We in the mortgage industry speak frequently about making the mortgage process more transparent. Most of us would agree that, while we’ve come a long way in streamlining the transaction, a combination of regulation and the 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. LOS and POS technologies have taken a quantum leap forward in terms of capability and the user experience (and lenders as well, in terms of adoption). Advanced technologies such as AI and RPA are already making their way into the production process, automating some of the most basic processes to streamline and accelerate the transaction.
It’s the little things that are often overlooked that can make a difference when it comes to streamlining the mortgage process 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.
Once upon a time, 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 the borrower some idea of what her 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 the borrower, unless she 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 she 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 ambiguity and confusion, and left more than a few borrowers grumbling.
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 tossed around before the rise of TRID? Most of the industry won’t soon forget the turmoil that rocked many operations across the industry as we stumbled from the HUD-1 and GFE process to TRID in an insanely short period of time.
Today, 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, LOs and consumers alike without the need for two voicemails, one returned call and a fax—and the time it takes to make them. Lenders are spending less time troubleshooting manual processes, and reallocating their skilled labor to more complex, and important tasks like client support or sales. And in many little ways—such as the use of accurate, digital closing cost calculators—the mortgage industry is moving toward clarity in a way it never has before.