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ClosingMortgageOpinion

Lenders can use closing technology as a bargaining chip

Improving time to close is a differentiator

“By failing to prepare, you are preparing to fail.” While John Wooden was not the first to utter these sentiments, it became one of his more well-known mantras and undoubtedly the soundtrack to more than one of his 10 national championships. For Wooden and his teams, the preparations were made during the off-season, in practice, in the weight room, etc. to excel during the games and season.

The mortgage industry is still seeing record-breaking numbers, but those numbers have started to wane and lenders looking to succeed in a slow market need to begin preparations today.

Recent trends indicate that the mortgage market is beginning to see the end of the refinance boom and enter a purchase heavy market. This is not news, nor is the fact that even as refinance numbers and mortgage applications have decreased recently, there have still been record-breaking volumes.

That’s because shifts in trends don’t result in an overnight change in market maneuvers. Luckily, this provides lenders the privilege of knowing where the mortgage market is heading with enough time to prepare for when it gets there.

While economists are looking at things like recent increases in the Consumer Price Index and what that’s likely to do to mortgage interest rates in the short term, as well as the ripple effects that will impact margin management, expenses and profitability in the long term, lenders should be looking at how the resulting margin management will impact their operations.

As tighter margins take hold, lenders will be forced to shave costs elsewhere and invest in a tech stack that will improve efficiency, automate manual tasks and manage the peaks and valleys of volumes. By preparing their tech stack today, lenders will be set up for success in the future.

While new technologies have a reputation for breaking the bank, the average lender only budgets less than 10% of their overall operations costs for technology. Without loan officer adoption, that spend becomes frivolous, making a lender’s decisions on which technologies to include in the tech stack extremely important.

By focusing on technologies that enhance the borrower experience and save loan officers time without losing the personal connection with the borrower, lenders build their tech stack and enhance customer service at the same time.

There is ample data to support the claims that borrowers want some sort of a digital mortgage experience but do not want the customer service aspect to suffer. Additionally, borrowers have stated that the two most appreciated aspects of an online application process were “a simpler application process (55%) and reduced time to close (53%).” With 91% of lenders offering an online application, the best way for lenders to differentiate their digital mortgage experience is to offer easier closings, faster turn times and better customer service.

In a purchase-heavy market, the closing can be a bargaining chip for the borrower and with a shortage of inventory, the ability to offer a 15- or 20-day closing could be what wins your client the contract. Creating a tech stack geared towards increasing closing efficiency isn’t just about offering eClosings. Increasing closing efficiency means implementing the right blend of technology to increase a lender’s entire mortgage operations efficiency, from application to post-closing.

Additionally, implementing the right digital processes can not only increase efficiencies through a reduction in turn times but can also result in cost efficiencies through a reduction in operation costs and savings in interest by delivering loans to market faster.

“Before anything else, preparation is the key to success.” Alexander Graham Bell’s words still ring true as lenders who invest in a tech stack today and spend the necessary time in implementing the technologies geared toward increasing closing efficiency will be primed for success in the impending mortgage market of the future. Without planning now, lenders will feel the inevitable strain of margin compression and increased expenses.

Matthew Mackey is National Sales and Marketing Director at IDS.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Matthew Mackey at matthew@idsdoc.com.

To contact the editor responsible for this story:
Sarah Wheeler at swheeler@housingwire.com

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