Technology called boon to mortgage-loan process

Technology has helped make the mortgage loan process more "transparent" for both lenders and borrowers, a panel of industry experts said Wednesday at the Mortgage Bankers Tech '09 Conference at Mandalay Bay.

As the industry faces challenges of tighter credit restrictions, uncertain housing values and voluminous inventory of home foreclosures, it's important to use technology as a strategic tool in bringing buyers back to the market, the panel agreed.

With the Internet, buyers are able to go online to compare interest rates and apply for mortgages electronically. They learn about origination points and mortgage terms.

Lenders can reduce risk through improved data quality and streamline the application process so it's more cost efficient. They can work smarter and faster.

The entire process has been transformed from "document-centric to data-centric," said Roger Hull, principal of High Performance Partners. Lenders are able to refresh data for a fraction of what it used to cost and get a current profile on borrowers, he said.

"Certainly, some capabilities are available on the borrower-risk side of the equation," Hull said. "If you put old data into an analytical decision engine, you still get a bad answer."

Sherri Powers, manager of Unity Council's Homeownership Center in Oakland, Calif., said the same principles used by retailers to track customer sales can be applied to mortgage lending.

Lenders want to look at the entire picture for a borrower, not just the front-end or back-end debt ratio, she said. The applicant may have a 45 percent debt-to-income ratio and still have negative cash flow at the end of the month because of their lifestyle.

"Lenders can't see what you're doing. Show me the work," Powers said. "It's like a math teacher who's not just looking for the answer. How did you get it? Show me the work."

She treats households like a business when evaluating their capability to handle a monthly mortgage. She makes them show 10 months of $200 positive "cash flow," or savings above their rent and expenses.

Technology is important, but the bigger issue is availability of credit, said Alan Schlottmann, UNLV economics professor and executive director of the Theodore Roosevelt Institute. That's why the Federal Reserve stepped in Wednesday and bought $300 billion in long-term Treasuries over the next six months, he said.

"It's predicated on the cost of a home, the availability of credit and the cost of credit," Schlottmann said. "The data suggest banks aren't lending. They (the Fed) tried to drop interest rates on mortgages and in addition make this huge amount of money available."

Technology creates transparency and transparency gives lenders greater control in the process, said Rick Seehausen, chief executive officer of Lender Live Network. They have a better handle on the measures of model components within that process, he said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.