14 for '14
An inside look at a special group of companies setting their sights on the coming year
As banks, credit unions and mortgage lenders struggle to handle the challenges of 2014 — Dodd-Frank Act rules, rising rates and a shift in the market toward new purchase loans — they must work to improve loan quality, compliance and efficiency if they intend to stay profitable.
The Dodd-Frank Act is one of the most complex pieces of legislation ever written, with more than 1,000 key provisions of the law that directly affect financial institutions and their regulations. Eleven new rules have been added in the past 12 months, and two more significant changes are expected this year alone.
At the same time, the mortgage industry is seeing significant market changes. With rates rising, originations will decline as refinances slow down. Lenders will have to shift their focus to making purchase loans. This smaller pie will have to be shared. Success will be determined by how quickly and effectively lenders serve the purchase market.
According to the Mortgage Bankers Association, the average cost of processing a loan has risen sharply from $3,500 to $5,500 since 2009 as a direct result of all of these challenges. And the challenges continue.
Loan officer compensation, ability-to-repay and qualified mortgage (ATR/QM) rules along with the Home Ownership and Equity Protection Act (HOEPA), the Equal Credit Opportunity Act (ECOA) and Higher Priced Mortgage Loans (HPML) appraisal requirements all threaten to reduce profitability for lenders. This makes it more important than ever to maintain compliance and drive more efficiencies.
Staying ahead of the curve
As a leader in compliance, Ellie Mae prides itself on being ahead of the curve with compliance readiness. More than 25 in-house employees, including staff lawyers and compliance specialists, are dedicated to supporting customers’ compliance needs, helping them to drive efficiency and reduce the cost of compliance.
Compliance is built into the Encompass platform; automated compliance checks allow users to create an audit trail for regulators. Quality control starts with loan origination and continues throughout processing, underwriting, closing and funding. In 2014, quality will be even more important and has been Ellie Mae’s focus since the launch of its Total Quality Loan solution (TQL) in 2012, which helps drive quality throughout the loan process by automatically ordering necessary services and compliance checks from one consolidated tool.
As a prime example, Ellie Mae is already delivering its comprehensive approach to assessing and documenting ATR/QM compliance. This solution enables lenders to automatically assess ATR/QM eligibility and effectively document compliance to investors and regulators. It provides tools to test for ATR/QM calculations, such as total debt-to-income (DTI) and points and fees calculations, including a bona fide discount point assessment. Underwriters can demonstrate that they have considered, verified and documented a consumer’s employment, income, assets and obligations in order to determine the consumer’s ability to repay. This focus continues with all the Dodd-Frank demands as Ellie Mae prepares for RESPA/TILA reform, HMDA changes and QRM.
As lenders begin to prepare for the shift to a purchase market, many are also looking for ways to effectively expand their current business models. Encompass delivers support for this expansion with configurable workflows that easily adapt to the lender’s loan channel, loan type or other loan criteria, to support business processes and remove redundant steps.
Building upon this flexibility is also new functionality coming soon: The company says it will launch Encompass Consumer Direct, to support self-service borrowers, and Encompass Mobile, for the loan officer on the move.
Ellie Mae has been a very vocal advocate of the advantages of cloud computing and the Software-as-a-Service (SaaS) model. The company pioneered the concept of Success-Based Pricing to help customers match technology expenses to revenue and loan volume, and to provide better ways of consuming technology, handling upgrades, and storing and securing data.
Next year will be challenging. Ellie Mae’s mission is to deliver technology that keeps customers compliant, effective and efficient — all at the same time — while speeding up the process of originating, funding and selling loans.
The company’s goal is to continue to provide the technology, education and enablement customers need to tackle the challenges of 2014, and beyond.
Editor's note: The companies participating in this Special Section sponsor their content. Each company tells a unique story, one they wished to share with HW Magazine readers and the industry at-large.