Parvesh Sahi of ICE Mortgage Technology on Digitizing Correspondent Lending
Parvesh Sahi is Senior Vice President of Business and Client Development with ICE Mortgage Technology, Pleasanton, Calif.
MBA NEWSLINK: We’ve seen the benefits of digitizing the front-end mortgage process. How can that also extend to correspondent lending?
PARVESH SAHI: If you think about it, it’s not all that different. The borrower wants to apply and get real time or near real time rates, fees, and maybe even an underwrite decision. That’s fairly similar to a B2B environment where a mortgage lender/seller wants real-time or near real-time certainty and pricing when selling their loans into the secondary market. It’s all about removing the friction while optimizing pricing. For both mortgage sellers and buyers, there’s untapped opportunity to leverage the same technology to reduce duplicative tasks and accelerate purchases. Bi-directional communication and condition clearing are just two important benefits that emerge.
Another critical aspect that has proven invaluable for those increasing the digitization of loan sales is the ability to exchange trusted data with ease. Whether that is system-to-system or even better, in the same environment. The continued path of digitization for correspondent lending means having the continuous real-time data flow from application all the way through to the secondary market without having to stop and verify or update data manually at any part in the mortgage supply chain, which saves time and money and drives increased ROI.
NEWSLINK: What are the benefits to buyers? Sellers?
SAHI: There are a number of benefits to both parties. If the buyers and sellers are leveraging trusted data, they can eliminate potential redundant tasks that can lead to cost reduction in manufacturing and acquiring loans. An example of that is the removal of post-close reviews, whether third-party or in-house, such as re-runs of appraisals, credit ratings, and income calculations to name a few. Data also enables buyers to provide alternative lending options to create competitive advantages. Essentially, they can see more real-time data helping them increase availability of a loan product or reduce it.
Correspondent digitization also provides loan performance analytics to help inform buyers and sellers of their risk. By using data to model and evaluate new product offerings it can lead to improving the transparency of each transaction reducing or exposing unforeseen risk earlier into the process. It provides greater insight into your customers and what they need to be successful, which allows them to target their product offering and understand the risk profile to a more granular level.
For lenders, a good borrower experience is critical to attracting and keeping business. Research shows that those who leverage technology, a shared data exchange and a robust network can accelerate the digital mortgage and deliver an even better consumer experience.
A similar benefit exists for the investors to their sellers. A digital streamlined experience for sellers creates a better experience which is passed down to the consumer. One example is digitizing the loan boarding process into their servicing systems or servicing partners more quickly and accurately, thus advancing and extending the borrower experience into the servicing of their loan, improving the entire manufacturing process and experience for consumers, sellers, and buyers.
All of these benefits can be better achieved by having the right technology, data, and network in place. Customers can gain a business advantage with seamless correspondent digitization support. By having this type of secondary market activity support within the same existing ecosystem, originators and investors can experience accelerated exchange of loans and critical loan data, creating more liquidity that enable their lenders to originate more loans with less risk, that then become available for investors to purchase.
NEWSLINK: How does digitization improve security?
SAHI: Regardless of where you are in the mortgage process, documents containing private information are exchanged. By digitizing the journey with vaulted data and documents through one, consistent ecosystem, securing the data transfer through encryption in transit can be achieved thereby reducing risk of loss. This proves to be much more secure, as opposed to document transfer and document custodian facilities maintaining and potentially losing those important documents.
NEWSLINK: Are there barriers to making this happen? How can they be overcome?
SAHI: Gathering accurate data in the current loan manufacturing process requires a number of service providers to participate. It takes complex orchestration of data and document exchange among participants. And enabling a set of APIs to make these service calls is key to moving the ball forward. Once you have those APIs, you need a very fragmented set of participants from each of the categories to all participate as you have different sellers and buyers that use their own vendors or services they trust. Therefore, having one workflow and a unified connection between all of the parties is paramount to making correspondent digitization a success.
NEWSLINK: How soon do you think correspondent digitization can reach critical mass?
SAHI: This will be an evolution not a revolution. Correspondent digitization is already happening today through system-to-system connections among sellers and buyers. This is just the beginning of the journey to adopt. The full digital experience includes the elimination of duplicative tasks, optimizing pricing for sellers and buyers through real-time data and loan exchanges, and the ability to expand or contract the credit box on a loan-by-loan basis is very achievable over the next three to four years. Ultimately, correspondent digitization creates a quicker purchase time for investors, a more seamless transaction for originators, and creates a broader end-to-end digital mortgage – which becomes a win-win scenario for all. This key advantage should be something all financial institutions consider for 2022 and beyond.
(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.)
