As the industry continuously digests the changes that will occur on Aug. 1, many are still treating this fundamental shift in the industry like other previous challenges. It’s time to approach the regulation, market pressures and operational inefficiencies from a different angle.
Those who ignore history are doomed to repeat it. In that spirit, we must step back as an industry for a quick review of what’s happened and what’s going to happen.
We’ve seen the costs to originate loans drain profit margins, especially during the initial compliance with QM/ATR. The government is tracking down those who haven’t been compliant, and has set records with the fines issued to them. We’re only months away from two new forms that will radically change processes and liability in this industry.
Any day now, a new generation of homebuyers will start knocking on digital doors of opportunity that will expose every limitation of current business operations. And with all of the technology advances of our time, all we end up with is just a more complicated, expensive version of the “way things have always been done”.
How did we get here as an industry? In large part, it’s the due to the following factors:
- In the majority of mortgages, each stakeholder during the entire closing process stays in their own world, and doesn’t know how to make the digital leap to collaborating and communicating effectively.
- Businesses get trapped in a seemingly endless cycle of tackling issues the same way over and over again, and never get back on the linear path to evolving.
- Solutions along the way have mirrored the same existing processes, and missed the bigger opportunities to innovate and help the industry evolve.
- Regulations in certain states still require wet-signing of some documents, and have caused a misfire in adoption of technology that could still help, while causing the industry to keep drowning itself in paper.
As a result, the industry as a whole looks at everything with the same pre-determined viewpoint, especially technology.
But here’s the good news, this is exactly what happens right before the explosive quantum-leap of an industry. We’re right on the cusp of that today, and it can be an exciting time, not a fear-stricken re-entry into the same unproductive cycle.
That said, here are three ways we can break this cycle as an industry, and get on the path to innovating and evolving:
1. Create a baseline digital workflow for all stakeholders.
This is the No.1 area where the real estate transaction is broken. Steps can be automated among and between stakeholders, and even published in a secure portal where everyone can see a status for the entire process. Digital workflows also put automatic quality controls in place – they can be configured so tasks can’t be checked off the list until they are actually completed.
2. Collaborate better.
Today, the majority of updates are either reactive (meaning someone has asked where something is), or need-to-know (provided to only one the next stakeholder who needs to know that it’s their turn to do something). In the end, the consumer still has no idea what’s going on during the entire process, and the reactive updates typically interrupt production and hinder efficiency. When collaboration is planned with the help of automation, it becomes much more predictable and reliable.
3. Provide an environment where consumers can get education and transparency into the process.
As we all know very well by now, this is the hot-button for the CFPB. But if you’re doing #1 and #2 right, then all you really need to do is give the consumer visibility into the process. Then it’s simply a matter of displaying documents in a secure, online environment with educational materials to foster the consumers’ understanding.
When the industry gets to a point of addressing these issues, not only will the cycle be broken, but the long-awaited benefits of technology will also be realized. There are the obvious ones, such as reducing operating expenses and increasing capacity, but there are far more to be realized with these intentionally-focused solutions.
There is also a dramatic enhancement on the customer experience, both with the consumer and other business stakeholders. Perhaps the biggest would be the new level of accuracy that the industry would be able to achieve, and the speed in which it can be achieved. Imagine being able to reduce buybacks to as close to zero as possible because accurate data is available to the secondary market in real-time.
On the surface, these concepts seem simple, and the benefits all too good to be true. Honestly, if one organization was to tackle all of this alone, it would drive them to the point of breaking. But it is being done. It takes collaboration and a new way of thinking, but it is being done. One of the biggest myths about many tech solutions in this industry is that you’ll need to pay for expensive integrations or join overtly large networks to achieve this. But they simply aren’t necessary. After all, the largest “integration” in this industry are document couriers.
In the end, it’s simply about getting started somewhere. So, what’s holding you back from taking that step?
