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When the Risk of Inaction Suddenly Outweighs the Risk of Action

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By Moshe Abudarham

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Unless you’ve been living on a desert island, actually scratch that… Even if you’ve been living on a desert island, you will have noticed the (hopefully temporary) medical, economic, and financial global gut punch that is the ongoing Covid-19 pandemic.

As a mortgage executive with millions if not billions under management, allow us to assume you want transparency, a sense of tempered optimism, and a plan.

March madness indeed

First, as promised, some transparency.

Having already paused long-awaited rate increases in December 2018, last month the Federal Reserve slashed the base rate to the record low 0-0.25% band, first seen in 2008 as a response to the U.S.-housing-induced Global Financial Crisis.

Effective Federal Funds Rate 2002-2020, Credit: St Louis Fed

At the same time, quantitative easing is back with a vengeance, with the Fed injecting $4,000,000,000,000 (yes, Trillion with an oversized, inflated capital ‘T’ and how often do you see 12 zeros-worth of stimulus?).

As for tapering – the other Fed initiative beginning with ‘t’ – it has become a distant memory, a financial dream that barely happened.

Federal Reserve Assets 2002-2020, Credit: St Louis Fed

And although U.S. mortgage rates have fluctuated in a relatively small range – especially as compared to stock, bond, commodity and foreign exchange markets – the Fed’s $200 Billion splash into the mortgage backed securities market is disrupting market fundamentals, as mortgage lenders’ loan portfolio hedges also flip on their heads.

But having been declared essential business, the question is less what has happened or is happening, but how post-Covid mortgage industry winners act with agility and integrity now, while post-crisis losers react slowly, ineffectively, or even negligently in the coming months and watch the competitive edge they once held disappear?

It was the best of times…

Moving swiftly on to a sense of tempered optimism, let’s turn to perhaps one of the most quoted opening lines from an English writer since Shakespeare:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.

– Charles Dickens, A Tale of Two Cities

Ok, so most people don’t quote the full paragraph, but for our purposes, it is highly poignant. In every crisis, there are glimmers of sunshine in the stormy sky. There are ethical (and unfortunately, unethical) opportunities to realize. And ‘the right course of action’ – given evolving events and possibilities – does exist and is waiting for the wise to pursue.

They say ‘real estate is local,’ and in large part that is and will always be true, but from credit scores to mortgage approvals and title and escrow to closing, real estate transactions are rapidly becoming remote and increasingly digital.

Innovation isn’t for everyone

We have a saying here at States Title: “Innovation isn’t for everyone.” It’s not to be condescending, but rather a simple acknowledgment of a well-known fact, neatly illustrated below:

The Rogers Adoption Curve from Innovators to Laggards

In ‘normal times,’ being on the left hand side has its risks – early adopters get prototype versions of a product or service, before the name and essential design features are bestowed-by-consensus upon the new offering.

But inherent in the laggard label, nobody wants to sit at the far right of the adoption curve – everyone knows laggards lose by being late to the innovation party.*

And generally, staying in the middle of the bell curve offers balance and stability (if lower potential returns), while avoiding the opposite possible pitfalls of maintaining a first-mover advantage and of waiting until it is too late to move at all.

The impediment of action advances action. What stands in the way becomes the way.

– Marcus Aurelius, Roman Emperor

When nothing is ‘usual,’ however, the adoption curve has a tendency to skew to the right – rapidly ensnaring the early and late majority in the laggards’ predicament. The time for inaction is over, and to be a post-Covid mortgage industry winner, you want to cleave to the left side of the adoption curve as quickly as possible.

Wait, what about the plan?

In the past few weeks, our focus – after the health and wellbeing of the people who make up the States Title family – has been to check on the health and wellbeing of our customers and their mortgage operations across the U.S.

Most are dealing with the situation admirably, many have turned to us to help them to stay abreast of regulatory and legislative developments at the federal, state, and local level – and to increase the volume of closings they can complete digitally with a remote online notary (RON). In some states, we have arranged an agent or attorney-in-fact enabled by a limited power of attorney (LPOA) to facilitate the transaction.

As a VP at our earliest and largest customer put it this week:

You have been ‘outstanding’ in operational efficiency during this COVID crisis – it has been noticeable to everyone.

Our clients showed foresight about an industry ripe for disruption and acted before the current crisis. We thank them for their faith as early adopters and are here to support them in every possible way.

But there’s still time for agile mortgage executives to act now, embrace RON closings, digital signatures, and our patented instant underwriting solution, and offer your customers the most convenient, approved way to close a mortgage from the relative comfort of their home.

In the coming weeks, we will share valuable resources around RON and LPOA arrangements to a broader audience. If you can’t wait that long, please get in touch today. Show us that innovation is for you, and we’ll show you how to close mortgages at scale, remotely, in this time of unprecedented upheaval.


*Full disclosure: I bought a top-of-the-line Sony MiniDisc player mere months before the iPod changed portable music forever, and then bought a top-of-the-line Sony digital camera mere months before… the iPhone changed mobile photography forever. Yes, I experienced being at the wrong end of a soon-to-expire adoption curve, twice, before I was 20.