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In today’s mortgage industry, loan quality is best assured throughout the process, not after the fact. The reason the regtech solutions are taking off is because lenders are slowly realizing they need to tackle loan quality issues as they happen, from the point they begin gathering information to create a loan file through closing.
The business risk of producing bad loans are only growing. Today’s lenders cannot afford to go back in time to try to fix those loans after closing. They cannot rely on their LOS, their processes and their underwriters to remember every nuance of investor guidelines and overlays, catch every problem and verify compliance. Loans must be originated correctly from the start—and without regtech, that is simply impossible.
Regtech is the ultimate traffic light for the entire loan life cycle that we’ve all been waiting for. It is the red light, green light approach to both loan manufacturing and loan acquisition that lenders will use to signal risk and oversight.
It enables lenders to electronically assemble vast amounts of data required for decisioning and then view, validate and verify all the loan data as it’s introduced, lowering risk and saving money by significantly increasing underwriter productivity.
By using this purified data and placing automation first, regtech drives regulatory and investor confidence and takes the subjectivity out of loan origination.
Regtech also instills confidence in the products of the mortgage industry, for both QM and non-QM lending, enabling higher quality for lower cost through automation and significantly improving transparency.
While fintech and digital mortgages continue to capture the attention of the housing industry, the real revolution in mortgage technology is happening in regtech. Shedding the old mentality of ensuring loan quality after the fact will be key to thriving in the current market. On the other hand, those mortgage companies that don’t rethink the way they originate loans and simply try to improve the borrower experience will in time realize that dazzling consumer-facing technologies don’t necessarily translate to dazzling results.
This content is from an excerpt of the LoanLogics white paper, Regtech Explained – Why Regtech is a Necessity for Reducing the Cost of Managing Mortgage Loan Quality. Read more about regtech in the mortgage industry and how it is helping bankers not only comply with regulation but also meet investor guidelines all while minimizing the use of human labor. Download now.
