The Right Way To Automate Settlement Services

FirstClose is a highly respected provider of best-in-class property & borrower data intelligence and settlement services nationwide. FirstClose specializes in delivering a powerful Saas Solution and LOS plugin that is the industry’s first and only home equity and refi tool that offers everything from application to servicing (credit score, valuation, title, tax, flood, closing and recording) on one easy-to-navigate platform. In addition, FirstClose delivers simplified vendor management by consolidating vendors and products on this one platform, FirstClose makes it easy to identify and repair the gaps where lender profits can be maximized. We talked to Tedd Smith, chief executive officer of Austin, Texas-based FirstClose, about the right way to automate settlement services. Here’s what he said:

Q: Describe how you first got into mortgage lending?

TEDD SMITH: As a senior in the business school at the University of Texas at Austin in 1992, my brother Tim started working at a company called Flood Data Services, Inc.  Excited to put my new business degree into practice and intrigued by both the flood certification industry and the notion of starting a business with my family, we discussed the business opportunities of the flood zone determination industry and decided it was a good fit.   Shortly thereafter, we converted the upstairs bedroom of our parent’s home into Suite 203 of Flood Zones, Inc. (which translated to the 2nd floor, 3rd bedroom on the left). At the time, we used one fax machine and the free Federal Emergency Management Agency (FEMA) flood insurance rate maps to provide manual flood zone determinations to lenders.  We marketed our new solutions to banks and credit unions in the Midwest and the orders started to keep the fax machine and our small team extremely busy.  We completed the research for the flood certifications, faxed the orders back to the lenders, and charged the going rate of $25 per order.

When the Flood Disaster Protection Act of 1973 was revised in 1994 to include new lender requirements to include the life of loan monitoring for future flood map revisions, our business soared due to the solutions we had created to satisfy the new requirements. We added automation over time and grew the company to over 200 employees, ultimately selling the business to Trans Union Corporation in 1996.  Four years after we sold the company, we got back in the business with FirstClose, Inc.  

Over time, we expanded the FirstClose, Inc. product lines into a complete digital lending platform that includes front-end point of sale application technology, automated decisioning capability, and automated ordering for all of the products and services needed to underwrite a loan.  In addition to credit, flood, valuation, tax, title, income verification, closing, and recording services, we became a one-stop, end-to-end solution for automating mortgage settlement services from “Hello to Here’s Your Money.”  Specializing in instant data, automated ordering, and efficiency solutions via hundreds of xml integrations into the top service providers, loan origination systems, and data analytics, the value proposition resonated with hundreds of lenders looking to automate the entire lending process.

Q: How has the mortgage industry changed since you first entered the space?

TEDD SMITH: The industry has changed drastically. The internet was in its infancy and access to data was challenging to obtain when I first started in the industry. As time marched on, the proliferation of data and access to more of it became increasingly valuable to our company and the entire industry. Banks and credit unions have typically lagged when it comes to technology acceptance and adoption. Many are not aware of the host of new solutions that are available to them today. Some lenders are amazed to learn that a lot of the work their staff used to do, can be automated, including giving consumers the ability to enter a small amount of information online and allowing systems to subsequently access multiple data sources to fill in the rest of the data required to populate the application. The same systems can automate the entire application and origination process, rendering automated loan decisions, all while populating loan origination systems and automatically ordering the appropriate settlement services based on credit score, loan amount, and other automated underwriting criteria.   

Q: What Impact has COVID-19 had on the industry and specifically on the business’s settlement services?

TEDD SMITH: COVID-19 has forced lenders to consider and use new and existing contact-less products and services like Remote Online Notaries (RON) and curbside closings. They are also using appraisal management companies that use technology to allow consumers to take pictures of the inside of the home and adds geo-stamp and geo-location verification software showing when and where the borrower took the photos. Companies using instant products for home equity loans such as automated valuation models (AVMs), instant property reports, borrower affidavits with E&O insurance, and other instantaneous contact-less solutions most likely fared well during the pandemic. However, rates were at an all-time low, causing a significant refi boom where cash-out refinances and standard rate and term refis were more prevalent than second mortgage and equity loans where automated settlement services are more common.  Since refis most often require full appraisals, full title insurance, and full closings, with wet signature requirements in many areas, lenders and vendors were forced to look for alternative solutions while the GSEs scrambled to authorize short-term exceptions where face to face contact was prohibited by shelter-in-place mandates.

