PERSON OF THE WEEK: Will a slowdown in the mortgage market result in lenders cutting back on technology investments?

Not necessarily, says Jim Voth, managing director at mortgage advisory firm Falcon Capital Advisors, in a recent interview with MortgageOrb.

Q: Historically, when the mortgage industry goes into a down cycle, investments in technology often get placed “on hold.” Do you think this will be the case this time around? Or will the drive toward digital transformation keep going at the same pace this year?

Voth: That’s certainly the conventional wisdom, but this cycle might be different. For one thing, there is a lot of momentum behind digital lending, and the value proposition is compelling. Digital lending and e-closings, for example, can drive operational efficiency and help offset some of the margin pressure that mortgage companies are facing.

The creation of e-notes accelerates delivery to the secondary market, which is why there are more and more investors accepting eNotes, including aggregators like Wells and PennyMac. Fannie Mae and Freddie Mac also have auto-certification that reduces document certification time to almost nothing and speeds up funding.

There is also the issue of competitive parity: The nation’s largest lenders are all-in on digital lending and enhancing the borrower’s experience at closings. The next tier of lenders has to go digital to stay in the game.

Going digital isn’t the heavy lift it was a few years ago. The closing technology has been proven and is integrated into the major lending platforms and in industry utilities, like the MERS e-registry. The settlement service community, for the most part, is also up to speed on hybrid and even full e-closings. So, a lot of the friction has been removed.

To flip the script, you could argue that the slowdown in refinancing might accelerate the digital transformation. That’s because lenders will have the bandwidth to undertake and finish these projects. One bottleneck that slowed progress last year, for example, was the switchover to the new URLA form, which pushed lots of projects further down the queue in IT departments. And that’s behind us now.

Q: What are some of the operational benefits that lenders (and other players) could quickly realize by taking on either discrete or end-to-end digital engagements?

Voth: Obviously the more digital you are, the more value that you’ll realize. But not every lender needs to be fully digital from day one. There is incremental value in each step in the transformation process. Hybrid closings, for example, are more efficient in most cases than traditional closings and enhance the customer experience. They are often a good interim step prior to full e-closings.

E-notes, as we’ve mentioned, are now being accepted by the GSEs and Ginnie Mae, as well as private investors. The numbers are still relatively small as a percentage of all mortgages, but they are growing rapidly. The industry is coming to realize how much faster you can move and sell these e-assets. For example, if you can move an e-note off a warehouse line in days, rather than weeks, that significantly reduces short-term borrowing costs.

So, to recap, end-to-end solutions are absolutely achievable and can produce real bottom-line results, but they can often be accomplished in stages.

Q: Everyone has always agreed that in principle digital lending is the future. But hard numbers on ROI have always been hard to find. Is this changing?

Voth: Getting solid return on investment (ROI) numbers has been a challenge. Recently, however, two new ROI studies have been released. The first study, commissioned by Notarize, found that a full e-closing saves lenders approximately $444 per loan, and settlement agents up to nearly $100 per loan. This was based on an analysis of time savings, fewer defects, and the direct printing and mailing costs.

The average time savings on a hybrid closing was 99 minutes; 157 minutes for an e-closing. Almost 90% of the respondents said that they could close more loans with the same or fewer staff members.

Similarly, ICE Technology released an ROI survey that showed its hybrid e-closing solution is saving 70 minutes per loan and reducing overall cycle time by 2-3 days. Together these two savings add up to a savings of $134 per loan. A fully digital closing, the study suggests, could save up to $500 per loan.

We’d argue that the ROIs might even be higher, since the surveys didn’t really go into some of the downstream secondary marketing advantages like fewer days on warehouse lines using eNotes.

Q: Are there bottom-line advantages in using a consultant in a transformation versus doing it all in-house or using turnkey vendors?

Voth: This is our business, so it is a little hard not to be biased. What we’ve seen in the market though is that successful implementation of a complete e-mortgage program is determined by much more than just buying the right technology. There are impacts across your people, processes, technology and policies and procedures that are critical to get right, both from an internal operations and external adoption perspective. A firm like ours, for example, can help clients assess their digital readiness and then develop a roadmap for their journey, including the identification of the operational changes that will be required.

The advantages to working with an advisor are even more pronounced for complex engagements: for example, multi-channel digital lending or end-to-end integrations to achieve straight through processing.

A good consultant will have e-mortgage business transformation expertise, experience working with the leading eMortgage technology companies and be an agnostic party in the vendor selection process.

Our team has worked on the client side of the mortgage industry at large banks, vendors investors and industry standard-setting organizations so, in addition to knowing the strengths and limitations of vendors and solutions, we have a deep understanding of the business and compliance requirements necessary for implementation.


