Disruption In Mortgage Lending

The Mortgage Lending Industry, like many others, realizes the need to embrace technology to do more with data.  Industry organizations are trying new technology solutions to improve transparency and leverage data intelligence across multiple data sources.  One technology gathering buzz is blockchain buzz. What does blockchain do and how could it be applied to mortgage lending?

As described by IBM and others, blockchain is a shared, unchangeable ledger for recording the history of transactions. Blockchain, also known as DLT, Distributed-Ledger-Technology, provides each member in the network with access rights to the confidential information when requested. By keeping a record of trusted information, blockchain can make it easier for an organization to securely access confidential information when needed.  

The healthcare industry is exploring the benefits of blockchain for confidential medical records.   Individual healthcare data is known to be inconsistent, especially if a patient moves between providers.  Owners of hospitals and clinics are often less focused on information technology solutions, causing data integrity concerns for patients.  MedRec, is a blockchain solution that securely associates multiple data sources and easily pulls data for health care providers.

Similarly, major challenges in the mortgage industry include a lack of transparency between data sources, increasing costs, and lengthy loan origination timeframes. Lenders could benefit from a system that decentralizes transaction information and how records are stored.  In mortgage banking, lenders need improved access to trusted borrower information such as bank accounts, income data, and related qualifying information.

How might blockchain work in the mortgage industry? All necessary data would come from a trusted source—banks, IRS, or payroll services— and would be initially verified by all the computers in the specific blockchain network according to specific network verification rules, be sealed with a lock, encrypted and would not then need to be re-verified again. The blockchain transparencies could enable industry participants to streamline labor-intensive processes and identify and make easily accessible important data in the mortgage lending process. Now, when a borrower applies for a loan, obtaining and distributing all of the documents needed to approve the mortgage can take days.  And the documents that need to be verified and redelivered continue to increase. As I discussed in the book, Digitally Transforming the Mortgage Banking Industry, a single loan file can be up to 700 pages and the information contained prone to human error, causing a delay in time to close and increases in closing costs. After the lending decision is made, whether the borrower is or is not approved or not, the information must then be reported back to all the entities involved in the transaction.  Often this “back end” work is mostly done manually and requires extra labor.

Blockchain could advance the mortgage process by streamlining the participants required to provide or validate the information in each stage of the loan process. According to Time magazine, the data that’s requested from each entity increases the closing cost for the buyer by 1%-2% of the property value. By incorporating blockchain, lenders could detect fraudulent data early in the process or determine that data that was manipulated, preventing problems downstream in the mortgage process.  To improve customer satisfaction with a streamlined process, mortgage bankers are seeking technology solutions to securely automate labor-intensive components of the loan originating process.

As noted in Digitally Transforming the Mortgage Banking Industry, an individual bank account record (say 24 months of transaction data) can be provided from a bank to a mortgage organization quickly and securely. The same goes for all data coming from a trusted source; payroll data, mortgage payment history, prior credit events, collateral information, credit report data, etc.  With blockchain, an immutable trusted source data regarding a borrower that is immutable could be utilized by authorized parties.  A consumer could grant permission to a lender to access this trusted information. Mortgage bankers could experience an enormous cost savings and customer satisfaction from the profit intelligence solutions.  

Moody’s suggests that the annual U.S. cost-savings as a result of blockchain-based application processes could be as high as $1.7 billion. Incorporating Blockchain could improve loan processing efficiency and reduce the overall time to close. Mortgage lenders could benefit from a powerful solution, as noted in Disruptor Daily. On average, a mortgage loan takes about 40 days to originate and often longer. With blockchain this could be reduced to 30 days or less, saving an estimated $177 million on a $97.7 billion book of loans (Disruptor Daily).

Disruptive Technology Currently Being Used in Lending

Mortgage Bankers are acutely focused on increasing profits, reducing costs and fully utilizing their technology investments to empower their people to perform at the highest level. Most believe a combination of technology and human touch will enable them to enhance profitability while gaining a competitive advantage in today’s lending environment.

Currently use of blockchain in the mortgage industry is more theoretical then real.  However, there are powerful technology solutions available now.  Profit intelligence solutions are a reality that improve transparency and profit margins for today’s lenders.

So how do mortgage bankers get started using profit intelligence in their business?  Mortgage bankers must find the right partner who can help guide them to profit intelligence by first evaluating their current operations and the utilization of their technology stack. The key is being able to easily identify data integrity issues with one click.  Profit intelligence can allow mortgage bankers to reduce costs by identifying subpar performance by product, channel and branch, all with real time data. Then lenders can easily access and identify whether profit, volume, mix, productivity, cash flow, loan servicing metrics are on target.

A good profit intelligence solution should bring lending data to life, enabling Mortgage Bankers to have a better and more comprehensive view of their organizations’ profitability.

The profit intelligence solution should take data from multiple sources and associate the data to speed up loan closing, ultimately improving customer satisfaction and profitability. The solution should also have the ability to easily identify and eliminate performance problems, waste, and revenue leakage is crucial, especially in today’s challenging lending environment.  

The right profit intelligence solution should be designed by mortgage bankers to solve issues for mortgage bankers.  More specifically, it should be made for busy executives who need to easily access data across multiple platforms to quickly make important decisions on profitability, growth and long-term sustainability.

Ideally the information should only be a couple of clicks away. Historically, pulling information from multiple data sources and silos such as LOS, CRM, POS, Servicing System, Core Banking, etc., has been a huge challenge. Those days are gone with the advent of profit intelligence solutions.

Today, a Profit Intelligence solution such as Teraverde’s Coheus enables executives to easily connect the data sources and provide near real time visual reports based on the executive’s key interests.  This data can be accessed from iPad, phone, or desktop, providing a significant advantage when it comes to increasing profits and staying competitive. Lenders must turn to vendors that focus solely on leveraging the lender’s big data to create more business opportunities. 

Teraverde seasoned mortgage banking executives in conjunction with the Coheus profit intelligence platform are making a breakthrough for executives in the mortgage banking industry, the combination of deep mortgage banking expertise with world-class technology has been proven to deliver an increase in profitability and customer satisfaction — truly disrupting how mortgage bankers deliver profitability.

Teraverde’s name for its profit intelligence solution — Coheus — arises from the mythological Greek Titan named Coeus. The Titan Coeus could use information to foresee the future. Many of Teraverde’s customers asked for reporting and analytics that permitted access to the vast array of information in their loan origination system, general ledger, hedging and servicing systems. Clients want to gain profit intelligence from associating data within and among these systems, there wasn’t any solution that met their needs, so a team of Teraverde employees led by Maylin Casanueva went to work, and Coheus was the result of their efforts.

For example, a Mortgage Banker utilized Coheus by comparing historical data and the mortgage executive used a couple of clicks to find there was a major spike in delinquent loans. The mortgage banker immediately took action and saved the organization $4.2 million of delinquency and repurchase costs.

Another Mortgage Banker reduced time to close by 16 days and reduced the number of missed scheduled closings to less than 1% using the Coheus Profit Intelligence platform. They were able to reduce hedge costs by $2 million, increase daily underwriter loans underwritten by 40%. Ultimately this helped the mortgage lender improved customer satisfaction by 10%.

Blockchain might be part of the solution for mortgage lending in the future, but lenders need proven solutions now to address industry challenges. Today, in the mortgage banking industry Coheus Profit Intelligence is being utilized by leading disruptors in the mortgage industry to drive profitability.