Over the weekend I paddled on Tamales Bay.  It is located 45 minutes north of San Francisco and abuts next to the Point Reyes National Seashore.  It is a long skinny piece of water that was originally caused by movement from the San Andrea fault (the same fault that caused the 1906 and 1989 earthquake). 

I arrived early Saturday morning on a calm party cloudy day.  For 2 hours I appeared to be the only boat on the water (at least I didn’t see anyone) and navigated north along the western coast for 3-4 miles.  The coastline was a combination of steep cliffs rising from the water and small hidden beaches tucked in small bays.  I saw a couple of homes on the bluffs, but most of the landscape was uninhabited. 

This summer, the annual Western Secondary Market Conference is held in San Francisco.  Come a day early and take a day trip to the Point Reyes area.  You won’t be disappointed.

My topic today is mortgage technology. 

One area of our FOCIS-plus Study is Information Technology.  We ask customers about the type of mortgage technology they use to support loan origination and mortgage banking activities. Then drill deep into how they use it.  We spend a fair amount of time following a loan from origination through loan purchase and see how technology is used to support the work flow process, reporting and compliance controls. 

Here are a couple of observations from our most recent FOCIS-plus Studies:

  1. Loan officers have embraced technology and now perform most of origination functions within their loan origination system.  Most order DU, generate disclosures and monitor the status of their loans through their LOS.  All use it to complete the application and some deliver a digital package to loan processing. 
  2. Processors use technology to perform most tasks that are required to submit it to underwriting.  We still see hard copy files being reviewed even though the system supports image files.  Some processors would rather sift through paper than review a file on a second screen.  One item that jumped out at us is the use of Excel spread sheets to monitor their pipeline rather than generate a report from the LOS.  A large percentage of processor use desk top technology instead of their LOS to generate reports.
  3. Most underwriters won’t review an image file.  Just like a dog that won’t let go of good bone, some underwriters just have to feel and smell the credit package.  We see some underwriters generating the disposition in a word processing rather than generating it through the LOS.  All dispositions are sent via email to loan officers and processors, but some use Excel spread sheets to monitor conditions.  Every LOS has a function to deploy status updates through a web interface, but may underwriters email a daily spread sheet instead.
  4. The Closers generally use an interface between the LOS and a doc prep vendor to generate docs.  We did see most interfaces lack some fields, requiring the closers to backfill some data on the vendor’s web site.  Sometimes funders are preparing spread sheets to request wires from warehouse lenders.  Others go directly to the warehouse lenders web site to set up wires.  We always ask if there is an interface between the LOS and warehouse lender to automate the wire request task.   And, we again see more desk top spread sheets to monitor docs, funding and loan delivery rather than using reports generated in the LOS. 

I’ve had a habit of kayaking 2-3 places and not exploring something new.  This last Saturday I paddled something new.. There are many great bays and lakes in Northern California to explore.  We find habits the main culprit for employees not using their mortgage technologies.  Most LOSs have great functionality and can assist in driving down costs and improving efficiencies.  Employees sometimes find it hard to break old habits and management sometimes won’t encourage employees to change those habits.  And sometimes, LOS vendors need to enlighten customers on all the functionality and benefits of their products.