Binh Dang: New Integrated Disclosures Present Three Main Challenges

Patrick Barnard
Written by Patrick Barnard
on February 24, 2015 No Comments
Categories : Person Of The Week

PERSON OF THE WEEK: Binh Dang is founder and president of LendingQB, a provider of browser-based end-to-end mortgage loan origination systems (LOSs) used by lenders of all types. Dang also created PriceMyLoan, a best-of-breed mortgage pricing engine and automated underwriting system. MortgageOrb recently interviewed Dang to learn more about how the company has been helping lenders transition to the Consumer Financial Protection Bureau's new rules, what new innovations are currently being developed and what's driving the company's rapid growth.

Q: It's been more than a year since the CFPB's ability to repay and qualified mortgage (ATR/QM) rules went into effect. How smooth was the transition for your company, in terms of upgrading the software, and how smooth was it for your customers? Are there still some glitches that need to be worked out? Have you heard anything back from your customers regarding problems with implementation?

Dang: The transition process was fairly smooth for our customers because we provide our technology to them as software-as-a-service. This means that changes are automatically pushed out to end-users. All they have to do is take advantage of the new functionality. We were able to incorporate ATR/QM in both our LOS as well as in our Universal Decision Engine (pricing and underwriting engine).

We haven't heard anything from our customers with regards to our ATR/QM solution for many months.

Q: Lenders are now scrambling to prepare for the CFPB's new integrated disclosure rules, due to go into effect on Aug. 1. This presents yet another major transition for both you as a software maker and for your clients. What are the main challenges LOS providers face in assisting their lender clients in making the transition?

Dang: There are three main challenges that an LOS provider faces:

1. The technology has to support a dual paradigm. That is, loans that are originated pre-Aug. 1 need to use the old disclosures, whereas loans originated on or after Aug. 1 will use the integrated disclosures. This means lots of changes to the underlying data layer and some changes to the user interface to accommodate this. It is a not a trivial matter to ensure that end-users are not confused and send out the wrong disclosures.

2. Integrations to third parties are also seriously affected. Our approach is to adopt the MISMO 3.3 file format and work with our third-party partners to rebuild new interfaces. The coordination and collaboration efforts required are quite tremendous when you have to work with many different vendors.

3. Lenders will have to be trained due to changes in the system. Therefore, we are working to create materials to make the training and change process as easy for our clients as possible.

Q: While we were at the MBA Annual, you discussed how your company is now analyzing the data that flows across your loan origination system to determine which processes work the most efficiently, based on loan type, and then sharing that information with your customer base. This way, lenders can learn from other lender's best practices as which processes and policies work best in terms of gaining efficiency and cutting costs. How has that project been progressing?

Dang: Unfortunately this project has been placed on hold while we focus on the CFPB project. Once that project is completed, we will redirect our energy to use the data we collect in our system to provide lenders with the information they need to become leaner. We are building a data science team dedicated to using loan data in addition to user activity data to provide our clients with an accurate picture of how their business is operating.

Q: Tell us how LOS providers are differentiating themselves in the marketplace? Your company grew by more than 30% last year and your platform now handles more than 25,000 loans per month. What's driving your growth?

Dang: Actually our company grew by 44% last year (now that we have the data), and we handle over 30,000 loans per month. We believe the primary factor driving our growth is lenders wanting to work with partners, not vendors. Our mission is to create technology that helps our customers reduce the cost to originate mortgages. And we don't stop there. We team up with our customers to ensure their success in originating efficient, compliant, low-cost mortgages. Our Lean Lending strategy is a testament to that purpose.

Q: There has been a lot of emphasis lately on getting as many defects as possible out of the loan origination process – lenders don't want to take the chance of originating loans with minor, non-material defects that might trigger an audit or an investigation by a regulator. Tell me some of the things you are doing, as a software provider, to help lenders originate ‘defect free’ loans? When it comes to LOSs, is compatibility and reliable integration with other systems the key factor in eliminating defects?

Dang: There are three ways we help lenders originate ‘defect free’ loans:

1. We provide seamless integrations to the third-party. Defects can occur when lenders have mismatching data. An increase in mismatching data happens when lenders have to manually re-input the same information into multiple systems due to a lack of seamless integrations.

2. Our system supports the implementation of hard stops rules to prevent the loan from moving forward, if certain information is missing. For example, the lender may want all HMDA reportable data to be collected before it goes into final underwriting.

3. Based on our Lean Lending strategy, we recommend changes to the lender's processes that will eliminate areas where defects may occur. An example of this is the centralized disclosure desk. The disclosure process is much more complicated today than in the past. It's better for a few people to handle this rather than spread it across the entire sales organization.

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