Executive Outlook 2020: Fintech and Data Analytics in Origination, Servicing and the Secondary Market

MBA NewsLink looks at 2020 with perspectives on mortgage technology from several industry executives: Pat Stone of Williston Financial Group; Mike Seminari and Seth Sprague, CMB, of STRATMOR Group; Raymond Eshaghian of Greenbox Loans; and Jane Mason of Clarifire.

MBA NEWSLINK: As mortgage lenders pushed to improve the borrower experience in 2019 with data analytics, mobility and electronic closings, can we expect a better borrower experience from application to settlement and servicing in 2020 from the lessons learned in 2019?

PAT STONE, CHAIRMAN and CEO, WILLISTON FINANCIAL GROUP: Truthfully, the area in which mortgage lenders have improved the borrower experience is in the application process. Rocket Mortgage led the way; now many lenders are offering a more streamlined and automated application process.

Where we have seen constant advances is in improved borrower experiences within front-end digital mortgage lending platforms and SaaS providers. As the regulatory burden continues to drag the lending process, applying for a mortgage digitally is becoming seamless. However, the concept of a total “eClosing” will remain far from reality long past 2020.

While data and analytics have not noticeably impacted the borrower experience, they have increased loan process efficiency and reduced loan processing time. Improved mobile access and technological advances in the electronic closing process have had minimal impact and I doubt that they will positively affect the borrower’s experience in the near future.

MIKE SEMINARI, DIRECTOR, MORTGAGESAT BORROWER SATISFACTION PROGRAM, STRATMOR GROUP: We expect to see the trend toward improving the borrower experience continue in 2020, but not just because of more automation and better tech tools. Rather, it will be a result of lenders re-infusing a personal, human element into the tools they’re using.

Borrowers want to upload documents instead of sending in the documents by mail or email attachment, but they still want a ‘live chat’ or 24-hour response time when they have questions. Borrowers want easy online application tools, but they also want personal calls to update them on their loan’s progress.

Tech has given us tools to provide a better experience, but moving the needle will ultimately depend on the people wielding the tools. A white glove experience wins every time over a slick technology. And companies that combine the two will be positioned to see the biggest gains in 2020.

NEWSLINK: Do you see non-QM lending continue its growth this year? How will expiration of the QM patch in 2021 factor into non-QM loan volume in 2020?

RAYMOND ESHAGHIAN, PRESIDENT, GREENBOX LOANS: The future is alternative lending, so I definitely think the non-QM market will continue to see tremendous growth in 2020. I speak frequently at housing events to educate real estate and mortgage professionals on non-QM options, and my goal is to help dispel some of the notions tied to these products. More and more people are beginning to understand the benefits that non-QM loans provide and are realizing these products should not be mistaken as agency fall-out options.

Spreading the word is half the battle, though. Today’s non-QM products are very robust, and there’s a lot of pent-up demand from credit-worthy consumers who never thought they could get the kind of loans that are being offered today. I’m thinking of the large number of self-employed borrowers we saw in 2019 who did not qualify under traditional mortgage standards. Non-QM options provide a perfect solution for these underserved consumers. As home values continue to rise, we’ll also see more self-employed borrowers who need second mortgages to help consolidate debt or perhaps make home improvements. Our bank statement second loan program, which is geared specifically to self-employed borrowers, has been one of our most popular products.”

As far as the QM patch goes, it’s still unknown if the patch will definitely expire in 2021, so it’s difficult to say how that would affect non-QM volume But I believe the non-QM market will continue to grow either way. As more people become familiar with non-QM loan options, more lenders will add these products to their portfolios to help underserved borrowers get the financing they need to become homeowners or strengthen their financial situation.

NEWSLINK: Does AI and machine learning continue its momentum from 2019 to help speed loan originations and reduce costs for servicers and secondary market activity heading into next year?

JANE MASON, CEO, CLARIFIRE: Good industry innovations typically start in origination and then stall when getting to the servicing side of the business. Servicers, as well as secondary marketing, absolutely need to continue to embrace the benefits of AI. 

There’s an obvious cost to strategically incorporate AI into servicing rules and decisioning; however, the efficiency gain readily offsets the expense. Additionally, challenges for AI in origination are currently revolved around fair housing and credit equality, whereas incorporating AI into servicing doesn’t adversely impact borrower selection. 

AI for servicers can significantly reduce response timeframes and costs, as well as improve accuracy and efficiency. With the capacity to take process automation to an entirely new level, AI expands servicer access to data, where it can be subsequently leveraged for decisioning capabilities in workflow and business rules. Of course, appropriately implementing AI, understanding the core algorithms and requisite documentation, enables organizations to aptly meet auditing needs.

As the loss mitigation options, including disaster, have become more complex, it only makes sense to pursue a higher level of data synthesis through AI. Clarifire embraced AI several years ago. The Clarifire automated workflow application includes a workout decisioning engine and sophisticated qualifying calculator that has been consistently leveraging tools such as AI.

NEWSLINK: How do you see data analytics improve from 2019 and have a further impact for investors in secondary market trading for MSR trading and RMBS investors?

SETH SPRAGUE, CMB, PRINCIPAL, STRATMOR GROUP: Both Fannie Mae and Freddie Mac continue to expand their offerings to improve servicing liquidity for their customers through technology-driven solutions. Fannie Mae’s Servicing Marketplace is gaining popularity and serves a completement to its Servicing Execution Tool. SMP allows for approved sellers to participate in the program and the sales are bifurcated in terms of origination reps and warrants.

Freddie Mac also has a program called Freddie’s Automated Servicing Transfer, which is available for loans sold through Cash-Released XChange only. It allows seller to sell the loan to Freddie Mac and receive a servicing execution through the approved buyers. Both the Fannie Mae and Freddie Mac programs offer an alternative to the current co-issue market and provides real time pricing.

Overall on the loan pricing side, mortgage companies continue to migrate away from rate sheets and are moving toward real time pricing. Pipeline advisory firms continue to roll out increased connectively through APIs to improve the delivery options, lower costs and provide real time pricing.

(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.)