Mortgage Fintech Warm Up Took 13 Years. Now For Some Results. 

This article originally appeared in DS News & the August Edition of Mortgage Point Magazine

Mortgage fintech narratives are mostly about cool new innovations coming to market, but one key thread has held all narratives and innovations together since the beginning: regulatory compliance. Let’s recap the mortgage innovation timeline to show the role of regs and compliance, then let’s review how servicing fintech will deliver industry-changing results in 2024 and beyond. 

How Policymaking Drove Mortgage Innovation Since Post-2008 Era

The ‘Digital Mortgage’ era began 13 years ago this summer when the post-2008 crisis Dodd-Frank re-regulatory bill was enacted July 21, 2010.  

This body of laws created the Consumer Financial Protection Bureau (CFPB), which announced its first major initiative – new consumer mortgage disclosures – on May 18, 2011.    

You all know this as TILA-RESPA Integrated Disclosures, aka TRID, and it fueled the biggest mortgage innovation wave of the modern era. 

That tech race to the October 3, 2015 TRID compliance deadline led to the Rocket Mortgage launch, plus created the entire Point of Sale fintech category.  

This did two things.  

First, it helped modernize the rest of the originations tech stack. 

Second, the ‘Do it all on your phone’ approach to innovation led to a total overhaul of the consumer experience from paper to digital.  

Then came Day One Certainty (D1C) from Fannie Mae October 24, 2016 and Freddie Mac’s Asset & Income Modeler (AIM) shortly after. 

D1C and AIM use investor policies to drive lender adoption of digital loan origination tools in exchange for risk relief.  

This paved the way for rapid innovation in the $2 trillion per year originations sector until the pandemic hit.  

Then pandemic policy – most notably the CARES Act signed into law March 27, 2020 – led to rapid innovation in the $13 trillion servicing sector.   

Using Real-Time Policymaking To Speed Innovation

As I said, CARES policy being made in real-time wasn’t a one-off, it’s now the state of play. 

This is a good thing because faster policy drives faster innovation.

Effective July 2023, FHFA has doubled down on CARES payment deferrals.

Are Sagent servicing customers ready? Of course. But they also ask questions like: 

“Yea, but how do I handle customer and investor needs – and compliance – if FHFA’s newly expanded deferral policy is reversed again suddenly after November 2024?”

This is what I meant by ‘long-tail compliance’ above. 

It’s not about one change like FHFA just made. It’s about keeping servicers ready for constant real-time changes, and how each change impacts customer, investor, and compliance processes today and tomorrow. 

On a related note, we’re also now exploring huge policy challenges like how HUD and servicers can solve for FHA borrower hardships if the inflation fight leads to recession (more below).

This is a hot topic because Ginnie Mae pool rules make HUD hardship solutions more limited than FHFA solutions.

I love questions and explorations like this because it forces us to speed innovation to meet ALL eventualities in a real-time policy era across ALL regulators, GSEs, and investors. 

And the faster markets get each year, the more real-time policymaking is the norm. 

Defining The Role of Servicing Fintech In A 2023-24 Context

I assumed the CEO role of Sagent that same month, and we began by defining the role of mortgage servicing fintech in two ways. We said Sagent-powered customers:   

  1. Must have real-time platforms for real-time markets and regulations.   
  1. Must be best-in-class on three key Cs: Customer, Cost, Compliance.  

We review this often, and it’s holding up well in a 2023-24 context.  

By Customer, we mean transforming the consumer experience. We often call the endgame here homeowner-first servicing modernization. This includes applying all the do-it-on-your-phone advances in originations to the servicing space. The tech must enable consumers to self-serve for almost any scenario, and get immediate human help when needed – and those human advisors must see exactly what the consumer sees. It’s even more important in servicing because servicing is where customer relationships are nurtured, grown, and retained via new originations or attentive hardship resolution.  

By Cost, we mean lowering not just IT cost but servicing operations cost. This is a critical distinction that’s especially important in servicing. We’re the only major servicing software player with core, default, and consumer platforms that are all synced by real-time data, cloud-based, and open API. This means a few key things: Servicers can streamline ops by needing fewer ancillary systems. They can configure (rather than code) for real-time investor and regulator changes. And they can easily build their own processes for custom use cases across core, default, and consumer servicing. All of this lowers IT and especially operations cost, and the latter is where servicers beat competitors on service and profitability. 

By Compliance, we mean ensuring every compliance detail is innately built into every user action – regardless of whether that user is a consumer or a servicing employee. This is where Sagent’s three Cs and “real-time platforms for real-time markets and regulations” approach comes together. With all core, default, and consumer platforms synced by real-time data, anyone – consumer or servicing employee – touching any Sagent platform is seeing the latest customer, investor, and compliance information. Which of course leads to better customer experience and more efficient operations. And in a bigger compliance sense, it also means avoiding enforcement risks and penalties.  

How Regs & Servicing Fintech Fuel Industry-Changing Results In 2024 

Now that we’ve defined the role of mortgage servicing fintech in a 2023-24 context, let’s bring it home by recapping how the March 2020 CARES Act led to rapid servicing innovation. 

In my last piece for DS News, I noted how unemployment spiked from 3.5% to 14.8% early in the pandemic, and CARES was a crucial bright spot that ultimately helped 7.8 million people keep their homes.  

When CARES forbearances and other hardship relief became effective, Sagent-powered servicers were ready on day one because they simply configured (rather than coded) for each compliance nuance CARES homeowner hardship relief enabled. 

This meant being able to offer forbearances, payment deferrals/partial claims, and extended-term modifications to struggling homeowners immediately—and not missing a beat on compliance. 

Same goes for being ready when FHFA recommitted to CARES payment deferrals this year. 

And if next year’s election results in more policy changes, servicers will be ready for that too.  

Same goes for servicer readiness for the next bank crisis, recession, or other sudden exogenous event. 

It’s all powered by real-time platforms for real-time markets and regulations. And it all builds off fintech progress over the last 13 years.  

So, to end where I began: with cool new innovations. Please connect with me and Sagent on LinkedIn to see what we’re bringing to market in 2H23 and 2024. 

Spoiler alert: it’s industry-changing results on Customer Experience, Cost Control, and Compliance.  

Please reach out and let’s keep this thread going. 

This article originally appeared in DS News & the August Edition of Mortgage Point Magazine


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