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Fine-tuning the Mortgage Manufacturing Process

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By Moshe Abudarham

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When American businessman Henry Ford developed the assembly line, he forever changed the manufacturing process and made cars available to the middle class. Rather than build cars one at a time, he used a technique that allows for the mass production of cars, piece by piece as they move from station to station in the factory. Today, all sorts of products follow the same methodology, including mortgages, and several mortgage companies – including Quicken, Flagstar, UWM, and Homepoint – operate out of Michigan, where Ford founded his company.

As Homepoint CEO, Willie Newman, put it at our recent Mortgage Mic Drop event:

“Fundamentally it’s getting a little bit more advanced now. But fundamentally, mortgage is the manufacturing process. So, you know, assembling a mortgage is a manufacturing process. Now, again, I would hope that over time we can make it much more modernized, digitized, and more convenient for the customer. But I kind of feel like it’s just in the DNA of the region that we would be kind of focused on manufacturing at scale.”

All mortgages start with a potential homebuyer, or a homeowner looking to refinance an existing mortgage. The consumer applies to prequalify, based on their income and credit profile, and gets an idea of their eligibility and likely rate and monthly repayment. As we explained in our recent blog, lenders can use data they already have access to to predict when a consumer is ready for a mortgage or refinance and to prequalify the consumer proactively, ahead of the competition.

The next step is a formal mortgage application, which lenders can put entirely in the hands of the consumer. In our Ask the Expert webinar with Thuan Nguyen, CEO of Loan Factory, he explained: “We give the customer the control. They are the ones that fill out our application. They are the ones that submit the documents to us. They are the ones that monitor the rate. They are the ones to tell us to lock the rate. So they are in control of the entire process, not us. But in effect, I give them the control, but I give them the work. They do all the work for us, I don’t have to do it… So that way it saves me time, saves me trouble, and makes everything move so fast, so easy.”

At this point, the professionals have to get involved to move the mortgage further down the assembly line. A loan processor will pull the consumer’s credit report, request a property appraisal, and submit an order to a title company. This is where lenders can leverage the efficiencies States Title is creating in the title and escrow process, through innovations such as instant underwriting that can deliver a final title commitment, free of defects, in less than a minute for 80 percent of refi transactions, and instant closing disclosure, which leverages machine intelligence to return a completed settlement statement to lenders in under a minute.

When we spoke to Jay Promisco, Chief Production Officer at Sierra Pacific, he said that one of the first things he did after arriving at the lender was to negotiate with all of its credit report vendors and appraisal vendors to get the cost of manufacture down. That allows him to pass that saving to the consumer and gives Sierra Pacific a higher win rate.

During an Ask the Expert webinar entitled “How to Close a Loan in 7 Days,” Jay explained how his team now runs an automated underwriting system (AUS) concurrently with property inspection waivers and automatic collateral evaluation.

“By putting both AUSs and running them at the same time, we’re now at like 38 percent of our applications have an inspection waiver. That’s 38 percent of our loans where I don’t have to worry about an appraisal anymore,” Jay said, and this method can shave up to 15 days off the production process.

By following Willie, Thuan, and Jay’s example, it’s possible for lenders to make the mortgage manufacturing process more efficient at every stage. To learn more about how States Title can help your loan operations team to become more efficient by using technology to complement optimized processes, supported by a unique ops service model, download our ebook, Partnering to Capture Value in the Closing Process.