Lenders and settlement companies collaborate on various activities throughout the loan lifecycle, and many of these exchanges directly impact the lender’s overall efficiency. Yet the collaboration between lenders and settlement companies has been less than optimal. What does it take to improve the working relationship with settlement companies, and why haven’t prior solutions worked?

To better understand how lenders and settlement agents coordinate and communicate during the pre-closing, closing, and post-closure processes, Qualia commissioned STRATMOR Group to conduct an in-depth operations survey. The survey’s primary goal was to uncover how lenders and settlement companies work together to complete mortgage closings and, where possible, inefficiencies exist in lender-settlement company operations. Questions were targeted at understanding:

  1. The relationship between lenders and settlement companies (referred to as title companies in the study) 
  2. Methods of collaboration between lenders and settlement partners and
  3. The effectiveness of the process from order opening to post-closing

At Qualia’s Future of Real Estate Summit, STRATMOR Group Principal Jennifer Fortier joined Qualia’s Director of Finance, Nzau Mutisya, to discuss the key findings from the study. 

Setting the stage: the importance of lender-settlement operations 

Within the survey, STRATMOR Group asked lenders how important coordination with the title company is to the overall borrower experience. 98% of lenders rated coordination as “important” or “very important” to the borrower experience.

When things go wrong during the closing, the survey found that lenders believe their reputation is negatively impacted; however, many of the processes that influence the closing experience are primarily outside their control. 

78% of lenders said late closings are an issue that negatively impacts the customer experience and, in turn, reflects negatively on the lender. Meanwhile, 60% also cited insufficient time to evaluate documents as a concern.

Both issues depend on lenders’ level of visibility into the closing process and what activities are being completed on the settlement side. The survey found that lenders have virtually no visibility into their settlement orders. Only 20% of lenders report that they receive communication and alerts related to the status of the closing from their settlement companies.

As mentioned above, various pain points in the collaboration process between lenders and settlement companies exist. Yet, lenders don’t have control over the settlement process; therefore, the entire mortgage settlement process still hinges on an inefficient process between lenders and settlement companies. 

The STRATMOR survey found that 1 in 4 lenders work with more than 100 title companies every month. This means the possibilities of communication inefficiencies and workflow errors impacting the closing experience are considerable. Lenders can fix inefficiency and gain control over their borrower’s closing experience by standardizing their workflows with any and all settlement companies. Achieving this would allow lenders to stay in sync with all their settlement partners and unlock unprecedented real-time visibility into the settlement workflow.

Email is a communication “crutch” for lenders and settlement companies

Lenders were asked throughout the survey about the various systems used to coordinate with title companies. This included systems to obtain fee estimates; place title orders; exchange pre-closing, closing, and post-closing docs; and process CD and final fees. Each task had one thing in common: email was the primary collaboration mode.

At the summit, Fortier explained that the reliance on email is likely due to limitations in the collaboration tools lenders have available. “It’s somewhat the constraints of the software that’s available to the lenders, and it’s somewhat that lenders maybe haven’t gotten around to [using these systems] because email is awfully easy,” she said. 

Fortier noted the enactment of TRID as one example of why lenders often rely on email to collaborate with settlement companies. In the early days of TRID, software emerged to help lenders and title companies work together to create loan estimates and closing disclosures. However, when lenders would send documents through these systems, settlement agents would often fall back on email to return the documents because they didn’t have time to learn the new system (especially when working with dozens of different lenders who each used their own unique collaboration system). The lack of adoption led lenders to rely once more on emails, and the inefficient process remained.

Although the first generation of collaboration tools failed to reach adoption, lenders still crave technology that can improve the mortgage settlement process. For example, Fortier highlighted one survey response that illustrated the desire for better collaborative technology among lenders. The respondent noted that “the LOS integration to title companies varies by company which can be confusing to the closers. It is easier to use a custom order form and email or fax it. Enhancements in communication tools between lender and title company would be welcomed.”

The desire for more collaborative technology is also apparent from the STRATMOR data. Most respondents indicated that they “highly valued tools that replaced manual tasks with automation. “Lenders like tools that help them get through the [closing] process,” Fortier said. “They really like automated tools.”

Fortier noted that as the industry redefines what constitutes a competitive market, automation will be increasingly beneficial in the current purchase market. And when it comes to the critical role technology will play between lenders and settlement partners, Fortier stated, “The important part of technology is how to artificially create the efficient relationship between lenders and title companies.” By ridding collaboration between lenders and settlement agents of its inefficiencies through automation, both parties will enhance their relationship with one another and, more importantly, optimize their workflows. In turn, automation will create a better closing process experience and improve the borrower experience for homebuyers, benefiting profitability.

How to achieve efficiency through automation

Technology must be integrated between the lender’s LOS and the settlement company’s title production software to establish an automated process with high visibility. This ensures that both lenders and settlement companies easily adopt the technology and that the system encompasses the entirety of the lender-settlement workflow (not just one piece of it).

Through automation within each party’s system of record, lenders will gain visibility into settlement operations and gain oversight into their files once they’re in the hands of settlement partners. A collaborative system that automates exchanges between lenders and settlement companies will reduce the need for emails and phone calls altogether.  

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. 

Qualia Connect allows the lender to remain in their LOS while the title company remains in their core system of record for true adoption and efficiency on both sides. 

To read more from the report and learn the importance of effective lender-title coordination to meet borrower expectations and win new business, click below to download your copy.