Nima Vahdat, SVP, Associate General Counsel, loanDepot
Efficiency. Safety. Speed.
In 2018, we’re in a constant cycle to optimize all facets of a transactional experience without undermining others. We can now buy and sell stocks, do our banking, and shop for just about everything imaginable from our smartphones. The need to keep the cycle of progression moving is relentless and no industry is an island. The strides of one drive the performance of others, in a dynamic known as “technology pressure”.
Technology pressure is when consumers adapt to a certain level of convenience and efficiency in one industry to the point that they’ll no longer accept lack of progress from another. The perception is that the lagging industry is slow, disorganized and even incompetent. It’s as if someone who is used to driving a Ferrari is loaned a beat-up 20-year-old economy car. The effect is experienced as doubly slow and more frustrating than it might have been just five years before.
Two huge industries slow to move
When the shift to digital records and digital records transfers started becoming the norm, certain industries–particularly health care and finance–were slow to adapt. The reasons were a combination of the sheer size of the institutions, the security issues involved and probably, a reluctance to change. Revolutionizing the dynamics of these massive industries would not be easy or cheap.
For the mortgage side of the finance industry, the shift has been started but it’s just the beginning. Most agree, however, that the time has come when traditional means of transferring records is becoming untenable for the consumer. Most can’t see the logic of having to dig up and fax or make copies of their tax returns, W2s, bank statements, etc. It is tedious and time consuming to those who have grown used to online bill paying and digital check deposits.
Lending needs to change: Fortunately, the industry’s resurgence after the Great Recession has helped set the stage for this. With new, tighter regulations, only the innovative can survive. Lenders need to align their processes with consumer expectations of speed and efficiency along with the regulatory agency’s demand for transparency and compliance.
Successful organizations are those that look to regulatory compliance as an opportunity, not a burden
Risk concern was not unwarranted
As we have seen all too clearly, with the security breaches experienced by multinational companies such as Target, Uber and Equifax, digital records are vulnerable to attack. Not that the old processes were immune to compromise either. But the consumer has spoken and there is no going back. Financial companies need to be digitized as quickly as possible.
Now that the necessity has been accepted by the lending industry, the hard work of developing the technology is underway and the companies leading the charge, especially those investing in building out their own proprietary systems, should see significant consumer response. Those are the companies that will be ready to meet the consumers where they live and make the entire loan process fast, certain and convenient, from application to funding.
Building compliance into the digital DNA
It’s not just about creating a platform that can accept digital records transfers. However there are many layers that must be factored in when developing technology for mortgage companies. One of the central issues is the element of regulatory compliance. Currently, most mortgage companies rely on off-the-shelf loan-origination systems to take and fulfill mortgage applications. These one-size-fits-all programs are great at achieving minimum compliance requirements, but should we really settle for “minimum compliance”?
To make regulatory compliance requirements most effective, it needs to be easy and seamless and built into the foundation of the technology itself. As Steve Jobs once said, “simple can be harder than complex.” It should be the goal of every lender to make regulatory compliance simple, unobtrusive and as clear as possible for the consumer.
Having your company’s compliance experts involved in the creation of the technology can have distinct advantages such as building the requirements into the architecture of the system. Additionally, they can provide the wording for each page of a digital loan-origination form and make it as transparent as possible. It is widely accepted that if an online form is not easy to fill out, the consumer will not continue with it.
Clear, concise, compliant
Successful organizations are those that look to regulatory compliance as an opportunity, not a burden. Regulatory changes provide an opportunity for mortgage companies to re-examine their entire origination processes. As companies implement new regulations they need to ask themselves these basic questions:
• Do I still need to do it this way?
• What if I eliminate this particular practice?
• How can I streamline or automate this?
Each answer will help lenders clarify their systems further and for those running their own system, the results can evolve as the technology evolves.
Those organizations that approach technology, risk, and regulatory compliance with a commitment to clarity, efficiency and ease of use will find gains in all facets of their business each time they implement a new procedural change or version of technology.