By George Baker
The mortgage industry’s consumer loan information disclosure model is antiquated, flawed, inflexible and outdated.
Regulators love to regulate static outdated models like ours. Without realizing it, mortgage lenders have fostered and amplified compliance, legal and regulatory problems because we continue to do business the same, old way.
As other industries provide speedy, on-demand and accessible information and transparency, the mortgage industry transmit information to consumers through an arduous, opaque disclosure—either a paper or digital process.
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Baker: The focus needs to be on the transmission of data and on reducing the number of disclosures.[/caption]
The industry is complicit in this practice, because it’s well-known that loan applicants don’t fully understand what they are signing and lenders have an unmonitored sales structure that, by default, entrusts originators to be the primary educator of consumers.
Mortgage lenders, who are fully liable for their loan originators’ actions, have no reliable method, no system of checks and balances, to monitor what loan originators say--or fail to say--to loan applicants. To be sure, this practice is acceptable in other industries, but in regulated markets, it is problematic.
Make no mistake, consumer ignorance of confusing and legalese-ridden forms they receive in mass (over 200 from application to settlement) exposes lenders to unnecessary legal, regulatory and enforcement actions or fines.
That’s because they generate unnecessary consumer complaints associated with poor communications and misunderstandings. The industry has become so reactive to regulatory requirements, and complacent in our old ways, that we have forgotten that we have the ability to control our future.
And our future lies, not with information that resides within the confines of a form but in multimedia, interactive multilingual loan-information technology that is engaging and educates borrowers.
If the mortgage industry was to work with federal and state regulators, the government sponsored enterprise’s and others to reduce the number of disclosures provided to loan applicants--and focus on the transmission of information to loan applicants--our industry would correct many of its systematic deficiencies.
Providing consumers with transparency through faster, easier and smarter dissemination of loan information and knowledge reduces costs, enhances the consumer experience, and minimizes miscommunications and leads to more consumer control, comfort and trust.
A database of loan information is translatable into different languages, can be easily searched for answers to questions--and unlike loan forms, is easily portable to mobile devises.
Through the use of multimedia multilingual loan information technology, lenders gain a solution for limited English proficiency along with an enterprise fair-lending solution and self-policing mechanism to mitigate consumer regulations. Every consumer, at the time of loan origination, would receive standardized, consistent and verifiable information, delineated by language, level of financial experience and learning preferences.
Lenders who embrace loan-information technology can expand business development and sales opportunities by satisfying diverse expectations. Loan-information technology appeals to cultural and money management differences among minority homebuyers, the largest source of future home formation, and millennials.
Regulators for the first time would have a well-placed belief that consumers actually understand the features, benefits and risks of their loan, related costs, and requirements. Loan information technology simply provides the highest form of compliance. And, according to Freddie Mac and HUD studies, a correlation exists between loan education and lower delinquency rates, especially among first-time home buyers.
Multimedia, multilingual loan information technology can provide pseudo home counseling for all first-time homebuyers and reduce delinquency rates by as much as 30 percent.
The mortgage industry needs to provide consumers with what they expect and receive from most other industries: On-demand information, true transparency, and ease of use. It’s time to modernize and upgrade decade’s old, rusty and tired business practices.
It’s time for us to stop being our own worst enemy.
About the Author: George Baker is the founder and chief executive officer of Talk’uments, the mortgage industry’s first interactive multimedia, multilingual consumer education, compliance, and quality assurance platform. Email him at This email address is being protected from spambots. You need JavaScript enabled to view it..