Explore More

Falcon Digital Mortgage May Newsletter

05/17/2022

Ginnie Mae and Falcon to Host a Webinar

Later this month, Ginnie Mae is expected to reopen its Digital Collateral Program, a project that our consulting group has been very involved in over the last two years. To help Issuers and the eMortgage ecosystem get up to speed on the new program, our company is hosting a joint webinar with Ginnie Mae on Thursday, June 2 at 2pm ET. Presenters will include Lynne Chandler, Ginnie Mae's Digital Program Director and Rebecca Perkovich and Tim Renner from Falcon Capital Advisors. The informative one-hour program will cover:
  • Digital Collateral Program overview and requirements
  • Policy changes
  • Ginnie Mae Digital Collateral Program Guide (eGuide) changes How to apply to become an eIssuer
  • FAQs
  • And more
The webinar is open to all Ginnie Mae Issuers, interested lenders and other eMortgage ecosystem stakeholders. Click here to register. Hope you can join us! - Armando

ICE to Buy Black Knight

Last week, NYSE and Ellie Mae owner ICE announced it will acquire Black Knight in a deal valuing the mortgage-lending software and data analytics firm at $13.1 billion. Now ICE must convince regulators that the acquisition will not harm competition in the mortgage tech solutions market. But top executives at both companies told analysts last week that the businesses are complementary with ICE focusing on origination and Black Knight focusing on servicing and the secondary market. The company doesn't expect the deal to be completed until the first half of 2023. LEARN MORE  

MISMO Starts eVault Standards Development Workgroup

Earlier this year MISMO put out a call for participants to create a set of eVault standards to improve the current process and enhance digital mortgage scalability. Learn more about MISMO's newest eVault Standards Development Workgroup (DWG) from Tim Renner, Falcon's Counsel who is co-chair of the group. LEARN MORE  

Integration Updates

Vesta, a LOS and SaaS company, and Docutech, a provider of eSign and eClose technology, announced an integration that allows lenders using the Vesta LOS to easily generate document packages and support eSignatures via Docutech's digital mortgage and eClosing solutions. SaaS platform paymints.io has integrated with Notarize allowing paymints.io users to see if a transaction is eligible for a digital closing from within the paymints.io platform. Finally, Figure Technologies' lien and eNote registry system, DART, announced integrations with Blue Sage and Docutech. Through the integrations, Blue Sage and Docutech customers will have the ability to register loans with DART simplifying the loan process and allowing for immediate settlement.  

NotaryCam Surpasses 1 Million RON Transactions

Over the past 10 years, NotaryCam has facilitated more than 1 million transactions for Fortune 500 companies, banks, mortgage lenders, attorneys, settlement agents and more across the country and around the world. Commenting on the milestone, NotaryCam president and founder Rick Triola said, “Whether it was the first or the one-millionth transaction, NotaryCam has been committed to providing a RON platform that facilitates a smooth mortgage closing experience without any of the limits imposed on traditional closings, and we will continue to bring that commitment to our next million transactions.” LEARN MORE  

Bitcoin-Backed Mortgages

Buying a house with Bitcoin as collateral may soon be possible as crypto startups try to crack the $2.6 trillion mortgage market. A start-up called Milo started offering 30-year mortgages backed by cryptocurrencies in March and is working with more than 700 potential borrowers on pre-approvals and has made $5 million to $10 million in loans. LEARN MORE  
Have an eMortgage related news item you want to share? Want to make sure you and your team are on our distribution list? Have a question about Falcon's digital mortgage advisory services? Send us a note at [email protected]

10.26.21 – Update: New Date for HUD-Held Vacant Loan Sale 2022-1 (“HVLS 2022-1”) – Now December 1, 2021.

09/21/2021

The U.S. Department of Housing and Urban Development (“HUD”) has announced an update to the date for the upcoming HUD-Held Vacant Loan Sale (“HVLS 2022-1”). The new date for this sale is now December 1, 2021, which replaces the previous sale date of November 10, 2021. The sale will consist of due and payable Secretary-Held loans. The loans are first liens secured by 1 to 4-unit, vacant residential properties where the last surviving borrower is deceased. This sale will include increased bidding opportunities for non-profit and state & local government purchasers. Entities interested in participating can contact the Office of Asset Sales Single Family Transaction Specialist at 1-844-709-0763 or email [email protected] for more information. For prospective bidders to this sale, please refer to the section on this webpage entitled, For Prospective HUD Asset Sale Bidders, to become a qualified bidder and receive the Bidder Information Package for HVLS 2022-1.