Mortgage Lending in Today's Times
Mortgage lending has been transformed by consumer expectations. Consumers today rely on one-click shopping with 2-hour free delivery, online ordering with rapid delivery of meals, and the ability to stream TV shows on their smart phones. They want quick, simple transactions with immediate results. Consumers expect the same experience when they apply for a mortgage loan. They want the entire mortgage process completed online, at the touch of their fingertips, any time of day, beginning with a streamlined, efficient, simple mortgage application. To meet today’s consumer demands, lenders must offer digital access throughout the entire mortgage application and closing process.
According to one survey, 54 percent of home buyers completed their mortgage application online. More than 70 percent submitted at least some supporting documents to the lender via email, an app or a website. Homebuyers who used online tools to submit their documents said it saved time (92 percent), helped them stay organized (83 percent), and cut down on paperwork (68 percent).
According to a Zillow survey, buyers model their financing options with the help of online mortgage calculators (62 percent) as well as comparison shop for lower interest rates online (67 percent). Fifty-four percent of those who seek pre-approval do so online, and 51 percent of home buyers apply for their mortgage using an online application. Millennials are the most likely generation to use an online mortgage application (56 percent).
Consumer Complaints about the Closing Process
The Consumer Financial Protection Bureau (CFPB) surveyed consumers about their pain points in the mortgage closing process. The CFPB identified four major problems:
Not enough time to review closing documents. When people don’t get the closing documents until the day of their closing, they feel pressure to sign the documents quickly, without taking time to ask questions and fully understand the terms of the loan.
Overwhelming stack of paperwork. Many consumers reported feeling overwhelmed by the hundreds of pages in the closing packet. Without reading every word (War and Peace, anyone?), borrowers fear that they may have unknowingly signed a hidden document that will jeopardize their financial future such as hefty fees or penalties.
Incomprehensible documents. Many consumers find it difficult to understand the legalese and don’t receive much, if any, interpretation help during the closing. According to a 2017 report by the National Association of Realtors, millennials struggle with paperwork and understanding the process.
Document errors. Even minor mistakes—a misspelled name or address—can delay the closing process while closing agents re-process their closing documents.
Benefits of Online Mortgage Applications
Simpler, faster process. To address these problems and help borrowers avoid unpleasant surprises at closing, the CFPB launched the Know Before You Owe initiative. As part of this initiative, the CFPB conducted an e-closings (electronic documents) pilot study. More than 3,000 consumers working with seven lenders participated in the 4-month study. Borrowers who closed their loans using an electronic platform understood the terms of their loan better than those who used only paper documents. According to the CFPB, using electronic documents allows for faster document delivery. E-closings also make it simpler to provide borrowers with educational tools to help them navigate the closing process. Furthermore, most e-closing borrowers said they felt they had more control over the mortgage process, mainly because they had more time to review documents, ask questions and flag concerns.
Transparency. The Fair Credit Reporting Act, evolving Home Mortgage Disclosure Act (HMDA) requirements and borrower education efforts have created unprecedented transparency in the mortgage process. Borrowers are now informed, active participants during critical junctures and decision points throughout the process. Best-in-class LOS platforms allow borrowers to access their loan status and complete tasks through integrated portals to trusted third parties. These portals expedite the process and put the borrower in control.
How FICS® Can Help
By using FICS’ LPOnline® web application, borrowers can complete the mortgage process quickly, easily, and transparently. Borrowers can apply for a mortgage, check its status, upload additional required information and review their initial and closing documents all through the LPOnline® portal.
FICS’ customers order their documents from their preferred document provider, who warrants accuracy and compliance of their documents, using Loan Producer’s Document Services Interface. And, if the selected document provider offers e-sign capability, the documents can be electronically signed. This is the ease and efficiency of the Loan Producer® suite of products.