The Shiny Object Problems in Mortgage
Jun 21, 2019
A Wall Street Journal study from 2010 found that the average NFL game, despite taking about three hours to broadcast, contains less than 11 minutes of actual football playing. The other two hours and fifty-some minutes consist of commercials, yes, but also just shots of players huddling and waiting around.
Three hours of your Sunday to find out the result of a contest that takes less than 11 minutes to actually play. It’s a lot, right? And it’s a lot like how getting a mortgage works today.
While the typical borrower has to wait 30 days from initial application to loan close, the actual tasks required in that time – like qualifying a borrower, running a credit check and loan scenarios, providing disclosures, underwriting, and getting borrowers to sign everything – amount to just a few hours’ of actual work.
And it’s the result of two “shiny object” problems that we’re working to fix.
Shiny Object Problem 1: The Point of “Sale”
In recent years, the mortgage tech space has seen a lot of developments on the front end of the mortgage process – the side that borrowers see. Whereas you once had to visit a lender in person and fill out paper documents to apply for a mortgage, today, you can do it digitally, from whichever device you have handy.
But after that initial “digital mortgage” transaction, the 30-day waiting game is more or less unchanged.
I’m not saying it was a mistake to fix the front end. It was absolutely necessary. But it isn’t sufficient for mortgage tech companies to make a smooth front-end process and then leave the back end mostly untouched.
Because what that amounts to is letting customers get their information to Loan Advisors faster than ever, but leaving those originators with the same slow processes and systems they’ve always relied on to run scenarios, structure deals, lock rates, send disclosures, order appraisals, and otherwise work to close the loan.
It amounts, in other words to a point of “sale” that makes it impossible to actually sell anything – that’s not what a digital mortgage should look like.
And that brings me to the second shiny object problem.
Shiny Object Problem 2: Everything Else
Imagine a world where a borrower could fill out a loan application and then immediately, during that first call with their advisor, the originator could get them qualified, run credit, check debt-to-income, put together a few loan scenarios and deliver disclosures for them to sign plus order the appraisal. Imagine a world where all that was possible through integrations with whatever loan origination software (LOS) the lender was using.
In that scenario, the motivated borrower would be in the right mindset to sign paperwork immediately, rather than putting it off a couple of days as they dealt with the everyday inconveniences of living.
The originator, benefitting from data integrations, wouldn’t have to wait around for their colleagues to run this check or send those forms.
Even without scientific research, we understand that this scenario would be much more efficient than what we currently have. But there is research to help explain why the current process is such a drag.
Shifting between tasks, as it turns out, can cost up to 40 percent of someone’s productive time. That means the typical originator’s workday – following up with colleagues and potential customers and a handful of other people, instead of steadily and consistently servicing loans – is wildly inefficient.
Solving the Back End for a Better Experience
There are two encouraging things about this state of affairs.
First, what’s good for borrowers is also good for lenders and the mortgage industry as a whole.
Technology that integrates more data sources into the LOS lets originators work faster while relying on fewer manual tasks. That, in turn, means borrowers can get faster answers about whether they qualify for a loan and what the terms of those loans will be, which means advisors gain commitment faster.
Second, we already have that technology.
Cloudvirga customers get the ability to sell in the way I described above – to achieve a true digital mortgage – via a two-phase implementation with their existing LOS:
- Phase one: Our consumer-facing point-of-sale system lets borrowers seamlessly and digitally input the information necessary for the qualifying and underwriting process to happen. Lenders get pricing, fee integration, and asset integration features to enhance functionality.
- Phase two: Full integration with data sources provides real-time needs list generation and sharing, tools to structure the loan deal and present terms, instant credit pull with DTI calculations, real-time rates, fees, issue and e-sign disclosures, appraisal ordering, and more. All of that lets lenders close loans faster.
The shiny object problems in mortgage are hurting borrowers, originators, and lenders. But as more stakeholders have access to technology like what we’re building at Cloudvirga, more people will find that the borrowing process is a lot less like watching an NFL game live and a lot more like watching a highlights reel.