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Mortgage industry moves into digital age

Mortgage companies have been rapidly adopting new digital technology, partly driven by new regulations and party by the demand from mortgage customers seeking a quicker, paperless process. Henry Cason, senior vice president and head of digital products at Fannie Mae, discussed the revolutionary changes that have laid the groundwork for a digital mortgage.

Why should the mortgage industry view new digital technologies as a good thing?


I have been at the firm for over 25 years, and have been involved in this industry inside and outside of Fannie Mae for a long time, and a couple of things have been happening over the last 18 months that have increased the focus on digital. One is that more and more consumers, who are customers of our customers, have been looking for a better experience when purchasing a home.

Other companies across the world, like Amazon, have been really building customer experience, and that is starting to translate into mortgages. People are looking for a better way to get a mortgage versus the traditional way — lots of phone calls, lots of paperwork. The second thing we are seeing is that, over the last 15 months, we have transitioned from primarily a refinance market into a purchase market. That is a much different market. It is harder. It is more expensive. Our customers [the lenders] are looking at digital as a way to create a better experience for their customers [borrowers], as well as using digital technology as a way to streamline the process, create some efficiency and reduce costs, so they can compete in this transition to a primarily home-purchase market. 

How far along is the mortgage industry in creating a fully paperless mortgage process?

Are we close to 100 percent digital process for every loan in the country? Probably not. Lots of our customers have been focusing on the entry point, when consumers begin to reach out to them, and start the application process. A lot of our customers are completely digital in terms of collecting that application and processing that application, and [reporting] findings back to the consumer. So, a lot of time has been spent on the front end. There are a lot of fintechs [financial-service technology companies] that have entered into the space to solve this problem for some of the banks and nonbanks who originate mortgages. It is a much faster way for them to get up a digital front door. So, that part of the process is well on its way.

We have got a long way to go in terms of steel threading [the process] from the time a borrower takes application to the time a loan is closed and then sold on the secondary market. But you are starting to see pockets of either digital tech or process engineering start to occur. Over the next 12 to 18 months, you’ll start to see our customers stitch it end to end.

Is there the infrastructure in place to create a true eMortgage from the point of origination to securitization?

When I hear the word "infrastructure," I automatically go to platforms. Is there one platform? No. But there is enough tech, whether that is existing tech or new digital tech that is in place that would allow you to do a digital mortgage. We have a number of customers that are assembling that, whether in partnership with us or with other third parties, to create that end-to-end digital view. I believe the tech is there, but you need more than just tech. You need  to look at your existing processes. Our customers have not been that successful when they have put new tech on old process. So, it is a combination of the ability to look at infrastructure and tech, and combine it with process efficiency, process change. The customers who are doing that are further down the road.

Do you have a prediction on when an eMortgage will be widely adopted?

We have had an eMortgage program for a number of years. The issue with eMortgage has been from an adoption perspective. No. 1, the technology had to be mature and be in place. I think we are there now. There are a number of pieces of tech that allow you to store a note digitally, and to do a bunch of things around that. So now it becomes about what is the value to the customer? It has to be more than just an elaborate technology solution. How do you take that technology and create value, so people want to do an eMortgage? And how does that integrate into the processes in front of it and the processes behind it?  That work is now happening. We are seeing a lot of momentum in the last eight months. In 12 to 24 months, you are going to see a higher number of [eMortgages] begin to happen.

Technology also tends to raise suspicions. For example, appraisers are concerned that automated-valuation models, basically robots, will increasingly replace appraisers in complicated home-purchase deals. With the Equifax breach, data security also is a major concern. Does fear present any threat to the widespread adoption of digital processes?

Let me take the security issue first. Fannie Mae takes security extremely seriously. When we bring partners on the platform that connect into Desktop Underwriter [Fannie’s suite of programs that determine a loan’s eligibility], the first conversation we have is around security and controls, and the second conversation we would have is around function. We are highly invested in security, but it is a concern for people looking for homes. If I am moving into a more digital process, is my data being protected? Yes, that is a barrier to adoption. One of the reasons we are heavily involved in the space is to make sure that not only is it [the mortgage process] fast, not only is it cheaper, but it is also safer and secure. I don’t believe you can have the first two without the last two.

On the first one [the question involving appraisals], I think, any time any industry is going through a transformation, like the mortgage industry most certainly is, you always have key participants in that industry start to question their relevance. In the context of appraisers, Fannie Mae believes that appraisers have a role in this industry, even with a digital mortgage. We want appraisers looking at very complicated home-purchase deals, or at the areas where you may not have the data you need. Our digital strategy is to have them integrate and compliment the process because, in the case of appraisers, they have real expertise.

How long do mortgage companies have to adapt to the new technologies so they don’t get left behind?

Last 12 to 18 months have been a whirlwind in terms of what we are starting to see in the industry, in terms of adoption of new tech or the ability to refocus process change. We have seen a tremendous amount of momentum across both banks and nonbanks. We have seen it all over the place. You are also seeing a lift, in terms of changing the industry, from interesting fintechs that have burst on the scene and solved very specific problems. Change is happening pretty fast. Let me say it this way: [in] 25 years working for Fannie Mae, the last 18 months is the first time I have really felt that there has been real change [in the industry], a real want to change. We still have a long way to go, but I can actually see it, and I am optimistic about where we are headed. 


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