­cept to re­al­ity. What will it take for every­one else to catch up?

National Mortgage News - - Contents - — Austin Kil­gore

It’s been nearly three years since a wa­ter­shed mo­ment pro­pelled the con­cept of a dig­i­tal mort­gage into the pub­lic con­scious­ness and sent the in­dus­try into a frenzy of in­no­va­tion and in­vest­ment.

That mo­ment, a 60-sec­ond com­mer­cial dur­ing Su­per Bowl 50 for Quicken Loans’ Rocket Mort­gage, asked the ques­tion, “What if we did for mort­gages what the in­ter­net did for buy­ing mu­sic, and plane tick­ets and shoes?”

“You would turn an in­tim­i­dat­ing process into an easy one.” While Rocket Mort­gage was far from the in­dus­try’s first foray into on­line lend­ing and pa­per­less pro­cess­ing, some­thing was dif­fer­ent this time. In the af­ter­math of the Great Re­ces­sion, mas­sive reg­u­la­tory changes up­ended how busi­ness was done. New pro­cesses and tools were needed to man­age these com­pli­ance re­quire­ments. Ev­ery­thing else was an af­ter­thought. As a re­sult, an in­dus­try no­to­ri­ous for be­ing tech­nol­ogy lag­gards found it­self even fur­ther be­hind.

But by the time 2016 rolled around, con­di­tions were im­prov­ing. Most of the new com­pli­ance re­quire­ments had been im­ple­mented and the “new nor­mal” had set in. Lenders, and their tech­nol­ogy ven­dors, fi­nally had the time and money to in­vest in im­prov­ing the bor­rower ex­pe­ri­ence.

Prac­ti­cally every­one un­der­stood what a seam­less, dig­i­tal ex­pe­ri­ence would mean for the in­dus­try. Get­ting there was the hard part. The four-part se­ries that fol­lows ex­am­ines key dig­i­tal mort­gage de­vel­op­ments and ex­plores the un­tapped op­por­tu­ni­ties that re­main.

While the em­brace of dig­i­tal mort­gages has been swift among many early adopters, ques­tions about value propo­si­tion and op­er­a­tional com­plex­i­ties con­tinue to vex the broader in­dus­try.

Fan­nie Mae and Fred­die Mac’s ef­forts to au­to­mate orig­i­na­tions with third-party data may prove cru­cial as lenders con­tinue to face pres­sure from ris­ing costs and thin­ning mar­gins. But while lenders may see the value of these ini­tia­tives, many are slow to com­mit.

Dig­i­tal mort­gages are great for the first 30 days of a bor­rower re­la­tion­ship, but what about the po­ten­tially 30 years af­ter that? Or when a bor­rower comes on hard times? Em­brac­ing dig­i­tal mort­gages in ser­vic­ing may prove valu­able to bor­row­ers and ser­vicers alike.

Fi­nally, as mort­gages rapidly be­come more mod­ern, com­pli­ance re­quire­ments aren’t mov­ing quite as quickly. But re­cent ef­forts by the Trea­sury Depart­ment may soon open the door for im­proved di­a­logue be­tween in­dus­try prac­tion­ers and their reg­u­la­tors.

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