Saturday, April 3, 2010

Mortgage Originations = Children's Game of Telephone...Technology is Key to Winning

I remember playing the game of telephone as a child. We’ve all played it. One person starts a story or makes a comment. They then whisper the story to another friend, who whispers it to another, and so on. After relaying the message through multiple people, the final person in the game reveals the message they were given. Without fail, every game had the same result. The original message had been changed after it passed from person to person.

I realized that originating a mortgage is very much like a game of telephone. The game begins with the initial contact with a client and ends with the sale of the loan to secondary market investors or a securitization. A mortgage banker's process flow and technology systems sets the game for how many players or filters are involved. Information is often passed along from system to system. A phone call leads to pulling credit and starting a loan application. Then comes disclosures, an appraisal, title orders, DU, pricing engines, quality control, processing, underwriting, closing, funding, post closing etc.

I've worked for mortgage bankers in various roles and departments. Too often the story, or loan application changes as it moves along in the process. There are so many people working on every particular file and updates to the file are constant. This is where technology can either a friend or an enemy.

Mortgage banks which run multiple technology systems which are not interconnected or in sync are asking for trouble, or looking to lose their game of telephone. This simply leads to inefficiencies and problems for a lender - both of which result in increased costs.

-A mix-up on a rate lock which frustrates the salesperson
-An unexpected update requiring the loan to be re-underwritten
-A purchase advice coming in less than expected
-A loan kicked from investors due to a guideline overlay
-A buyback or kick because the final DU does not precisely match the final loan documents
-A buyback or kick due to a RESPA or disclosure issue
-A fine or buyback due to new SAFE Act licensing requirements

An integrated, centralized system ensures that as a loan changes, other systems are made aware. Certain systems will not just auto-update but can produce alerts for key players in the process, notifying them which data is updated. The message cannot be changed or lost as the loan moves along in the origination process. Required updates are made quickly and efficiently, limiting any surprises which ultimately lead to additional costs. We call this data integrity.

How many lenders out there realize they're playing a big game of telephone, countless times a day, with money at stake? Technology will either help you win or help you lose, but the first step to winning is to realize you're playing the game.

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