COVID-19 also forced many lenders to shift their attention from conducting business to dealing with government Payment Protection Program (PPP) loans at a record pace. Companies were demanding funds, all while navigating a whole new environment of shelter in place quarantines that no one saw coming or were prepared to face. To add insult to injury, the unemployment rate increased to the highest level since the Great Depression at 14.7%, causing lenders to consider placing further restrictions on lending parameters and approvals, all while trying to navigate their safety during a national pandemic. When you add additional challenges associated with county closures that affected recordings and poor vendor turn-times as appraisal companies and title companies struggled with their shelter in place quarantine mandates, you have the makings of the perfect storm that will likely impact the industry years to come.

During these challenging times, however, lenders rose to the challenge, worked extremely long hours, and will ultimately come out of this crisis stronger than ever. They implemented new and efficient ways to originate and fund loans while better meeting the needs of customers.

Q:  What type of Innovation have you brought to the market as a result of COVID-19? 

TEDD SMITH: FirstClose has brought tremendous innovation to the market as a result of the pandemic.  A complete end-to-end automated solution from “hello” to “here’s your money” was already in the works, but enormous strides were made quickly on the front-end, middle, and end of the closing process during the COVID-19 pandemic. FirstClose One was enhanced on the front-end by allowing borrowers to enter their information essentially into the bank’s underwriting system with no loan officer or processor interaction. The borrower receives an instant decision on how much their home is worth per the lender’s view of the value of the house through the use of lender approved automated valuation models, instant data to determine liens and balances, sophisticated reverse amortization scheduling technology and the lender’s LTV requirements.

In addition to providing an instant result on available equity for cash-out-refinances, home equity loans, and home equity lines of credit, FirstClose ONE was also enhanced to provide the borrower with an instant decision based on the lender’s unique underwriting guidelines within their LOS by tapping their automated underwriting engines and returning the borrower an instant decision, again, without any loan officer or processor interaction.

Automated ordering of subsequent settlement services was also introduced during COVID-19 that enables us to take the lender’s “order-out” matrices, typically posted in the cubicles of the processors, and enable the system to automatically order a full range of products from AVMs, PCRs, and desktop valuations to restricted appraisal reports, 2055 Drive-by Appraisals, and full 1004 appraisals all depending on the loan amount, FICO score, debt to income ratios, and other existing lender underwriting criteria. Similarly, property reports, title searches, Jr. ALTA and Full ALTA title insurance products “order-outs” were automated based on the same underwriting criteria to eliminate the need for duplicate data entry and time for processors to place the orders for the right products with the right scenarios.

Additional automated ordering for instant verification of income, verification of assets, and employment verification was also added to streamline the settlement services fulfillment.

COVID-19 also gave birth to enhanced communications between the borrower and the lender, including the ability to upload documents for lender conditions and create a better user experience for the borrower and the lender through better communication.

In addition to instant equity results, instant decisions, automated ordering for the appropriate settlement services, and better communication, the FirstClose One system captures and populates all of the data collected from the prospective borrowers into the lender’s LOS as leads regardless of how far they went in the origination process. If the borrower continued to an instant decision, FirstClose ONE also populates all of the settlement services data into the LOS upon completion of the orders with pdf copies of the reports and all of the data elements, including full legal descriptions, vesting information, the value of the homes, etc.  On the tail end of the origination chain, FirstClose ONE enhances the closing experience with additional options for RON closings, contact-less curbside closings, electronic signatures, and more.  

Q:  You talk about FirstClose being the ONE source for property data intelligence.  What do you mean by that? 

TEDD SMITH: When FirstClose is defined as “Your ONE source for property data intelligence,” it means more than just providing data to lenders from one access point.  It means enhancing the entire end-to-end process of originating and closing a loan from the borrower and lender’s perspectives with the most streamlined and efficient user experience created to date. This all-encompassing approach to data and intelligence ultimately results in faster closing times, reduced risk, and happier borrowers and lenders.  

From a management perspective, FirstClose ONE includes turn-time reports, vendor quality reports based on revision rates, and other sophisticated reports created and deployed to assist lenders with their vendor management duties and to ensure vendors are meeting or exceeding SLAs and if not, vital information on which vendors should be granted more orders based on positive performance versus which vendors should be reduced or replaced based on poor performance. 

Q: What sets FirstClose apart from other settlement service providers? What is the true FirstClose differentiator? 

TEDD SMITH: It is the combination and bringing together of people, automation, technology, and service that has a positive impact on our customers and their businesses. 

