February 27, 2003
Mortgages and technology: A Catch 22
By MARK MEATH
The mortgage industry has gone through a revolution in the last 10 years, mostly due to computer and Internet technology.
The primary improvement has been access to information and the speed to complete tasks via the Internet. Credit reports are back in minutes and government data can be downloaded instantaneously.
The interesting issue is an employment gap exists in the ability of individuals to produce a product to meet secondary market requirements.
There is a need for educational improvement. Unfortunately the proper training ground is non-existent. Thus loans can be completed in record times, however the ability of the available work force lacks.
With the amount of loan volume that has come crashing down on companies in the last two years, a huge backlog has been created and true productivity levels are lost or mired by the lack of service to the individual consumer due to a lack of trained personnel.
The working hours to create a mortgage commodity have been sped up exponentially, however the ability of an individual to complete the task still requires an understanding of the mortgage process and the ability to complete the task via the technology.
The mortgage industry really lacks a training ground other than on-the-job training to create the individuals to perform the tasks. Furthermore, the amount of volume reached in the last six months was at such record levels due to 40-year interest rate lows that backlog and time frames were stretched.
At one point in 2002, any loan on a mortgage banker’s books was deemed “refinanceable.” Unfortunately, no mortgage company had the time or willingness to invest in training when every working hour was used to unbury themselves from transactions.
In the end, technology was a curse as it lead to higher expectation levels from the consumer and employer. That, coupled with access to Internet information, caused income margins that could only be profitable in tighter closing times. The costs created due to higher wages for those with experience and the ability to actually complete transactions within realistic time frames diluted profitability from the volumes.
Purchase transactions — although treated as a higher commodity to create the relationship with the client, Realtor and/or builder — were still pushed to longer time frames as the title, escrow and appraisal portions of the transaction were pushed to excess limits as the refinance boom continued through year end.
Technology allowed speedier return times on those parts of the transaction via e-mail of information and documents. However, the standard work hours to retrieve and process information was exceeded by the ability of those available to complete the tasks and properly formulate the loan as a commodity to meet secondary market requirements.
Once the market levels off and the mortgage boom of 2001 and 2002 curbs, we will see how technology has properly allowed for timelier transactions and better customer service. Until then, the consumer may not really see any difference in service. Furthermore, the mortgage industry may not realize how profitable or unprofitable they had really been in those years until the dust has settled.
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