22 Sep Transparency
As the mortgage industry looks to rebound from the mortgage meltdown and current economic conditions, transparency in the lending process can help lead the way. Transparency is the full, accurate, and timely disclosure of information. Transparency can help restore investor and consumer confidence in the mortgage market as we work to rise from the ashes.
While the technology exists to allow for a much more transparent lending process there needs to be willingness from market participants to adopt and implement such processes. We can look to other industries and there are numerous examples of companies and processes becoming much more transparent.
Let’s look at Domino’s pizza for instance. Domino’s launched Pizza tracker, a system that allows customers to follow the progress of their order from the time they click the “Place Order” button or hang up the telephone until the pizza is delivered. Pizza Tracker is directly linked to the computers inside each Domino’s. Once customers place an order, they can go to the Domino’s Web site and click on the Pizza Tracker icon. They will see a horizontal bar that lights up red as each step in the process is completed. Customers will see confirmation of their order being received by the store; when it’s being prepared; when it’s been placed in the oven; when it’s been boxed and placed in the Domino’s HeatWave bag; and finally, when it’s on its way for delivery all in real time.
In the auto industry, car buyers can walk into a showroom fully armed with information that they have gathered on the Internet; such as list price, MSRP, dealer invoice price and any and all incentives currently available at the time of purchase. Car buyers also know what cars and incentives the dealer down the street willing to offer. Basically, they have full, accurate and timely disclosure of information to make an informed decision.
But that is not necessarily the case in the mortgage industry. Yes, it is a more complicated transaction, but consumers have a difficult time obtaining full, accurate and timely disclosure of information to make side by side comparisons. Margins are acquired through interest rates, discount points, loan fees, yield-spread premiums and lenders are creative with how and when this information is presented to potential borrowers. The same can be said for investors looking to obtain full, accurate and timely disclosure of information about the pools, MBS’s and the quality of each loan. Transparency in the back end process can demonstrate loan quality and begin to restore investor confidence.
The technology is clearly available. Is the mortgage industry ready and willing to adopt and implement more transparent processes? Will we apply innovative thinking to make the lending process for consumers easier and more transparent so that borrowers can make more informed lending decisions? Will a more transparent process reduce fraud and improve loan quality? Will a more transparent process ensure more accurate and reliable valuations?
Can e-mortgages and fully automated electronic processes provide even greater transparency and quicker adoption? Do you believe that the mortgage process, both on the front end and back end, need to be more transparent? Will greater transparency help restore consumer and investor confidence in the mortgage industry? Do you believe that there is willingness in the industry or resistance to embracing transparent processes? Why?
Share with us your thought and opinions as we work together to rebuild the mortgage industry.