The mortgage application process is often no picnic for borrowers. The time to close can easily take 40 days or more—and for someone eager and excited to move into a new home, those days can feel like forever. Eagerness can turn into anxiety when problems arise along the way; a Consumer Financial Protection Bureau report found that 24 percent of applicants had their closing delayed, and 18 percent were forced to redo paperwork.
The result? Borrower expectations and the current housing market put lenders under pressure to deliver expedient, technology-based service to customers. That sounds reasonable in theory, but without the right tools and a careful strategy, a lender’s risk profile can increase. And don’t forget—expediency doesn’t necessarily mean efficiency: A lender that chooses the wrong technology may see its revenue flatline or worse, fall.
The best loan origination software (LOS) solves this challenge by automating risk mitigation and streamlining the application process from start to finish. Here’s a closer look at how:
A Risky Lending Environment
Lenders face risks from all angles—and not just borrowers defaulting on their mortgages. You are likely well aware of many of these risks, including:
- Changing conditions in the housing market
- Changing economic conditions
- Fair Lending compliance
- Security and privacy risk
- Industry and governmental compliance
- Fraud risk
A newer risk that lenders are facing isn’t so much technical as it is market-driven: As interest rates climb, the number of mortgage applications have decreased. Lenders require quality software to optimize the applications they do receive. Yet, many banks are still processing mortgages with weak software or with multiple solutions that don’t always play nice with each other. This condition not only risks slowing down the process, but also risks losing valuable loan applicants along the way.
A Superior LOS Mitigates Risk
Most risk during the mortgage process is unavoidable—it’s just the nature of the business you have to live with. However, a comprehensive, efficient LOS mitigates much of this risk, giving you confidence that the solution is automatically covering every base. The best loan origination software helps in the following ways:
- Better underwriting that helps ensure risky applicants aren’t slipping through
- Streamlined compliance so you know all the boxes are checked and that you aren’t running afoul of any regulations
- A focus on Fair Lending risk so that steering, underwriting, and pricing are uniform for every application
- Better security so that your systems are safe and applicant data is not exposed
- Robust audit trails to pinpoint who did what and when
- Integration with top risk mitigation solutions to handle data within one system
A top-notch LOS offers other benefits, such as making the process easier for your customers, which in turn reduces their frustrations and increases the odds they will stick with you for their present loans—and beyond.
Less risk = more efficiency and fewer problems. More efficiency and fewer problems ultimately mean more revenue in the long term. A great LOS:
- Streamlines your processes, eliminating the need to juggle multiple systems and allowing you to handle more applications in less time.
- Centralizes data so both your staff and applicants can access information, forms, and documents quickly.
- Reduces decision times, allowing you to process more applications and approve more loans without sacrificing the quality of your decisions.
- Finalizes the loan process in less time, which makes borrowers happy and frees up staffers to work with more customers.
- Configures to your requirements, workflows, and reporting preferences.
- Provides mobile capabilities, which delivers convenience to customers and efficiency to your team.
All these benefits can favorably impact your bottom line over time. Moreover, the best loan origination software is easy to implement and train employees to use, thus allowing you to hit those long-term revenue advantages sooner.
A Win-Win Solution
Risk must be managed—that’s a non-negotiable in the mortgage industry. Lenders must also maximize revenue. Efficient loan origination software puts you in control of both.
Further, the efficiency gained by an outstanding solution reduces your cost to process each loan, thus allowing you to process more and serve your customers better—which may be the best benefit of a superior LOS. When you meet your borrowers’ needs, you not only increase the chances of them becoming repeat customers and advocates, but also help make their home ownership dreams come true.