The mortgage industry can be slow to adapt to technological innovations, certainly not with consistency or scale — but when it happens, it yields rewards, notes Simon Moir.
Moir is the chief product officer for eOriginal, a financial technology company that enables trusted transactions of digital financial assets for all parties from the borrower to the secondary market. The company creates digital original documents — fully legal, enforceable contract and regulatory documents with the advantages of digitization. During the recent Mortgage Banking Technology Conference in Dallas, he spoke with Mortgage Media’s senior technology advisor Dave Matthews about what eOriginal has to offer lenders and clients, along with how various elements of technology, from blockchain to AI, are being implemented — or not — in the industry.
The rewards are there: Moir states that digital closing adopters report anywhere between 7 and 15 basis points — a nice boost to profitability, especially during a slow period in the industry where we’re seeing compressed margins again.
According to Moir, eOriginal started in mortgage technology 20 years ago — and did the very first eClosing at the time, in Broward County, Florida.
“It’s nice to have a first like that,” he said. “But we all know the mortgage industry — when it comes to technology, it’s conservative. A lot of the ecosystem needs to be involved for something like eClosing to be adopted at scale. And with the financial crisis, eOriginal focused on other asset classes – auto, vacation ownership, marketplace lending, equipment leasing, etc. This allowed eOriginal to create a comprehensive digital lending solution and perfect their ability to handle lending at scale, supporting millions of transactions a year.” The mortgage side is much smaller, but now seeing accelerated growth, he said: “The mortgage industry is now benefitting from the gains made across the other lending classes and we are seeing real returns on investment.”
“Conservative” may be an understatement — Moir likened the mortgage industry to a complex puzzle, particularly in terms of getting consistent, systematic technological infrastructure in place. “There are so many entities that need to all play together for this to actually work,” he said. “But the truly exciting thing is that we now have an ecosystem in place to support digital mortgages.” There’s more momentum in that direction now, he noted: Large institutions like the GSEs are behind digital mortgages; Ginnie Mae has put forth a 2020 plan for digital mortgages; and big players like Wells Fargo are coming into the industry — so there’s some critical mass, he noted. He said eOriginal is doing ten times the number of transactions per month they were doing just a year ago.
But seeing true, large-scale change in the technological infrastructure of loan origination and processing requires large-scale commitment. There’s a lot of buzz around blockchain applications for mortgage banking, for instance, but no application of blockchain at scale across multiple parties. Moir said, “I think that’s one of the largest barriers to blockchain’s ability to benefit the mortgage space. Because there are no implementations of blockchain in the mortgage industry at scale, you ultimately see siloed blockchains, resulting in islands of information, rather than the self-governing, information sharing nirvana organizations believe blockchain will offer.”
MERSCORP Holdings, Inc. (MERS), which he noted is the registry mandated by the GSEs, could implement blockchain and move the mortgage industry to greater acceptance of the technology. But, “if the benefit of adopting blockchain is providing trust, and the market is already indicating trust of both the MERS eRegistry by requiring it, and eOriginal’s platform by using it (over 450 organizations conduct 10 million transactions per year on eOriginal), what’s the benefit of moving to blockchain?”
Also, on the subject of trust: When asked about cybersecurity concerns (eOriginal captures and digitizes information), Moir acknowledged he understands people’s concerns—but notes that any use or non-use of technology has its associated risks, and it’s a matter of understanding those risks and the steps that have been taken to mitigate them.
“Our clients are trusting eOriginal to hold their data—and obviously that data includes their clients’ data. So, it’s something that can never be thought about too much. But, people often forget that storing it in paper also presents risks,” said Moir.
“Ultimately, we see cybersecurity risks, financial risks, operational risks, and other types of risks all factoring into an organization’s risk posture,” continued Moir. “So, it’s worth having a conversation with the different vendors and providers in the industry to understand how to manage your risks.”
As Matthews noted, during his days with Royal Bank of Canada, they were more worried with paper loan files that loan officers would carry in their cars than with the security of digital files—what if the car got stolen, for instance?
To which Moir concurred: “Often people in operations worry about lost notes, and the lost note affidavit. But … it’s not only that they don’t have the note. It’s that it could be anywhere – lost in transit, lying on the side of the road, or with an identity thief. With the digital solutions that are coming to market now, that data is never present on someone’s laptop or in someone’s briefcase. It is truly sitting in a secure data center.” Equally important, digital allows the data to be immediately accessible to the lender even though the closing might be happening a thousand miles away.
What can we expect to see from eOriginal over the next couple of years? Continued innovation says Moir.
“I recently moved over to Chief Product Officer for eOriginal. I started with eOriginal as the general manager for digital mortgage – an area that we’ve seen great success. When I started, we took the innovations developed for the other asset classes and applied them to mortgage. Now, we’re doing the opposite by taking the innovations we created for the mortgage market and applying them to the other asset classes,” he said.
“And I think that’s an interesting storyline that you’ll see play out over the next couple of years.” said Moir. “Our innovations have come from working across multiple industries with incredible partners and an unmatched customer base. The market will not only see this innovation continue, but accelerate.”