PERSON OF THE WEEK: The ancient Greek philosopher Heraclitus is famous for his observation that the only thing constant is change. This week, MortgageOrb speaks with Don Iannitti, president and CEO of Carson, Calif.-based Document Systems Inc., about the continuing changes that impact technology within mortgage banking.
Q: How would you categorize the overall state of mortgage banking technology?
Iannitti: Technology is vitally important to the mortgage lending industry. However, it is disjointed in that there are many areas of mortgage banking technology that are extremely automated (i.e., credit, flood, automated underwriting) while other areas remain manually intensive.Â
Data quality remains a concern in that originators must often use several different platforms to originate and fund loans. In many cases, the transactional data does not flow well between these systems, and information can be lost along the way. As such, information can change during the origination process in one system but not in another creating a real risk for the lender.
Q: In your opinion, how much of the problems currently facing the industry can be blamed on inadequate technology and/or the improper use of existing technology?
Iannitti: I think that technology is little to blame, if at all. The problems we are currently facing as an industry have to do with the absence of regulation in the underwriting of loans and the failure by individuals, from borrowers to lenders, brokers and secondary market investors, to be honest and face the fact that certain borrowers were unable to meet their financial responsibility, despite the fact that they met the underwriting guidelines. Technology simply cannot be blamed if it was compliant with preexisting regulations at the time.Â
Q: Many of the problems at the root of the ongoing foreclosure crisis are blamed on inadequate document management. What exactly went wrong there, and could it have been avoided?
Iannitti: I think that there could have been more checks and oversight by management.Â Perhaps technology could have been leveraged to help with some, though not all, of those checks.
Q: For many years, e-mortgages have been hyped as the future of the industry? Where do you see e-mortgage deployment today?
Iannitti: The adoption of e-mortgages continues to grow, but we're still far from significant adoption. There needs to be uniform implementation of e-mortgage technology, acceptance by governmental agencies indicating that the integrity of loan documentation is intact and the borrowers' security has been assured, and access to the technology by all players (i.e., the lender, borrower, notary public and governmental agencies). Currently, growth in adoption is most notable where the investor is a key participant in the transaction.
Q: What do you see as the primary technology-related issues facing mortgage banking in 2011?
Iannitti: One important issue is the implementation of technology that complies with aspects of the Dodd-Frank Act as they become effective through the adoption of regulations. For example, we will have to be prepared to create a single integrated model disclosure that combines the disclosures required by the federal Truth in Lending Act with the good-faith estimate, the Department of Housing and Urban Development (HUD) special information booklet, and the HUD-1 or HUD-1A settlement statement required by the federal Real Estate Settlement Procedures Act once this becomes effective.
There is also the question of continuity. As more regulations and requirements are moved earlier in the origination cycle (i.e., closer to the point of application), the terms of the transaction and lending decisions must be preserved. It is no longer acceptable to simply export a subset of the loan data from the point-of-sale system and import or re-enter the information into a closing system. This approach leaves too much relevant data behind.
However, we have seen recently that systems that attempt to provide end-to-end solutions are often not agile enough to meet the client's requirement for innovation. Consequently, the exchange of data between systems will become increasingly critical to the industry.