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Reevaluating your origination tools? Here’s where to start

With the recent downturn in volume of new originations, many lenders are using this time to take inventory of the available tools geared toward risk mitigation and workflow optimization. There is also a renewed interest in the future state of residential mortgage originations. This has led many lenders to feel overwhelmed by options and lack understanding of how, when and where to best implement new technology. 

Looking Inward 

Many leading lenders are first taking time to review their origination processes and then creating clear digital transformation goals. Many of these goals lead to adding technologies that can both speed up cycle times and drive down costs. Though some solutions are being built in-house, oftentimes the key to implementing time savings relies on finding or expanding partnerships. 

While the lending industry has traditionally seen a measured and conservative approach to technological evolution, we are finding that many “strategic” decisions are made during these relative lulls in production. Choosing the right direction at the right time can accentuate the differences between merely competing for survival and growing at a time when others are not. 

The pace of change highlights the need for reliable partnerships geared towards adaptation and evolution. We have operated in a space that has seen the lending environment undergo massive pressure to meet consumers where they are on their respective financial journeys. 

Some lenders are contemplating changes to their origination channels such as the re-emergence of equity lending via HELOC and Second Loan products, according to this recent HousingWire article. These equity products are becoming popular again and seek to leverage the $20 trillion of untapped equity estimated by the Federal Reserve, which by all accounts remains quite high. 

We have also seen large multi-channel lenders reducing their risk footprint in wholesale and correspondent lending. Predictably, this changes the risk profile of the overall book of business. Reliance on similarly positioned partners or suppliers that can mirror these nimble strategic decisions in real-time and still provide high-quality outcomes has become paramount. In fact, this very nuanced “competitive agility” can become a differentiator for many organizations. 

Looking Outward 

What about the factors outside of the origination workshop? Borrower preferences are continually evolving. They desire speed, digital interaction and frictionless borrowing experiences while still prioritizing their security and privacy. This does not even include the exacting requirements of regulators and investors.  

Choosing the right tools to streamline the transaction from point of sale through loan closing can create a positive experience for the consumer. The use of emerging technologies such as Artificial Intelligence and Robotic Process Automation can provide that seamless speed to market.  

It stands to reason that with the abundance of pre-existing data around each consumer persona, many traditional risk mitigation steps can be fast-tracked simply by knowing the consumer better at the time of application. Initiating the validation and verification earlier in the process creates less burden for everyone which becomes a critical component in the ever-evolving mortgage landscape. 

If we look further towards property valuation, many concerns were exacerbated by the pandemic and a dwindling number of qualified valuation professionals. Some studies suggest the number of active appraisers is steadily declining by an average of 2.6% per year. Leveraging technology to advance the appraisal process by delivering a quality assessment of value through automation, desktop, drive-by and even virtual technologies can enhance speed to market without sacrificing accuracy or infringing upon consumers’ security and privacy. As investor guidelines evolve, so too must the providers of valuation services and the lenders that use them.  

There are additional concerns around addressing the risk presented with natural disasters. Lenders strive to limit risk exposure while meeting compliance guidelines. This is another opportunity to leverage partners who can assess risk in real time, provide damage assessments and make accurate valuation and servicing for our consumers at a time when they need it the most. These are often solutions that can be very difficult or impossible to stand up using in-house technology alone. Lenders need to start evaluating what solutions exist already, determine what would fit their needs best, and be able to conform to fit future needs. 

Looking Forward

We would be remiss here if we did not mention the specter of evolving fraud risks, particularly those attack vectors emanating from outside of the transaction and participants. While fraud for housing has resurfaced to a certain extent with the typical misrepresentations of occupancy, assets and income, we are seeing a massive increase in cyber threats with synthetic identity, business email compromise, account takeover and wire fraud at closing.  

What we see today are coordinated attack vectors that originate from outside of the transaction and indeed many times outside of the country. Wire fraud at closing, which takes advantage of lax security controls to redirect wire payments prior to loan closing, is at unprecedented levels, according to the FBI 2021 IC3 report, Business Email Compromise and Email Account Takeover has resulted in nearly $2.4 billion dollars in annual losses. Compromise of email accounts and wire transfers has become the fastest growing fraud threat within mortgage lending today.

Given all of the internal and external threats, risks and pitfalls of mortgage origination today, what lenders need more than ever is to be able to rely on partnerships that can bridge the current state requirements of lending; enhance speed to market and ensure quality and soundness while providing security and innovation through a multi-tool “everywhere at once” presence. Competitive agility in the future state of lending relies upon being nimble as risk and market pressure evolve. If a trusted partner can help share the load, this drives down the technology burden without the onerous runway of long-term development.  

Helping lenders look inward, outward and forward is in the very foundation of the DataVerify DNA.  We evolve with our partners providing solutions our clients expect while keeping our eye firmly fixed on possible future needs they may demand. This could mean supplying risk mitigation through MERS, NMLS and Watchlist screening. But it could also be enhancing our client’s innovation with Artificial Intelligence, Robotic Process Automation and Wire Fraud protection. Lenders can depend on us to be agile and resilient regardless of their risk appetite and wherever their strategic direction leads them. 

Now more than ever, lenders need to be asking their providers tough questions to ensure they are being provided solutions that fit their needs and are not given one-size-fits-all tools. Leading and lasting lenders are doing the work of digital transformation with clear, set goals. Some goals are being met with in-house solutions, but many rely on experts in each field to provide them with cost-effective, long-lasting, and strategic solutions. 

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