HousingWire recently spoke with Kevin Wilzbach, director of product management at Wolters Kluwer, about the adoption of digital technology and the future of e-notes.
Thank you for reading this post, don't forget to subscribe!HousingWire: What kind of impact has the overall slowdown of the mortgage market had on digital technology adoption over the past few quarters?
Kevin Wilzbach: Well, I guess the short answer is, it hasn’t helped. When the market was booming two years ago, many lenders were too immersed to focus on digital transformation projects; Now his focus is on reducing costs.
That being said, we are seeing continued strong interest in evaluating and purchasing mortgage closing platforms. What we’re hearing is, “Give me a platform that will grow with me and give me a consistent operational workflow whether I’m closing via paper, hybrid or fully digital with e-notes.”
After seeing the value of digital closing in their refinancing options over the past several years, many of the country’s largest lenders are moving in this direction.
We are also seeing interest in technology and solutions that support home equity lending. For example, our IDS business has a real base in the home equity space with its credit union customers. And in the middle of last year, we introduced an OmniVault that supports digital HELOCs.
Having said that, prospects are mindful of cost per loan and ask us and all of their technology partners for evidence of ROI so they can sell these projects to management. At the end of the day, institutions know that e-closing and e-notes are the future. I think the painful experience of downsizing has probably convinced them that when the next cycle comes, they’ll need to scale using technology to meet it, not just another hiring boom.
By the way, lack of budget is not the only reason for the slower than expected pace of digital adoption. Recently our company conducted a snapshot survey of 138 lenders asking why they are not more digital. 15% of respondents cited budget reasons, but more than 60% said they could not find the right solution, the right provider or were not sure of the price. Eye opener.
HW: What do you see as the value proposition of e-notes? Is it evolving as the market shifts from speed and volume to cost and margin?
Kilowatt: There is no doubt that cost and margin are uppermost in the minds of our customers and the use of e-notes addresses both these concerns. But e-closing also minimizes risk and supports a focus on improved customer experience. Simplifying the closing process through electronic signatures, both in general and pre-signing specific documents prior to formal closing, is critical to an improved customer experience.
As I mentioned earlier, I don’t think we’re going to see any major changes in buying patterns. What we’re seeing is a real effort to correlate the overall cost on a per-loan basis. We are also seeing interest in the market with smaller institutions looking for a more efficient closing solution.
There are several reasons for this. Recent ROI studies suggest that hybrid and e-closing can save a lender somewhere between $200 and $400 per loan in time and cost. According to MBA, these are not insignificant numbers when lenders are losing money on originations, as they were in the most recent quarter.
Digital loan solutions also improve loan quality. Going back to the snapshot survey I mentioned, we asked lenders how many of your closing packages contained errors or inaccuracies. Only 6% of respondents said “none.” Another 94% said they believe that somewhere between a quarter and all of their closing packages have flaws. Scary thoughts with the kind of put-back activity we’re hearing about these days.
HW: Are you seeing a change in buyer behavior? For example, sourcing from best-of-breed components versus end-to-end bundling? Are customers looking to add new vendors or do more with less?
Kilowatt: Customers come to us looking for solutions, not technologies or components. They have specific markets and customer needs they’re trying to meet, and they look to companies like Wolters Kluwer for solutions.
From our point of view, we have never believed that we should own each and every component. We build on what we know in our core competencies and integrate with others where appropriate. We ensure that we own the integration and when customers buy from us, they integrate with us once, and we will handle the subsequent downstream integration for them, which is a huge advantage and resource savings.
Going back to your question about adding new vendors, we’re trying to let customers do more with fewer vendors, which certainly brings efficiencies. Being able to combine services like Document or eVaults under the same MSA has a lot of advantages in terms of due diligence and vendor management.
This has certainly been the case with our recent addition of IDS, for example, and our introduction of OmniVault.
HW: What regulatory changes/trends do you see affecting mortgage technology in the near term?
Kilowatt: I think the nature of highly regulated industries is that we’re always reacting to regulatory change. The Uniform Instrument Update took center stage in 2022, and 4506-T tax transcripts are being phased out for 4506-C in 2023.
In this coming year, any lender making more than 25 loans per year in 2022 and 2021 will be required to HMDA Reporting. Three years ago, that limit was 200 loans per year.
At the end of the day, there are a plethora of government regulatory agencies at both the state and federal levels. Clients look to Wolters Kluwer and other compliance providers for solutions because they know we have the expertise to monitor and then implement compliance-related changes so they can focus on their business.
