Matt Hansen: New-Era ‘What-if’ Scenarios

Matt Hansen is founder and CEO of SimpleNexus, a provider of digital mortgage mobility.

To industry outsiders, it may appear that mortgage lending is a choice profession from which to ride out the COVID-19 crisis. Yet even before the White House began urging people to work from home, lenders were struggling to keep up with record-breaking loan application volumes. As municipalities around the country enact travel restrictions, it will only get harder for companies to meet application demand while revising work policies on-the-fly and finding new ways to serve customers who may be sheltering in place.

The pandemic is evolving rapidly, requiring businesses to respond quickly. By this point, most lenders have confirmed employee well-being and transitioned workers to remote environments where possible. For their next move, lenders need to start playing an aggressive game of “what if.” While no one can predict exactly how events will unfold, the prudent move is to consider plausible downside scenarios and test our resilience under those circumstances. For instance:

• What if loan production is put on hiatus?

As states, counties and municipalities enforce business closures and enact shelter-in-place orders, lenders may find they have no choice but to put loan production on temporary hiatus. After all, you can’t verify a borrower’s employment if nobody’s there to pick up the phone, and you can’t fund a loan if the county recorder’s office isn’t open to file the deed. But the applications will keep coming in — so how will lenders keep those relationships warm and prevent business from going to other lenders?

Borrowers don’t want to play an endless game of phone tag any more than lenders do. Instead, they need access to real-time loan status information. Since emails are easily misfiled or overlooked, the better way to deliver loan status information is to notify borrowers where they are: on their mobile devices. An even more ideal solution is to connect other involved parties, like real estate agents and settlement service providers, in a centralized hub. If these capabilities aren’t native to your organization, consider a production hiatus your opportunity to strengthen the ship before the eye of the hurricane passes and the next stormwall hits.

• What if the market contracts significantly?
  With open houses being cancelled and unemployment on the rise, coronavirus is expected to deal a serious blow to this year’s purchase market. The refi boom won’t last forever — especially if the Fed stops buying mortgage backed securities. How will you successfully compete for a healthy share of the few purchase loans that are available?

Since lenders rely on referral business from partners and satisfied customers, companies need a plan for facilitating warm introductions without face-to-face meetings. The ability to collaborate with borrowers and Realtors remotely, once considered “nice to have,” will be an essential advantage. The lenders that win will be those who are best-equipped to work hand-in-hand with referral partners, who are likewise competing for their slice of a shrinking pie. These professionals want to see capabilities that get buyers from consideration to close faster, from home search to the ability to generate on-demand pre-approval letters from a mobile phone.

• What if these “temporary” work-from-home mandates become a long-term reality?
  There is no clear consensus among experts as to when life will return to normal. Some of the more pessimistic estimates say we could all be working from home for as long as 18 months. As remote work policies proliferate nationwide, fewer and fewer consumers will have access to fax machines. Postal mail is a poor alternative, as it introduces the risk of contamination, presents major security risks and extends turn times, causing costly rate lock extensions and customer attrition.
  
  Steer borrowers toward self-service tools that eschew physical paperwork and require no equipment other than a computer or smartphone. For example, if you support electronic verification of assets, employment or income, now is the time to make those pathways the standard, not just a convenient option for your most tech-savvy borrowers. Otherwise, give borrowers safe and easy alternatives to handling physical paperwork, such as the ability to securely scan and submit documents from a smartphone. Instead of mailing disclosures packages, email them — or better yet, deliver them straight to the consumer’s mobile device for immediate review. We have seen not just the raw number, but the percentage of consumers completing their disclosures via mobile app nearly double in the last six weeks alone, so we know consumers are ready to embrace this more streamlined process.
  
  What if vendors start to falter?
  The typical lender relies on dozens, sometimes hundreds, of third-party service providers. If any one of those providers experiences an interruption in service, the entire loan manufacturing process can grind to a halt — so it’s important that lenders open a dialogue with partners now.
  
  Ask your vendor partners to share their business continuity plans and consider risks that might not be immediately obvious. For example, do you work with early-stage startups that rely on investor capital to maintain operations? Investors are feeling conservative in light of the current recession, so cash infusions may be hard to come by in the months to come. Do they rely on physical data servers for which problems will be hard to troubleshoot, or is their tech stack stored on the Cloud?

Companies across the mortgage industry will need to come together to solve these and other challenges yet unknown. It’s been said that the coronavirus epidemic has created an inadvertent experiment in America’s capacity to transition from a traditional workforce to a remote one. Similarly, the coming months will tell us a lot about the mortgage industry’s readiness to fully embrace digital mortgage solutions. What’s certain is that lenders will have to adjust operations for the foreseeable future, whether or not those changes outlive the crisis.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)