For mortgage lenders, there are three overarching goals that should be driving your current business decisions:
1) Increase revenue
2) Decrease costs
3) Align your organization with the mission, vision and values of the CFPB
If the eClosing pilot proved anything, it was that a digital closing platform is a critical tool for lenders to achieve these three goals. Participating in a unified real estate closing process not only transforms the consumer’s experience, but it also enables all stakeholders to communicate effectively and ensure a seamless, efficient transaction from start to finish. Here’s how:
Increase revenue
With the CFPB’s stance against Marketing Service Agreements (MSAs), lenders are going to need to develop better strategies for encouraging real estate agent referrals. With a digital closing platform, the entire process provides a better experience for everyone, especially consumers. Consumers can be educated easier, consolidate their communication channels with everyone and get questions out of the way prior to arriving at the closing table. As a result, closings can be completed in 15 minutes or less, and with docs immediately available after closing, it provides the opportunity for same-day funding. Thus, those lenders that can deliver faster closings are going to quickly earn the loyalty (and referrals) of real estate agents in their area.
Speaking of loyalty, digital closings also provide lenders with an opportunity to court the highly coveted millennial demographic. This tech-savvy generation is going to appreciate a forward-thinking lender that has utilized technology to create a transparent, efficient process that provides them with total access to the entire transaction. Brand loyalty is extremely high within this demographic, and a millennial customer earned now could easily become customers for life.
Once you’ve garnered that consumer’s attention, a digital closing platform can enable you to extend the life of that relationship by keeping you connected to the consumer, increasing the likelihood of repeat business. In addition, consumers are going to be accessing the platform at a point where their propensity to buy mortgage services is high, thus providing the opportunity to up-sell while you already have their interest. That relationship is further strengthened by providing a memorable, world-class experience.
In addition to supporting these “front-end” revenue generators, a digital closing platform also enables lenders to sell their loans faster to the secondary market. Speed and accuracy are the two factors that drive success with investors. This type of platform creates an electronic record of all actions taken regarding the loan and reduces errors through improved communication, which increases investors’ confidence in your product, and confident investors are paying investors.
Decrease costs
Errors make up one of the largest costs to originate for lenders, and most often, errors occur due to lack of communication and/or coordination between all stakeholders in the transaction. Proactive education and direct connections to loan officers through this type of platform can reduce the number of phone calls and emails between parties, ensuing that information doesn’t get “lost in translation.”
Bringing all parties together in one collaborative environment eliminates those challenges and improve overall loan quality by reducing errors that can lead to costly post-closing follow-ups and buy-backs. Ultimately, a digital closing platform has the potential save lenders up to $1,500 per loan in compliance, reconciliation and transaction completion costs.
Furthermore, a digital closing platform also speeds up the time to fund and reduces overhead for closings. In the current process, lenders incur significant labor, materials and courier charges, not all of which can be passed on to the consumer. By making the overall process cheaper to execute, lenders can, in fact, do more for less – a fact that will not be lost on the CFPB.
Align with CFPB’s mission, vision and values
This one is obvious. The CFPB sponsored the eClosing pilot. Clearly, they view digital closings as a clear component of their mission to improve the consumer’s borrowing experience, especially after Richard Corday stated such during his session at the MBA Annual a few weeks ago. Even if there wasn’t a compelling reason outlined above, this alone should be reason enough to adopt a digital closing platform.
The CFPB wants to see lenders making a “good faith effort” to serve the consumer’s best interests. This means going beyond what is required by the letter of the law and embracing the spirit in which it was written. TRID and the eClosing pilot were both components of the CFPB’s larger “Know Before You Owe” initiative. While only one of those components is required, it is in lenders’ best interest to behave as if they both were because what’s at the heart of that initiative is providing the borrower with transparency, education and the ability to participate in the process.
When you break it down like this, the value proposition of a digital closing platform becomes abundantly clear. Increase your revenue, reduce your costs, and keep the CFPB happy – it doesn’t get much simpler than that.
