Digital lending is the north star that the entire industry is pursuing now. There are many reasons that all of the industry’s stakeholders want to go fully electronic, but the biggest reason may be that it will improve the borrower experience. In a purchase money environment, like the one we’re in now, nothing is more important.
When you consider the borrower touchpoints in the mortgage origination process, the vast majority fall to the lender and the title company. Any inefficiencies or friction-related problems between these partners will almost certainly impact the borrower. That will reduce borrower satisfaction, at a minimum. It will also likely slow down the process, costing everyone more.
When it comes to digital mortgage challenges, this working relationship between the lender and the title agency is the big challenge that is standing between the industry and the goal of digital mortgage adoption.
Efficiency is the Key
We tend to think of efficiency as a key driver of profitability, and that’s true. But greater efficiency is also the key to overcoming the biggest hurdles standing in the way of digital mortgage adoption. There are at least three good reasons for this.
Reason 1: It Makes Volatility Manageable
When you have a market that changes course as rapidly as the U.S. mortgage market, you need to be very efficient to keep pace. And this market is volatile.
Coming down from two years of massive loan volume (over $4 trillion!) to the $2.5 trillion or so we expect to see this year would be bad enough, but with interest rates moving up and down so rapidly, lenders and their title agency partners are struggling to keep up with the changes.
A more efficient process makes this easier to deal with because whether loan volumes are high or not, the title agency can work efficiently with whatever digital mortgage platform the lender is using.
Reason 2: It Frees up Time to Deal with a New Type of Homebuyer
When the title agency is more efficient, it frees up time to deploy personnel to do a better job of customer service. This is important because the agency’s lender partners are busy trying to do the same thing and title agency efficiency benefits them as well.
The digitally connected millennials and Gen Z borrowers who now dominate the marketplace expect a new level of technological expertise from those who serve them. They want hyper-personalization and faster closings and they have little patience for errors. This is forcing companies to update their software and configure it with borrower satisfaction in mind.
There is no digital mortgage solution that can be effective if it doesn’t free up time to meet the needs of these new home buyers.
Reason 3: It Frees the Agency from the Fetters of Underwriters
One of the reasons that so many title companies are using software that basically puts their agency in the control of the industry’s large underwriters is because they couldn’t be efficient without their software.
That’s no longer the case. While these firms consistently bring a lot of value to the market, the title company should be in control when it comes to their software.
When title companies have an efficient system in place that allows them to streamline their entire title production process, they can reduce friction and meet the requirements of both the lender and the borrowers. That delivers a host of benefits that we’ll discuss in our next post.