3 Misconceptions about Borrower Collaboration

In recent months, “Borrower Collaboration” has proven to be a hot topic surrounded by much discussion. However, it has been widely misconstrued in how it fits in with the current mortgage procedure. We’d like to clarify what it really means and the effects it has on inclusion in the closing process. Here are 3 Misconceptions of Borrower Collaboration:

Engaging only at the beginning of the loan embraces full Borrower Collaboration.  

So many people believe that Borrower Collaboration is something that can be achieved with only the application or searching for a Loan, and then no other touchpoints throughout the mortgage process. Technically, yes, you “collaborated”, however, true Borrower Collaboration spans beyond an online origination, engaging and collaborating with consumers from the beginning of the transaction through closing, servicing, and eventually the next loan. Borrower Collaboration should be viewed as a situation where once you are connected, you are connected for life, constantly updating and engaging with borrowers.

Collaborate and done; no relationship required.

This industry must escape this all-too-common mindset, and needs to start moving to real relationships with borrowers. In today’s world, the most relevant way to connect with these customers is through business social media techniques to build electronic relationships with borrowers, from the beginning of the transaction throughout the life of the consumer. Once the industry recognizes and begins to apply these concepts, an entirely new business model emerges, which is both cheaper and more repetitive compared to the current “burn-and-churn, one-and-done” approach.

Borrower Collaboration is communication with only the Borrower.

True Borrower Collaboration should go one step further by creating collaboration, not just for the Lender but for Title, Real Estate Agents, and other service providers together. After all, that’s what the transaction is to the borrower. Because each party is involved with the transaction, a unified front of active communication is needed to truly engage the consumer and create the definition of Borrower Collaboration.

The old adage, “it’s much cheaper to keep a customer than get a new one,” now applies more than ever before. Here at Pavaso, we turn a mortgage into a lifetime electronic relationship where customers build loyalty to those who engage with them. As if it could get any better, this connection with Borrowers also reduces expenses, creates new revenue, produces fewer errors, features higher security, and allows for faster closings. 

Integrating eNotarization into Your Digital Strategy

Throughout the industry, eNotarization is one of the more commonly misunderstood aspects of the digital closing process. To integrate this process successfully into an overall digital closing strategy, there are a few key elements that must be in place: 

State Approved eNotary

There are many states that must certify eNotary systems and/or approve individuals to eNotarize documents. Lenders need to review the procedures of their eNotary provider because, although many early systems made some headway, their focus was too wide. Most providers only pursued blanket approval from states for all types of notarizations and did not look at the specific requirements for notarizing mortgage-related documents. Early approvals like these set the standards that may not be not applicable today and, in many cases, are incorrect, creating approval processes that do not meet mortgage industry requirements.

Embedded Notary

As we explained in an earlier post, document notarization, whether executed electronically or on paper, is an integrated component of the entire closing process. Trying to execute this activity as a one-off or separate from closing is wildly inefficient and risky, not to mention the fact that it disregards the CFPB’s directive to improve the closing experience for the borrower. Therefore, lenders should choose a provider that incorporates eNotarization as part of their overall closing platform, so that this functionality works to streamline the closing process rather than to obstruct it.

Understanding what eNotary really means

Contrary to what much of the mortgage industry steadfastly believes, physical presence and proof of identity are required with eNotary. In fact, identification is more accurately and efficiently verified electronically than it can be in the paper world. However, state regulators fear that eNotarization means documents will not be notarized in the presence of the notary, which is simply not true. Audit trails that track eNotarization are highly detailed and always available in Pavaso, which provides an abundance of proof of the details associated with all actions that take place, and not just at the closing, but for the entire process from start to finish.

Would you ever ask a notary for their credentials and proof of their commission being valid when you wet sign documents?  Would you ever check with the government to make sure the information the notary provided was valid and that they are in good standing?  No one has ever done that and would be hard pressed to get their documents signed if they tried to get that information on the spot.  In the digital world, the validation of credentials happens each time to make sure everything is valid and correct.  Secretary of State data bases are cross-referenced with eNotary solutions to be certain that all information is current, allowing only properly registered notaries to perform their duties.

eNotary is a prime example of a technology delivering a standard before businesses have caught up to define what is actually needed. This can easily be changed, but states need to consider business process benefits and the needs of the industry, just as much as the technology that is used to execute the process. In the near future, we expect to solve this issue by constructing a process where states approve closing platforms specifically for mortgages and other types of loans.  This will eliminate the concerns and unnecessary complexity of covering all the scenarios for any notarization, and will instead focus on the more streamlined mortgage process.

eNotarization involves much more complete verification and assurance that a notary has done their job correctly, and should be included as a part of any company’s digital strategy.

