As mortgage lenders near what appears to be the end of the refinancing boom, many banks have determined that, to stay competitive, they need to cut costs by further leveraging straight-through processing (STP) and automated underwriting technologies that were implemented during the loan rush of the past few years. But eliminating manual processes and creating a true STP environment is only the beginning. With more institutions vying for the business of fewer customers, it's more important than ever for mortgage players seeking to grow revenues to improve service by offering new and differentiated mortgage products, such as Web-based offerings.
With a decline in overall mortgage volume in recent years, financial institutions must reevaluate their growth and operations strategies in the mortgage market, according to Craig Focardi, a senior analyst in the consumer lending practice at Needham, Mass.-based TowerGroup. "The lending industry volume at peak was $3.8 trillion in 2003 and declined $2.85 trillion in 2004," he relates.
However, by further automating mortgage systems and cutting operating costs, lenders will be headed in the right direction, Focardi continues. "The initial strategy is to cut costs," he says. "Leading lenders that are looking to increase margins are using technology to further automate their lending process." According to Focardi, the leading technology vendors in the mortgage space include Fair Issac (Minneapolis), Fidelity Information Solutions (Jacksonville, Fla.), FileNet (Costa Mesa, Calif.), Fiserv Lending Solutions (Lake Mary, Fla.) and Harland Financial Solutions (Atlanta), which offer solutions ranging from point-of-sale and loan origination systems to document- and vendor-management systems.
Mortgage by Numbers
Some banks are mitigating declining refinance volume by emphasizing other types of mortgage products. For example, AnchorBank (Madison, Wis.; $3.84 billion in assets) is maintaining strength in the market by focusing on new purchases. According to Lynette Passini, first vice president, residential lending operations, AnchorBank aims to determine what customers will need next and cater to those needs.
"I think the refinance boom will be running out of steam," says Passini. "We are focusing less on our origination of refinances and focusing [more] on purchases."
To address operational efficiencies and support growth of its statewide mortgage lending business, AnchorBank implemented a mortgage loan origination system (LOS) from Fiserv Lending Solutions. The bank deployed the vendor's easyLENDER platform, integrating the system closely with Fiserv Vision, a core processing system that the financial institution has used since the '70s. The implementation took place in July 2002, in the midst of the refinance loan rush, reports Passini. At the time, the bank's mortgage activity tripled in volume and the system helped handle the growth.
"The product seemed to keep pace with those increased volumes," notes Passini. "In 2002, we closed over $2 billion in residential loans. What we would consider normal is 500 loans a month and we were processing 800 loans to 1,000 loans a month after the Fiserv product was implemented."
In addition to the fact that it had a prior relationship with Fiserv, AnchorBank chose easyLENDER because of its reasonable price and ability to integrate with the Vision product, relates Passini. "We wanted a one-stop shop product that would mix well with Fiserv Vision," she says. Part of Fiserv Lending Solutions' suite of mortgage, consumer and commercial lending products and services, easyLENDER has enabled AnchorBank to automate every phase of its mortgage loan origination, processing and closing stages, Passini adds.
As a result of the automation enabled by easyLENDER, AnchorBank has reduced operating costs, Passini continues. "Technology helps us to lower our processing costs," she says, pointing to the automation of task and document tracking from origination through post-closing review as an example. "This allows us to track printing, receipt of documents and processes throughout the entire process," Passini explains.
The next stage of mortgage automation at AnchorBank will involve the introduction of a Web-based application, providing customers with an additional channel for loan origination. The bank currently is rolling out an Internet platform through which customers can send their mortgage applications directly to the underwriting department, reports Passini. "We will then have a new way to offer [mortgage products] and get those underwritten quickly," she says.
Customers who apply for mortgages online will be able to complete the entire application process online. The Web-based application process, which is powered by Cedarburg, Wis.-based Mortgagebot, is fully integrated with the easy-Lender solution, allowing the loan origination system to pull data from the online application, eliminating double entry, Passini explains. "We can use a combination of the Web application and the easyLENDER application to completely process that loan from starting point to post-closing review," she says.
Since AnchorBank already is a "paperless society," Passini adds, the implementation of the electronic application process should be seamless. Most of the bank's documents already are scanned and available to bank employees in the easyLENDER system, she notes.
With the rollout of the Internet mortgage application solution, AnchorBank hopes to increase mortgage volume and also help loan officers manage their time more efficiently, Passini continues. "The Internet lending site is an opportunity to free up some of our loan officers' time," she says. "A lot more applications for loans come through the mail and over the phone." Web-based applications would allow the bank to process mortgages without a face-to-face meeting between a loan officer and the prospective customer, Passini says. She declines to estimate what percentage of mortgage applications the bank might receive over the Internet.