Editor's Note: This feature originally appeared in the November issue of MReport.
You would think the mortgage world would be used to change since nothing in this business ever stays the same. Between regulations and requirements, consumer behaviors, shifts in the market, and new competitors, change is all around us, and it is as inevitable as sunrises and sunsets.
In our constantly evolving industry, the reasonable approach to most of these changes is to embrace them. Any significant change creates a huge unknown for a business, and mortgage companies are no different. That’s particularly true with digital closings. An increasing number of mortgage companies are attempting digital closings, but very few of these companies seem to know how to do these—or even of their options. Even those mortgage executives who believe they are aware of what’s available to them have had their view of digital closings shrunk to fit the limited capabilities of their vendor.
Understanding Your Digital Fears
The mortgage industry has reached a tipping point with regards to digital mortgages— and that is one of the biggest challenges lenders face today. Most companies have recently recognized the power of digital mortgage technology and electronic closings in particular. They know the industry’s digital transformation is inevitable, and that their survival is in question unless they adapt and change.
Recently, I overheard a group of lenders explain their biggest fear— that a competing lender might undergo a digital transformation and suddenly vault into a market leadership position, taking everyone by surprise.
A great example of this is Blockbuster. At its peak, Blockbuster was a multi-billion-dollar company with 9,000 stores nationwide. In 2000, the company turned down a chance to buy a little-known startup for $50 million because, as Blockbuster’s CEO at the time famously said, “They don’t do anything we couldn’t do.” That startup was Netflix.
Blockbuster had blinders on because the brick-and-mortar movie distributor went bankrupt and the online models now dominate the market. The lesson here is that the power and speed of technology will always drive rapid change and that sometimes denying this change from happening almost accelerates it into happening.
After acknowledging that change is inevitable, the second step is to commit to changing. We’ve all heard the phrase, “change starts at the top,” and it’s true. CEOs need to be the first and the loudest to commit to change, and they must follow it up with action by dedicating staff and resources to making change happen. In the case of digital mortgages, the CEO needs to rally support from all levels of the company, as total buy-in is required for the initiative to be successful.
The Importance of Mitigating Risk
Your organization can commit to change and be ready to devote the required time, energy, and resources to enable digital mortgages and eClosings. But to make it work, your organization will also need a plan for mitigating risk.
The first and most important lesson in risk mitigation is to choose your digital mortgage partners carefully. Keep in mind that great technology today won’t necessarily be great tomorrow. A good technology partner will have a proven track record of continuous innovation and high quality for a sustained period. They should also be able to understand your business and be able to customize its methodologies to work specifically for your organization’s needs.
For most lenders just beginning to embrace eClosings, the best approach is partnering with a company that has multiple digital offerings, including eSign, electronic recording, eNotes, remote notarizations, and other products and services that enable a true end-to-end, seamless process. Such a partner can enable a mortgage company to implement digital mortgage technologies that make the best sense now and add on new capabilities later.
Regardless of what an eClosing vendor claims to offer, lenders need to be sure the technologies being evaluated can be seamlessly integrated into your other mortgage systems. If they cannot be, your venture into digital mortgage territory could be short-lived.
A brief word here about technology: Remember, technology is a business enabler, and a good technology investment is one that generates more value than the tool or method you use today. Ultimately, it becomes part of the fabric of your business. As long as the technology is kept up to date, the eClosing solution you choose could last up to 10 years.
For that reason, it’s crucial to choose a partner who understands your business and has a vision for creating a successful long-term partnership. One easy way to tell whether a prospective partner is ready for a long-term relationship is to find out how long they have been providing eClosing technologies and how many eClosings they have facilitated, including hybrid eClosings and full digital closings. A quality partner will be transparent with you about this information.
Another way to mitigate risk is to change your organization’s culture toward change by pursuing continuous business process improvements. If change is difficult for your organization, start by taking small bites and get your organization into the habit of making regular small changes comfortably. Foster a commitment within the organization to get better each day. Eventually, being comfortable with change will make it easier to adopt and implement digital mortgage technology and electronic closings.
Move Ahead Without Fear
With the pace of innovation accelerating, lenders are finding themselves in a whirlwind of new technologies, processes, and solutions that essentially create new layers of innovation upon previous innovation. This only means one thing: Don’t wait.
Pay attention to how other organizations are succeeding and how the industry is changing around you. If you see eClosings and digital mortgages in your future, but you haven’t started implementing these yet, start right now. Develop a plan that incorporates the people, processes, and technology that you have and the additional resources you’ll need, then develop a roadmap that puts your vision of a digital mortgage future on the path toward reality. Then allow digital transformation to become a daily part of your business discussion and leadership.
For most businesses, the old adage that “if you aren’t changing, you are dying” is true. For too long, however, most mortgage companies have avoided significant change when it comes to digital mortgages. They have taken a stance and are resistant to change as though it is an enemy.
Successful companies, on the other hand, understand that change is critical to growth, and they embrace it. I believe that when companies embrace change, they are forced to face their fears. The interesting thing is that the more quickly you face your fears, the more quickly you can overcome them. When you have done that multiple times, the fear of change no longer becomes an obstacle to success.
Once lenders realize that embracing change presents countless opportunities, the key is to develop a plan, evaluate technology options, and execute the plan. A word of warning, though: eClosing vendors are many, but few can truly deliver an end-to-end eClosing. Finding the right one is the Holy Grail.