The Issues With Your Doc Prep Provider

Just as gasoline doesn’t work well in diesel engines, not all technology works well with your business.  The old version of technology, that has lived in the industry for the past 20 years, cannot thrive in today’s digital world. It’s time for a change. The two areas that should be of concern to Lenders are LOS Systems and Document Preparation technologies. It’s likely that the use of LOS’ will survive a bit longer, however, Document Prep companies are having serious issues with the ever-changing need for data in this fast-paced world.

Looking back, you can understand that what was once innovative 25 years ago, was only innovative compared to the other technology of the time. The problem is that many of these same companies are now twisting and manipulating the unchanged technology in an attempt to fit the new needs of the industry, leading to trouble providing good service and quick turnarounds. The risk associated with document preparation technology outweighs any other, simply because it’s no longer just about documents!

Every company says, “Trust us, we’ll have what you need,” and to some extent, they might. However, as we dive further into this new digital world, these companies will always be one step behind innovating leaders, keeping you waiting for them to catch up. You need a provider who has the technology you need, when you need it, and even before you know you need it. As you start to realize the limits of your current capabilities, we recommend you look to the future for your technology needs. Some providers, like SigniaDocs, were specifically built on new approaches, different ideas, and the discoverable weaknesses of other document preparation companies.

Now that you realize that your current technology won’t make the cut, when selecting an advanced provider, we urge you to make a decision based on data. Find a company that manages data with the ability to produce any media, whether it be MISMO 3.3, 2.4, 10.10, custom data files, Smartdocs, BlockChain, eNote, or paper. This gives you the flexibility to utilize the newest technologies that will work ideally in a digital mortgage world.

After all, history has shown that those who don’t change, don’t survive. Don’t get yourself caught up in antiquated technology that was built for the mortgage industry 25 years ago; choose a company built for today and the future.

Where Current eNotary Tech Falls Short

Electronic document notarization (a.k.a. eNotarization) is certainly an idea whose time has come, and for lenders that are pursuing a digital closing strategy, this technology should be at the top of their wish list. However, the eNotary solutions on the market today aren’t really ready for primetime. Here’s why.

Most eNotary solutions have been developed using the assumption that a notarized document exists independently from the rest of the real estate transaction. Thus, most solutions that accommodate eNotarized documents do so in a single document format.

In reality, document notarization is just another step embedded in the closing itself. There is no separate payment for those services, as it is simply included in the closing costs. In many cases, the notary is an employee of the title company or the lender. In others, the closing agent offers document notarization in addition to escrow and/or other services.

This reality is what eNotary service providers have failed to understand. You cannot reasonably expect to charge $50 for notarizing a closing package or up to $15 for each individual document. That’s not a permissible fee for lenders to charge, and because the closing is conducted as one complete transaction, it becomes difficult to eNotarize documents on a one-off or document-by-document basis.

In addition, eNotarizing documents in such a piecemeal fashion is both inefficient and creates a negative experience for the consumer, which flies in the face of what the CFPB expects. In the Pavaso platform, eNotary is simply a part of the closing, and a closer using our system is a licensed notary able to notarize as part of the closing process.

Speaking of integration, there are serious security risks to sending documents outside the closing system for eNotarization because doing so breaks the chain of custody and potentially exposes borrowers’ personal information. That’s why, in Pavaso, the documents don’t leave the system until they’re completed.

As you can see, one-off eNotarization providers still have some issues they need to work out before their solutions can be truly functional in a digital mortgage closing environment. However, this should not dissuade lenders from pursuing a digital closing strategy. Instead, lenders should seek out closing solutions that incorporate eNotarization as part of the full closing process. 

The Right Technology is a Moving Target

It would be an understatement to say that technology floods our marketplace today. Its presence has not only completely changed how we live our everyday lives, but how we think and expect the world to work. For example: In today’s society, it’s expected for your company to have an accessible website, is it not? So as expectations change, why does the mortgage industry remain stagnant? Why are we slow to adopt technology when it can only provide benefits to reaching and engaging with potential customers? Much of it comes down to the fact that we aren’t sure where to start. How do we find a technology that fits our business? How can we implement new technologies within our organizations without changing our everyday business workflows? We’re here breaking down how to successfully fulfill a technology project with 10 Key Principles that any business can follow. Here’s an excerpt from the white paper, Why Technology is so Difficult, on Principle #8 to mastering and applying technology successfully.

“Principle #8 - Best is the Enemy of Better

“Best” is a moving target. What’s best today could be passé tomorrow, and if you are constantly chasing “best,” you will ultimately spend inordinate amounts of money and effort on something that you may never achieve. Instead, let your business decisions be guided by “better.” Create a culture of continuous business process improvement where the goal is to move the needle forward just slightly each and every day. This “slow-and-steady” strategy will keep you as close to best – whatever it ends up being – without churning through resources unnecessarily to get there.”

