The Housing Scene by Lew Sichelman

More Loan Processes Are Going Digital

Nowadays, you can get a mortgage any way you want it: You can apply online or in person. You can apply online, then jump off the internet to talk to a real, live person anytime you want. Or you can stick to the old-fashioned face-to-face application process throughout the entire transaction.

But what about the other important parts of obtaining financing -- the appraisal, the underwriting process and the loan servicing? These processes, too, are changing, but at a slower pace. Here’s a brief rundown:

-- Appraisals. Forget that appraisers sometimes seem to be slow to keep up with rising values. While that, in itself, can squash transactions in markets where house prices are rising rapidly, the real bugaboo these days is that it takes so long for them to complete their tasks.

The reason isn’t that the new regulations require them to be more thorough. Rather, it’s that there aren’t enough appraisers to keep up with the volume of work. And it’s going to get worse before it gets better.

Many appraisers are leaving the business because management companies, those controversial outfits hired by lenders to oversee the valuation process, are taking such a big slice of valuation fees that appraisers say they can’t make a living. And with the average age of appraisers approaching 60, many are either slowing down or retiring.

To remedy the situation, the Appraiser Qualifications Board, which sets education, experience and examination requirements for property appraisers, has boiled down its course load. Soon, this will allow appraisers to go out on their own in a year instead of the usual 2 1/2 years, reports William Fall of Valuation Partners in Toledo, Ohio.

Unfortunately, the new program won’t go into effect until July 2018. Until then, it’s going to cost more and take longer for appraisers to get their eyes on properties. “This is long overdue,” says Fall. “I wish it would have been July ‘08. Unfortunately, you can’t go backwards.”

-- Underwriting. Waiting for word from your lender that you’ve been approved for financing can be a suspenseful period. But forces are at work to streamline the process to give would-be homebuyers an answer more quickly.

Generally, it takes eight to 10 days to hear back from your lender. But under Fannie Mae’s new “Day 1 Certainty” program, lenders are making their decisions in a day and a half. “Thirty-six hours is a big deal,” says Andrew Bon Salle, executive vice president of single-family business at Fannie Mae.

Fannie Mae doesn’t make loans, at least not directly. But it is a key force in America’s mortgage financing system. Without it and other secondary market investors, lenders would run out of money to make loans. So to replenish their vaults and keep the spigot open, lenders sell their loans to Fannie. And to keep her happy, they follow her rules.

Under the Day 1 program, lenders don’t have to worry about being forced to repurchase loans to borrowers who default if they use Fannie Mae’s electronic validation service. With the borrower’s permission, lenders using the software can corroborate income, assets and employment, all online.

“We’re enabling a more accurate, simpler digital process,” says Bon Salle. “Lenders and borrowers benefit by moving away from the manual processes prevalent in the industry today.”

In other words, with the company’s technology updates, pay stubs, W-2s and tax returns will no longer be required. And, better yet, appraisals can be accepted upfront without the need for follow-ups.

Says Glenn Brunker, president of BOK Financial in Tulsa, Oklahoma: “This is a win-win, as the customer’s experience is improved through reduced documentation and accelerated closing dates, while we receive reps and warrants and operational efficiencies.”

-- Servicing. Another major pain-point for some borrowers is how their payments are collected and their money disbursed to the loan’s owner, the property insurer and the state and local taxing authorities. Sometimes, it just doesn’t go right. And to compound matters, the companies that manage your mortgage -- called servicers -- are not terribly responsive to your complaints.

But firms like BSI Financial Services of Irving, Texas, are using big data to service loans “cheaper, faster, with higher quality -- and with fewer mistakes,” says BSI President Gagan Sharma.

With the data his company has in its system, Sharma says he can identify small problems before they have a chance to become big ones. So, if your tax payment has been routed to the wrong agency, the system will catch the error -- probably before you do.

Equally as important, if you normally make your payment on the fifth of every month and the system hasn’t received your payment by, say, the seventh, the system will flag your account and a human will call to ask if something is wrong. Perhaps it’s lost in the mail, or maybe you’re having a bit of trouble financially. If it’s the latter, the human will ask, “How can we help?”

“With automation,” says Sharma, “we can find and address problems earlier. And that makes for a smoother process for everyone.“