This piece originally appeared in the December 2021 edition of MReport magazine, online now [1].
Although we talk about it quite a bit, it’s time for the mortgage industry to make clarity one of our highest priorities. As an industry, we’re collectively proud of our role in helping homebuyers achieve the American Dream. Nearly two-thirds of our population is comprised of homeowners, most of whom were able to achieve homeownership because of the help of a mortgage. But ask most consumers what they think of the actual process of buying a home, and words such as “confusing” or “frustrating” are most likely to be used. A 2019 survey of mortgage loan applicants conducted by CNBC and the Consumer Financial Protection Bureau reported that only 47% of those responding found their experience to be “satisfying.”
Are we happy with that? Less than half of our ultimate customers are satisfied with how we do what we’re here to do?
Yes, there are many legitimate reasons for the lack of transparency in the mortgage and homebuying process. A dizzying maze of federal, state, and local regulations and requirements is a very real impediment over which we have little to no control. While most of those rules were enacted with the best intentions, all too often, they end up having negative consequences for the consumers themselves.
There are other valid reasons that the mortgage process hasn’t quite evolved into the Amazon-like experience many other loan-application processes (student loan, car loan, personal loan) have, but we do have some level of impact on those. I believe it’s past time for us to do what we can to increase our transparency and bring greater clarity to the process required to fund one of the most noble transactions there is.
Clarity in the Process
The primary cause for confusion on the part of the typical mortgage borrower is simple. It’s a confusing process to originate a loan in the first place. I’m not aware of many other industries that require so many different chefs in the same kitchen to create a single entrée. Consider that a typical mortgage loan application is “touched” by a real estate agent, several people with the lender (loan officer, assistant loan officer, underwriter, etc.), then a couple more from the title agency (search, clearance, escrow, closing, plus assistants), not to mention an appraiser and home inspector. Further compound that with the likelihood that many of those touching the transaction aren’t with the same companies, and the root of the issue becomes evident. (And that list doesn’t even begin to consider mortgage brokers, post-closing, and a dozen other professionals who directly or indirectly impact the transaction.)
Now, add to that realization the fact that the majority of those different entities pulling in the same direction to bring a mortgage to closing don’t communicate with each other very well. Again, that’s for a number of reasons. Too many technologies, even those purporting to be multi-professional portals for “all” parties involved, require that they be the alpha technology. So, while an LOS may have a means by which the real estate agent, appraiser, and title agent may be able to communicate, it requires that each of the other professionals use that technology, when, in all likelihood, each has their own primary technology better suited to their part in the delicate ballet that is a mortgage closing. What that looks like in reality is loan officers using workarounds and unauthorized third-party apps just to get the job done. Or an agent leaving three voicemails with the title agency simply to find the status of the order.
All of this is the result of some mix of a “the way we’ve always done it” attitude, the inherently high production cost to make a mortgage loan, a system of applications and technologies that don’t always work together, and developers who aren’t interested in working together with other elements of the typical tech stack. We all have some say in this, whether by our own choice of tech, our demands to vendors, or how we build our own part of the process. It’s time for all of us to work on our end for increased clarity of process.
Clarity in Communication
Admittedly, there’s some overlap when it comes to clarity in communication and clarity in process. Here’s a great starting point. Because the transaction is so segmented (siloed?), there can occasionally be some confusion as to whom the “client” really is. For an appraiser, that could be the lender, the real estate agent, or the consumer. All have some say in which appraiser will provide the valuation. For a title company that could be a real estate brokerage (in purchase markets) or a lender (in refinance markets).
And while the lender is usually fairly clear on the fact that if there’s no borrower, there’s no loan, a wholesale lender might tell you that the mortgage broker is his primary ad target. And no mortgage lender will turn down a referral from a real estate agent.
The point is that, as an industry with inherently thin margins to begin with, our marketing budgets aren’t always robust. While a borrower may come in contact with several different people over the course of a single transaction, not all of them are focused on keeping that consumer happy. A mortgage lending company might spend just as much on marketing and communications for real estate agents as it does for borrowers—perhaps more. Many lenders have convinced themselves that the consumer doesn’t care to hear from banks and lending companies; instead, they are seeking the lowest rate or lowest monthly payment without the slightest interest in which institution is providing it.
It’s time for all of us in the industry to put more attention toward communicating with our consumer clients. After all, the consumer, in the end, is the client for all of us. Perhaps that’s creating more proactive materials that explain in clear terms what’s going to happen once the sales agreement is signed. Maybe that’s adopting technology that’s not only easier for a consumer to access when they have a question, but which allows lenders, title agents, or real estate agents to spend more time bringing the mortgage to closing and less time on the phone answering the same questions over and over again (“When is my closing, again?”). We’re not an industry that can afford, for the most part, to budget for large customer service staffing or call centers, so our professionals often do double duty. However, there are many different technologies that can get those professionals off the phone a little more often, and on to removing clouds from title or preparing loan estimates.
Finally, a lot of this is about attitude and purpose. For an industry that can and has moved mountains during the biggest pandemic in over 100 years, we tend to give up quickly on some things when it comes to effecting change. We all too often resist new technology, or don’t think strategically when we do invest. We put most of our efforts into sales with far less priority on referral or retention percentages. That’s also reflected in the technology we choose to implement. We lament poor fall-out rates yet drag our feet on making the process a little more seamless. We can make a difference, and it would benefit our bottom line as well as being the right thing to do.
It all starts with each business’ commitment to do a little more when it comes to clarity. Think a bit harder about how the latest addition to your stack might affect the communications pipeline with title agents. Demand solutions that, if they won’t integrate, at least don’t have a negative impact on the other components in that stack. (A visual comes to mind of a loan officer with two monitors on her desk; six tabs in each browser and a landline phone tucked under one ear, furiously tapping away on an app on smartphone just to move the file along.) If we all do a little bit more in the name of clarity, we will be well on our way.