The idea of “continuous business process improvement” is especially significant because this is the key to mastering any sort of organizational change, not just technology. In our blog post on Principle #7, we talked about how all technology has a shelf life and the importance of choosing a technology that can evolve with your business in the future. This is so imperative with technology because the idea of the best technology is ever-changing, just as the industry changes. Allow your technology projects to be flexible, and ensure that they are leading your business in the right direction, not the easiest direction. After all, what does it say about your business if you are stuck with a decade-old process? Don’t let technology be a barrier for your business. Follow these 10 Principles and master the seamless implementation of any technology project.

To learn more about all 10 Principles, download our white paper, Why Technology is so Difficult, here.  

Who's In Charge of Business Technology?

Have you ever wondered why technology projects for mortgage companies often fail? With technology at our fingertips today, it’s becoming more important than ever before to evolve. Why do we seem so slow to adopt new technologies? Uneasiness with using technology, especially when implementation may disrupt daily processes, seems to be the most likely culprit. Here’s an excerpt from our white paper, Why Technology is so Difficult, on how to master and apply technology successfully.

“Principle #5 - It's NOT an IT project.

A by-product of past frustrations, many executives default to IT on every project – leaving IT to define and discover the effectiveness of technology either built or bought. This results in an impossible circumstance for the leader of IT, as thesis deference and deflection of business definitions leave them to interpret and assume, rarely resulting in success. Many IT leaders have succumbed to dismissal simply because they are perceived to have not performed, when in reality they never have a chance to succeed from the beginning.

This approach also makes it impossible for a business to innovate, as the challenge of vision and betterment falls victim to deference to IT leaders. The result is clearly missed opportunities and chances for business to gain and sustain competitive advantage.

Even when a business has the highest performing IT leader with the best of knowledge of the business, conflict and misunderstanding will result in perceived failure. The business simply cannot defer the definition of vision, detail, objectives, or expectations. The lack of definition of a process would be equivalent to no blueprints while building a house. The end result is not getting what you thought you were getting and poor construction of the end product.

Do not defer to IT. Instead, create a team that equally represents the different areas of your organization and allow them to lead the project to ensure business objectives are being met. The role of IT is to ensure technology is operational. It’s the organization’s responsibility to ensure the technology is functional. Technology should be an enabler for positive change within the business. Stay focused on the business objectives you want to achieve, such as a percentage reduction in labor, time, or an improvement in customer service.”

This Principle couldn’t be more accurate. IT does not drive strategy, nor should it. Pushing total responsibility for an implementation project to the IT department without clear direction on business objectives not only leaves them confused, but it also dooms the project for failure because you’ve taken executive drive for the project out of the equation. See your project through both the planning and implementation phases to ensure that the project meets its intended objectives. Don’t let your competitors pass you by because your business can’t find a way to adopt technology.

To learn more about all 10 Principles, download our white paper, Why Technology is so Difficult, here.  

Objections as Obstacles or Opportunities

Technology and the mortgage industry have been slow to combine throughout the years. Mainly because no one is quite sure how to marry the two in harmony, with little disruption to the daily workflow. We’re here breaking down how to successfully fulfill a technology project with 10 Key Principles that any business can follow. Here’s an excerpt from the white paper, Why Technology is so Difficult, on Principle #1 to mastering and applying technology successfully.

“Principle #1 – It all starts and finishes with the Business

Every technology project – whether purchased or built – must start with clear business objectives. These are the expectations of the company that, if achieved, would result in reduced expenses, service improvement, or revenue growth. As an executive, you must set these objectives as the target for a project team to achieve. This and this alone defines success or failure in every project and gives both sides of the equation the target to rally around and come together to achieve.

Often, the operations side of the project will point out a valid obstacle which, rather than posing a simple challenge to overcome, becomes the reason to not do anything. The simple fact is nothing is impossible, and the leadership of each company should not tolerate this “Devil’s Advocate” approach to business objectives (i.e., allowing an objection based on fear to be the reason for inaction). Condition your teams to view these objections as the very product tasks they must overcome and not an excuse to stop taking action for the benefit of the company.

Don’t let business objections become the obstacle for taking action. Instead, view business objection as a challenge to be overcome. Each challenge and objection is something the team must figure out and should not be the reason for stopping.”

It’s clear that without a determined goal or plan for business applications, technology goes nowhere. Perhaps the most significant takeaway from this excerpt is that a project worth starting is one worth finishing, even if obstacles occur. Can you think of a time when you threw an idea out altogether simply because you hit a roadblock? It happens all the time and absolutely stifles innovation. Don’t let your company be an organization where technology misses the mark. Following all 10 of these Principles will allow your business to master the seamless implementation of any technology project.

To learn more about all 10 Principles, download the white paper, Why Technology is so Difficult, here.