The following post is part of a series of blogs written by MeridianLink Partners who will be attending MeridianLink LIVE! User Forum in May 2022. To learn more about the event, Click here.
By: North Star
In the mortgage industry, we often talk about “making the process better”. We will all agree that while we have come a long way in streamlining the transaction, a combination of regulation and the practical need for many parties to interact and collaborate from loan application to closing can sometimes make the somewhat hectic experience. This fuss can frustrate parties and consumers alike, as it can make the whole transaction anything but transparent.
While it’s easy for regulators and advocates to call for more transparency, it’s not always so easy, in practice, to put the whole process in full view of everyone, when they want it. We are improving a lot, but transparency and indeed clarity are laudable goals that mortgage companies are always working towards.
We salute the efforts of organizations such as MISMO or pioneers advocating for an “end-to-end” all-digital system. We have seen great strides in increased efficiency, as well as improved customer experience, thanks to the latest POS and LOS technologies, especially from our friends at MeridianLink! And we know that AI and RPA technologies are already making their way into the production process, automating some of the most basic and redundant processes to speed up the process and reduce errors and bottlenecks.
Let’s not forget, however, that the little things can also have a big impact when it comes to streamlining the transaction and bringing greater clarity to all parties involved. And while no one really spends a ton of time thinking about things like loan estimate (LE) and closing costs, stop and think for a second about how these two relatively minor factors can have a impact on the whole transaction.
In the “good old days”, a borrower would receive a good faith estimate and statement of truth about loans at some point before the actual closing. Both were meant to give borrowers an idea of what their title would be and closing costs, among other things. Because these can vary widely from state to state, county to county, this variable was a real wild card. The closing and settlement costs that appeared on the final HUD-1 form often varied significantly from the estimate, and not always to the benefit of the borrower. There was also a good chance that borrowers, unless they had friends or relatives working in the securities and settlements industry, had no idea what these fees were or why. for which they were charged. If they did not have a cashier’s check for the exact amount required, the closing would be postponed. Now consider that, more often than not, the Truth in Lending statement and GFE were often provided days or even hours before the actual close. The result was the opposite of clarity or transparency and left more than a few borrowers mumbling about unwanted charges or ambush tactics.
Although closing costs are a relatively minor part of the larger mortgage transaction, the lack of transparency was enough to cause federal intervention and quite a bit of industry-wide upheaval. Do you remember the chaos around the first trial balloon of the reform? Do you remember the concept of “bundled services” that almost came into existence in 2003 – 2004? If you were in the industry in 2015, you will probably never forget the turmoil that rocked many operations in the industry as we transitioned from HUD-1 and GFE process to TRID in a very short time.
It’s all because of the process of disclosing, among other things, closing costs.
Today, of course, lenders don’t have the luxury of being inaccurate on the LE without facing curative penalties. And they don’t have time to jump on the phone, send emails, rely on inaccurate templates, or browse bad websites in hopes of finding accurate title fees or register taxes. In this way, an accurate digital closing cost calculator with continuously updated data and vendors who understand the nuances of closing costs and taxes provide speed and accuracy. But by making those estimates available to the consumer weeks before the closing documents are delivered, this little closing cost calculator helps solve the transparency problem that had an entire industry bugged for months when the TRID became law.
The mortgage industry has come a long way to make the process more transparent for all parties involved. Today, artificial intelligence solutions deliver status updates to real estate agents, loan officers, and consumers without the need for two voicemails, a return call, and a fax, and without the time it takes to do them. Digital solutions obsolete archaic processes using “look and compare” skills. Lenders spend less time troubleshooting manual processes and reallocating their skilled workforce to more complex and important tasks like customer support or sales. And in many ways, like precise digital closing cost calculators, the mortgage industry is moving toward clarity like never before.