NMP - October 2016 - 88

Mortgage Lending: Where Will the Technology and Regulatory Environment Take Us? By Daniel Richardson, CPA MBA he mortgage industry has increased regulations covering many different aspects and affecting all parties involved. The Consumer Financial Protection Bureau (CFPB) has now increased their oversight on financial institutions and added additional reporting and compliance requirements. By the same token, TILA-RESPA Integrated Disclosure Rule (TRID) has changed the origination and closing requirements which have impacted mortgage processing software, efficiencies in the origination process and increased the maximums on fines. These changes have increased risks when submitting data to comply with the Home Mortgage Disclosure Act (HMDA), increased legal risk, increased transparency and expenses for human capital and IT upgrades. Regulations have also affected the income earned by mortgage brokers. The industry is shrinking twofold, a significant decline in loan originators and mergers and acquisitions. Mega banks are slowly leaving the business line to reduce their risk and can't justify the declining profits with forever changing regulations and increasing costs. Forbes.com is reporting that these mega banks represented approximately 50 percent of the market share in mid-2012 compared to 35 percent in 2014, and is expected to decline even further. This is leaving a huge space in the residential mortgage market that the small mortgage companies will compete against the online mortgage brokers like Quicken Loans and LendingTree. These companies aim to appeal nationwide in hopes that sheer volume will T OCTOBER 2016 ■ /BUJPOBM.PSUHBHF1SPGFTTJPOBM.BHB[JOF ■ NationalMortgageProfessional.com 88 drive profitability and can't always offer the same level of customer service as an individual broker could. In a recent discussion with Brian Jennings, president of Princeton Mortgage Corporation in Pennington, N.J., he focused on three key areas there are necessary for small companies to capture market share: ● Leveraging technology as a marketing tool; ● Maintaining and expanding relationships with title agencies and real estate agents; and potential borrowers; and ● Retaining quality loan officers. Many of the small mortgage companies cannot afford the TV ads, professional sponsorships and giveaway promotions. The online mortgage brokers aim to appeal nationwide in hopes that sheer volume will drive profitability. It is often that their low interest rates draw potential borrowers however do not necessarily qualify for the low rates as advertised. Reverse mortgages have also made a name for themselves over the last 10 years and their volumes are expected to increase. A study performed by the National Reverse Mortgage (NRMLA) showed that based on a survey, 70 percent of reverse mortgages are to fund everyday expenses and payoff existing mortgage debt. With the Baby Boomer generation retiring over the next 10 years, the volume is expected to increase. The Baby Boomer generation is generally a demographic that prefers the face-to-face conversation, which is a benefit to the individual mortgage broker. Reverse mortgages could then become the new norm for retirement planning as Social Security funds are expected to deplete by the third quarter in 2023, as shown in a recent report issued by the Social Security and Medicare Boards of Trustees. Not all is bad with residential lending as the regulatory bodies mentioned above are all for the protection of the borrower. TRID has shifted certain responsibilities to the lender, including a three-day window to allow the borrower to review the closing documents before arriving at the closing table. Some lenders would even argue that the shift in responsibility mitigates confusion and also create clear checkpoints along the way so that the lender, realtor and borrower are all on the same page. Dodd-Frank rules have enforced an even playing field for loan officer compensation and deter collusion between the broker and lender. The new rules prohibit brokers from generating higher income by placing borrowers in more expensive mortgage products that borrowers may not be able to afford. Where is the industry going and how can mortgage companies capture the market share that the mega banks are leaving? From a borrower's perspective, they want easily accessible data and want the process done as quickly as possible. With that said, they also want to know the options and financial resources to make the best decisions for them. What is the optimal amount of downpayment to provide given I have two children in college? Should I buy points? Would I be better off getting a 15-year mortgage or 30-year mortgage? There are many variables to consider that the average borrower may overlook. In today's environment, there are numerous Web sites that will compare interest rates, provide homes that fit a borrower's desired filters and make the application process as automated as possible. There are also services that can pool together borrower data from various online sources. As technology and the utilization of online resources increases, what will the future of the mortgage process look like and how will companies best adapt to seize market share? As we all know, housing markets and regulations differ geographically with states and municipalities having unique laws governing the housing market. The key will be to concentrate on a region that is tolerable for a smaller company to capture and stay current with. The younger generation wants information at their fingertips, from phone apps, and they want Web sites to be user-friendly. Social media can be leveraged to draw borrowers to a mortgage company's Web site. This will be a new cost that mortgage companies are facing and may require a new marketing person to stay on top of the social media world. Facebook began charging for advertising since going public and there's a strong likelihood that other social media outlets will begin doing the same. Mortgage companies still live and breathe on referrals from previous borrowers, real estate agents and financial services professionals. Referrals are a no-cost marketing tool, but build your brand, introduce new business and generally are a win-win for all parties involved. The key to a quality loan officer will be personality, adaptability, financial acumen and technologically savvy. There has been a significant decline in loan officers over the previous years. Borrowers with less of a personal finance background will have questions regarding tax deductions, mortgage options, home equity, the closing process and a bunch of 'what-ifs' which LOs are expected to be able to answer. LOs will need to stay abreast on regulations through continuing professional http://www.NationalMortgageProfessional.com http://www.Forbes.com

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