The quick rise in loan originations over the preceding two years increased profitability for lenders.  However, below the shiny veneer of record-breaking activity, rising cost per loan has been steadily increasing due to a largely inefficient process.

Lenders are currently confronted with a significant market change that has moved the market toward more purchase loans and away from refinance loans. Meanwhile, the overall record-breaking volume pace of the past two years has slowed significantly. In this competitive market, an excellent client experience is essential to attracting and acquiring new customers; yet, many inefficiencies that have gone unresolved for the past two years are creating a less-than-ideal borrower experience.

So why do these inefficiencies exist at a time when mortgage technology solutions—designed to reduce inefficiencies—are more prevalent than ever? In a time where mortgage lenders are looking to cut costs and make better financial decisions to maximize profitability, it’s helpful to look at the past to understand how different phases of mortgage technology advancement have brought lenders to their current reality as well as how they can continue to invest in technology that will improve the bottom line.  

A look back: 3 phases of lender technology investment

Many developments and challenges have shaped the real estate sector over the last 20 years.

The housing market crash in 2008 prompted the implementation of new regulatory mechanisms to protect homebuyers, kicking off a “regulatory” phase with the TRID (TILA-RESPA Integrated Disclosure). Lenders turned to technology to help them comply with new federal requirements and coordinate with settlement partners on closing disclosures. 

Soon after, Quicken Loans (now Rocket Mortgage) launched the first-ever fully digital mortgage application experience. This sparked the “digital application” phase, in which competitors quickly followed suit to keep themselves competitive. This phase ultimately led to the proliferation of digital mortgage applications which are now nearly ubiquitous. According to Ellie Mae, borrowers can now apply for loans online with 91 percent of lenders.

The third phase, known as the “eClosing” phase, took flight due to the pandemic. In response to client demand for remote closing options, lenders accelerated their investment in technology solutions for hybrid and even completely digital eClosings (known as remote online notarization or RON for short). 

Each phase required investment in technology solutions addressing pain points to propel the industry into digitalization for a more efficient experience. However, the technology has failed to work synergistically. Instead, lenders implemented many fragmented systems, many of which paved the path for additional inefficiencies.

The next phase for lenders: connected infrastructure

In today’s competitive purchase market, with lenders focusing on the importance of the borrower experience to attract new business, a new phase has emerged—the “connected infrastructure” phase.

Lenders must invest in technologies that will allow them to collaborate more effectively with their partners, particularly settlement partners as a way to optimize the closing process for an ultimately better borrower experience. By automating numerous manual operations, lenders can successfully ebb and flow with market changes while maintaining a consistent headcount. In other words, with more efficient operations, lenders no longer need to over-hire during periods of overwhelming volume and then eventually let people go when the market shifts.

It’s necessary to understand the impact inefficiencies have on a loan officer’s day-to-day tasks and why these inefficiencies make it difficult to maintain the same productivity through market shifts. In understanding daily tasks and time spent on such tasks, the importance of connected infrastructure showcases how and where automation improves upon closing experience through efficiency.

Impacts of inefficiencies on a loan officer’s day-to-day tasks

Managing the details of a transaction takes up a lot of a loan officer’s time. They log in and out of various technology solutions and frequently make dozens of phone calls and emails to locate information.

Qualia recently engaged STRATMOR Group to survey mortgage lenders. The survey found that a quarter of lenders exchange more than 30 emails or phone calls with a settlement company for a single loan. 

The problem isn’t that there aren’t ways for lenders to collaborate with third parties such as settlement companies. In fact, many lenders have access to portals and other systems to collaborate with settlement agents, but they ultimately fall back on email to communicate. 

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According to the Qualia and STRATMOR Group report, loan officers rely extensively on email to coordinate with settlement partners. This indicates that many of the collaboration tools aren’t connected through a common system—this lack of connectivity creates issues on both sides. The lender’s technology solutions require the settlement company to jump outside its core operating system to exchange information. Meanwhile, the technology solution used by the settlement provider poses the same problem to lenders.

The Qualia and STRATMOR Group survey also found that a quarter of lenders work with 100 or more different settlement companies. Taken at this scale, the issue of disconnected systems is enormous. 

Where does this lead us?

Connected infrastructure creates a path for automation

Nearly a quarter of respondents in the Qualia and STRATMOR Group survey said that more than 75% of their time is spent communicating with title companies. This tells us that a large percentage of efficiency-driving opportunities cannot be solved in a vacuum. Solutions must consider the settlement side of the equation.

Close coordination, crucial to a successful closing, will be enabled by a connected system native to both sides—one that integrates with the lender’s LOS and is the title company’s primary operating system. An efficient process with automated touchpoints can reduce the prevalence of late closings which ultimately impact the borrower experience. Here’s how Qualia Connect betters the borrower experience through automation:

  1. Reduces time-consuming manual activities and back-and-forth communication. This frees loan officers to concentrate on high-value tasks requiring their costly expertise, resulting in increased production. It also makes it easier for lenders to keep track of post-closing paperwork without hunting for them.
  2. Creates a more secure way to transmit sensitive documents and information. With the surge in cyber-attacks, a secure integration that connects directly into a lender’s loan origination system (LOS) reduces dependency on email, lowering the risk of phishing and fraud.
  3. Keeps relevant individuals abreast of all critical updates and information instantly. Errors are resolved quicker, and lenders can keep borrowers informed throughout the process to improve the closing experience. Additionally, automation assists lenders in avoiding the post-closing repercussions of late paperwork by recognizing issues as soon as possible.
  4. Provides lenders with insights and visibility into the settlement workflow. Insights on settlement agency performance show how effective the partnership is, and which settlement agencies are easier to work with than others. At the same time, visibility into closing progress improves the borrower experience and the overall closing experience.

Qualia’s unique offering to mortgage lenders directly connects to the system of record most widely adopted by title companies in the U.S.—Qualia Core. Our suite of products is designed to enable lenders and other participants in the transaction, including other technology point solutions, to finally be able to plug into the settlement ecosystem. 

To learn more about Qualia Connect, click below to schedule a demo.

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