The following post is part of a series of blogs written by MeridianLink Partners who will be attending the MeridianLink LIVE! User Forum in May 2022. To learn more about the event, click here.
We in the mortgage industry speak frequently about “improving the process.” We’ll all agree that, while we’ve come a long way in streamlining the transaction, a combination of regulation and the practical need for numerous parties interacting and collaborating from loan application to closing can make the experience a bit choppy at times. That choppiness can frustrate parties and consumers alike, as it can make the entire transaction anything but transparent.
While it’s easy for regulators and advocates to call for more transparency, it’s not always as easy, as a practical matter, to put the entire process on display for all to see, whenever they wish. We’re getting much better at it, but transparency and, in fact, clarity, are laudable goals toward which mortgage businesses are still working.
We applaud the efforts of organizations like MISMO, or the pioneers championing a fully digital, “end-to-end” system. We’ve seen great strides made in increased efficiency, as well as improved consumer experience, with the latest POS and LOS technologies, most notably, from our friends at MeridianLink! And we know that AI and RPA technologies are already making their way into the production process, automating some of the most basic and redundant processes to accelerate the process as well as decreasing errors and chokepoints.
Let’s not forget, however, that the little things can also have a big impact when it comes to streamlining the transaction as well as bringing greater clarity to all involved. And although nobody really spends a ton of time thinking about things like the Loan Estimate (LE) and closing fees, stop and consider for a second how these two relatively minor factors can impact the entire transaction.
In the “good old days,” a borrower was provided a Good Faith Estimate and Truth in Lending statement at some point before the actual closing. Both were supposed to give borrowers some idea of what their title and closing costs would be, among other things. Because these can vary widely from state to state, county to county, this variable was a true wildcard. The closing and settlement fees that appeared on the final HUD-1 form often varied dramatically from the estimate, and not always to the borrower’s advantage. Odds were also that borrowers, unless they had friends or relatives working in the title and settlement industry, had no idea what these fees were for or why they were being charged. If they didn’t have a cashier’s check in the exact amount required, the closing would be rescheduled. Now consider that, more often than not, the Truth in Lending statement and GFE were often provided days or even hours before the actual closing. The result was the opposite of clarity or transparency and left more than a few borrowers mumbling about junk fees or ambush tactics.
Although closing fees are a relatively minor part of the greater mortgage transaction, the lack of transparency was enough to cause federal intervention—and quite a bit of upheaval throughout the industry. Remember the chaos around the first reform trial balloon? Remember the “bundled services” concept that almost came to be in 2003 – 2004? If you were in the industry in 2015, you’ll likely never forget the turmoil that rocked many operations across the industry as we lurched from the HUD-1 and GFE process to TRID in a very short period of time.
All because of the disclosure process for, among other things, closing fees.
Today, of course, lenders don’t have the luxury of being inaccurate on the LE without facing curative penalties. And they don’t have the time to jump on the phone, send emails, rely on inaccurate templates or peruse bad websites in the hopes of finding accurate title fees or recording taxes. In such ways, an accurate, digital closing cost calculator with continuously updated data and providers who understand the nuances of closing fees and taxes delivers speed and accuracy. But by making these estimates available to the consumer weeks before the actual closing documents are delivered, that little closing cost calculator helps solve the transparency issue that set an entire industry on its ear for months when TRID became law.
The mortgage industry has come a long way in making the process more transparent to all involved. Today, AI solutions provide status updates to realtors, loan officers, and consumers alike without the need for two voicemails, one returned call and a fax—and the time it takes to make them. Digital solutions are making archaic processes using “stare and compare” skills obsolete. Lenders are spending less time trouble shooting manual processes, and reallocating their skilled labor to more complex, and important tasks like client support or sales. And in many, many little ways—such as accurate, digital closing cost calculators—the mortgage industry is moving toward clarity in a way it never has before.