Today’s new mortgage borrowers have grown up in the digital age. Almost everything they consume comes to them electronically. From their video games to social media to their online shopping experiences, today’s consumer expects instant fulfillment.
That’s making for a somewhat rude awakening when it comes to buying their first home. The mortgage origination process is the antithesis of instant gratification, at least the way it has traditionally been conducted.
That’s changing, and just in time.
According to CoreLogic, about 79% of the first-time home purchase applications filed in 2020 were signed by millennials. In all, they made up 54% of all purchase applications. Exposing this segment of the market to the traditional lending process that’s changed little over the last 30 years will certainly result in lower borrower satisfaction rates. This is something that lenders do not want to see happen, especially as fintechs continue to disrupt the marketplace.
Our industry can take advantage of the same techniques and digital processes that other industries have and offer the same high levels of satisfaction. When lenders do so, they will also enjoy other significant benefits. In this article, we’ll take a closer look at how better connections between technologies will allow lenders to originate more quickly at a lower cost while they also achieve higher levels of borrower satisfaction.
The first step involves tighter integrations between the various systems we use to originate mortgage loans. Fortunately, we have the perfect tool for this—the Application Programming Interface (API).
What the Right Integrations Can Do for a Lender
The API is the gateway to a better loan origination process. It makes it possible for the LOS to reach out electronically to order and receive the data from third parties and then can be smart enough to process that data to keep the lending process moving forward. This is exciting, but it only works if the lender and its technology partner adopt an API-first strategy.
What I mean by this is developing technology with the goal of getting everything the lender needs from third parties through the effective use of APIs. It requires the technology partner to not only make the connections between systems, but also to make the most of available automation once the results come back to the LOS.
For instance, a good document preparation partner can provide compliant disclosures that can be sent to the borrower at the touch of a button and then send back to the lender all of the electronically signed documents, along with a cache of other valuable information. With a data-driven API solution, this information can then be used to populate pipelines, trigger workflows, and meet compliance requirements.
At the same time, a lender’s point of sale (POS) partner may also integrate with the same doc prep provider to expand the consumer experience, perhaps allowing the borrower to order their own disclosures. If not integrated properly, when the report comes back to the lender, it may not be delivered as usable data, but rather as an inert PDF that cannot be used to move the process forward.
By using an API-first approach, the lender will get all information electronically and in an automated fashion. The benefits of this are faster origination, fewer errors, higher quality loans, and a better experience for both the lending staff and the borrower.
APIs: Opening Doors to a Better Way of Integrating Technologies
In the past, when lenders wanted to share information with third-party service providers in an efficient manner, it required building hard-coded integrations between systems. They were difficult and expensive to build and would break whenever either platform evolved or was updated.
Today, most modern systems have APIs built into them that can be used like hooks to connect disparate systems and allow technology providers to share information seamlessly.
Many older integrations were little more than links that would send the loan processor or underwriter out of the loan origination system (LOS) and into another SaaS (Software as a Service) platform, destroying the experience in the process. With so much emphasis placed on the borrower’s experience, which is vitally important, many have lost sight of the experience of their own mortgage staff.
Lending staff should have the same positive experience every time they process a loan on a given technology. Any integrations to that technology should provide the information they require automatically, behind the scenes, without ever pulling the lending staff out of their primary operating system, the LOS. Today’s modern APIs make that possible.
This is due, in large part, to mortgage software providers beginning to look at integrations the same way Amazon and Google do—data first. Instead of thinking about getting a tax transcript, flood zone certification, or appraisal report back, today’s software providers focus on the data those forms hold.
We see that fact clearly in the many different technology stacks lenders use today. Many include both new and legacy technologies, making it very difficult to connect the dots when it comes to integrations.
Even when all of the various technologies are connected, historically there hasn’t been an industrywide standard for data transmission. Thanks to the efforts of many volunteers, the Mortgage Industry Standards Maintenance Organization (MISMO) has made huge strides in establishing technological data standards that cover a broad swath of mortgage technology providers and impact nearly every aspect of the loan manufacturing process.
The MISMO API Toolkit is standardizing how data is transferred from one technology to another, making it easier for lenders to integrate disparate technologies.
Best Practices for Ensuring Good API-Based Integrations
While explaining what APIs are capable of providing to our industry is fairly straightforward, programming them effectively is not necessarily as simple. Here are three critical best practices lenders should apply to achieve greater success.
- Be open to change: Technology in the past was often employed to automate what had previously been completed manually. It’s not only about replacing manual processes, but rethinking the entire manufacturing procedure. A streamlined process with more automation will pay high dividends, but only if management is open to change. Look for the small wins. If the lender can shave five or 10 minutes off of the process over hundreds of loans, the return on investment will be significant.
- Take a holistic view: A technology roadmap allows the lender and its technology partner to take a more holistic approach to API development. This is important because starting with individual APIs can lead to workflow or other problems that can be avoided if development begins with a complete view of the lenders’ needs. The key here is to look at the entire lending process.
- Find the right technology partner: So much of what we do today involves the thoughtful application of APIs for seamless data integration. The lender should choose a partner, especially for their LOS, who truly understands how to use APIs to deliver value. Lenders are urged to ask questions of any prospective partner and make sure the answers are delivered from the lender’s perspective. If the technology provider doesn’t understand what constitutes value to the lender, it won’t be an effective partnership.
Effective lending, at least in the minds of the new generation of homeowners, will involve instant gratification at every point along the home loan origination process. Lenders can deliver it if they complete their journeys to digital, use technology to connect their systems, and then use automation to act on that data once it’s received.
The API, when properly utilized, will help the lender accomplish this and allow them to originate more quickly at a lower cost, while they achieve higher levels of borrower satisfaction.