CoreLogic's Sapan Bafna says lack of tech adoption made the 2008 housing crisis worse – and the industry still has a way to go
While the mortgage industry has weathered the COVID-19 pandemic well so far, the crisis will bring its own set of challenges, according to an expert from CoreLogic. Chief among these challenges – the industry is still underusing technology and data.
The mortgage industry ran up against this problem before – in the 2008 housing crisis, said Sapan Bafna, senior leader of advanced delivery engines at CoreLogic.
“2008 had its own set of challenges. Different reasons caused the mortgage meltdown back then,” Bafna told MPA. “We knew back then that data was a big issue, standardization was a big issue, and technology was a big issue. The industry was doing a lot of things manually. We’ve come a long way since then, but technology needs to be used more proactively and more holistically.”
In response to the 2008 housing crisis, Bafna developed CoreLogic’s IntelliMods product, a loan-modification decisi oning tool that accelerates HAMP, GSE and proprietary loan modifications and provides auditable reporting and tracking. He said that while the mortgage industry has done well developing front-end technology – e-closing technology, for instance – in recent years, technology on the back end is still lagging behind.
And while the industry has rushed to adopt new tech as the COVID-19 pandemic changed the way business was done, Bafna said that an emergency wasn’t the ideal time to do so.
“When the times are good, those are the best times to change technology and processes because the impact is light,” he said. “But we always know there will be a cycle every 10 or 12 years. This time it’s COVID. The next 10 years, it may be something else.”
And with 3.6 million homeowners currently in forbearance, according to Black Knight’s latest estimate, Bafna said back-end technology will become even more important in the near future.
“The real problem will come when these borrowers go into remediation. Are we ready for this? I sort of have my doubts,” he said. “We have the technology. There is an end-to-end process that we can use data to automate things as much as possible. The problem is that the industry has not adopted it completely. There’s technology that’s available not just to the large lenders and servicers – it can be available to a very broad section. There’s just a lack of urgency. They’re all focused on very topical items.
“Very soon, seven to 10% of loans in forbearance are going to be in remediation,” he said. “Do we have an approach that’s really going to make the industry shine, or is it going to be the same news all over again? Is it a budgetary issue or lack of resources? If you talk individually, everyone agrees – but no company is run by one person. That combined entity makes it sort of a challenge until someone from the C-level puts their foot down and says, ‘We’re going to do this.’ … What’s needed is a push that says that this is critical and is going to be defining for the industry.”