The FinTech industry had already begun to disrupt the mortgage space before the COVID-19 pandemic pushed borrowers further away from the traditional consumer lending landscape. FinTechs are attracting borrowers by providing a seamless customer experience that traditionally, banks and brokerages just haven’t been able to offer.
This became particularly evident when it came to business loans at the end of March when the federal government launched the Paycheck Protection Program (PPP). Because of the heavy reliance on manual processes in the traditional bank or credit union environment, FinTech lenders were able to step in and gain a lot of new customers in a short amount of time. For traditional lenders and brokerages to compete with FinTechs, a digital transformation needs to take place.
“FinTech lender create their own proprietary systems to ensure their systems and workflows are efficient but you don’t have to be a FinTech to have the best technology,” said Michael Farris, vice president, strategic solutions at Origence, an end-to-end lending solution. “There is software out there that lets traditional mortgage brokerages and lenders to do the exact same thing.”
Choosing a software solution that gives flexibility to compete while creating a seamless process is key, Farris added, because looking sleek just doesn’t cut it. Something that many mortgage companies don’t realize right away is that the loan origination system (LOS) is just as important as the point of sale (POS).
“Integrations on other parts of the system can be extremely beneficial, but I highly recommend automating the core LOS as opposed to tacking a bunch of systems on top of a legacy system. It’s not going to flow well and there will be issues with data moving back and forth,” said Farris.
While a good POS is important for taking the application and getting documentation in order, he added that having the back-end system to support that and move the loan process along for a quicker closing is vital.
“What happens in our industry is people rush to the next new shiny object as quick as possible, but it’s more valuable to look at the whole loan process and figure out the best way to compete. It’s great to get an application in 30 minutes, but if it still takes 30 days to close the loan, then how much benefit are you actually getting.”
Farris says there’s a huge benefit to being a local lender and a great opportunity to build strong relationships and gain trust of the community, whereas online lenders don’t have that option. His advice is to continue using local roots to connect, while examining processes and finding the best solutions.
“Lending processes are often quite similar because of regulations, so workflows won’t differ tremendously. Lenders should look for systems that are flexible, and won’t pigeonhole you, with the option to delineate workflows for different products. You probably want different workflows for a trust loan vs a 30-year fixed loan.
“Slick isn’t enough; the back end needs to be working smoothly to make sure internal processes can make sure the loan gets to the pipeline as quickly as possible to close on that loan.”