We have a complete end-to-end automated solution that starts at the borrower saying “Hello” and culminates when the lender says “Here’s Your Money” to the borrower. It uses the latest available technology to create the ultimate origination and closing experience for borrowers and lenders. 

Utilizing award-winning web apps and LOS plugin’s, FirstClose can offer the industry’s first and only solution to deliver everything lenders need from application to funding, using automation to streamline almost every aspect of the process. From application, credit score, flood, and valuation solutions, to instant title, income verification, and automated decisioning capabilities, FirstClose leverages industry-leading partners and technology to enable lenders to compete for and close consumer loans, unlike any other solution in the industry.

When used correctly, automating most aspects of the origination and closing processes will allow lenders to tap into the holy grail of lending. Using the critical data elements and reports featuring robust business intelligence, lenders can provide consumers with the funds they need in as little time as possible while meeting all required underwriting guidelines, checks, and balances. 

Q:  What role does technology play on the settlement services side of the mortgage business? 

TEDD SMITH: Technology plays a significant role; without it, lenders would be unable to compete and keep up with their competitors who embrace it and use it to their distinct advantage. Companies that fall behind without using technology will find themselves as outdated as a typewriter. 

Technology drives efficiency for lenders by streamlining mundane and repetitive tasks using FirstClose’s ONE platform featuring Innovation like:

Suitability Logic:  Software that finds the most suitable title and valuation product for each loan scenario using real-time property data and local market conditions.

Smart Select:  Technology that creates an instant title search using electronic data.  If data is unavailable, the software uses intelligence logic to select the best property report provider based on turn-time and price for the lender’s footprint.

Appraisal GEOLOGIC:  Logic that allows lenders to manage their compliance-based appraisal panel, automatically selecting an appraiser based on geographical competency.

Custom Configurations and Reports:  Customized bundled configurations for each lender’s loan scenarios, including multiple configurations per customer with all the services lenders need in one report.  Delivers the Proprietary FirstClose Report with flood, valuation, and title services custom-tailored to each lender’s unique loan fulfillment requirements.

Q: Technology is great, but so is excellent customer service. How does FirstClose bridge this gap to ensure the human side of the business isn’t lost?

TEDD SMITH: FirstClose customer success team members do the chasing of the orders on behalf of the lender so that processors aren’t continually asking “where’s my order,” “how much longer will it take,” or “why hasn’t the appraiser or closing agent made contact with the borrower yet.” iBots and other artificial intelligence technology have also been introduced to mimic behaviors of FirstClose customer success team members to automatically send e-mail notification reminders to vendors approaching SLA timelines to request a status update on the order and more, automatically.  

Also, FirstClose provides:

Dedicated Account Management:  Lenders work with their own FirstClose Customer Success Manager, who will consult, onboard, and train each user on the platform.

Simplified Vendor Management:  Lenders can access our vendor library, a national list of best-in-class providers, for all of their service needs.  Using vendor performance monitoring and other tools, we instantly replace underperforming vendors for our clients.

Automated Live-Order Monitoring:  Lenders get a dedicated support team that monitors all live pending orders and proactively tracks down any orders approaching the due date.  Our team works directly with vendors to manage all corrections.

We have a monthly business meeting with all stakeholders to show the status of how vendors are performing and the health of their business.  They provide us with feedback and we make modifications to ensure continuous improvement.

Q: What’s next for FirstClose as a company? 

TEDD SMITH: The future of successful lending involves leveraging property and borrower data intelligence instantly, applying technology in innovative ways to create solutions that bring together data, best practices, and vendor management processes to meet lenders’ unique business needs.

The end-to-end solution I mentioned previously has been built. We plan to make additional enhancements and integrations to add more vendor options. We also plan to increase automation and loan origination system integrations. The essential thing in the near future for FirstClose as a company is to deploy our services across the entire mortgage lending industry rapidly and to add a significant number of new lenders to create a paradigm shift in favor of extreme automation. Our goal is to be disruptive to any market that resists technology and automation so we can enhance the user experience and significantly reduce the time in the process.

When lenders must focus on putting the profit back into mortgage lending, increasing production, decreasing turn-times, and maximizing vendor management, demand a partner who can amaze.

INSIDER PROFILE

Tedd Smith is chief executive officer of Austin, Texas-based FirstClose, provider of end-to-end technology solutions to mortgage lenders nationwide. The FirstClose reporting suite is the first, comprehensive solution with capabilities to deliver title, flood, valuation and other important data elements in one report.