One of the biggest names in the mortgage technology world is Ellie Mae, which provides mortgage loan software to thousands of mortgage companies across the country – a full 20% of all mortgage lenders and brokers use Ellie Mae’s software.
Because its reach is so wide, Ellie Mae provides an origination report each month. The most recent one stated that it now takes less time to get a mortgage through the process.
According to the report, loan applications took a total of 42 days from initial application to the final funding date. That’s down nearly 15 percent from 2012 and may have an impact way beyond simply counting the days until closing time.
Reasons for Reduced Mortgage Processing Times
Okay, so the report stated that the time it took to close a loan was down by nearly 15 percent compared to just one year earlier. How did that happen?
Increased efficiency. For the mortgage lender, it indicates a more efficient approval process as a result of several factors. While mortgage lenders today typically underwrite the same set of loans, conventional as well as government, the flurry of lending guidelines were finally adjusted to. Fannie, Freddie and FHA especially adjusted underwriting guidelines to accommodate the new lending environment and it took some time for lenders to become comfortable.
From HARP changes to streamline loan requests, lenders felt more confident approving loans as more loans passed through the system under the same guidelines.
More experienced mortgage staff. A mortgage lender’s employees also find they’re processing and underwriting the same set of loan programs which makes them more efficient. Closing more loans means knowing in advance what the lending guidelines will require, meaning the loan is documented more completely. Common hangups were simply avoided as the end of 2013
For the consumer, a more efficient lending process means keeping loan fees in check and a more competitive mortgage market. Lenders compete against one another with the very same loan programs and often the deciding factor is both price and speed. When two lenders compete for an identical loan, the lender who can close the loan more quickly and competitively will most often get the edge.
Rising rates. No mortgage shopper likes seeing rates rise. However, there is one advantage: fewer refinance applications in the lenders’ systems, and the loans that are in the system close faster.
When a lender gets pummeled with a year’s worth of loans in 3 months, like what happened during 2012, it tends to jam up the system.
Since most people who could refinance already have, it leaves more room for the tougher refinance cases and purchase transactions to get through the process quicker.
Mortgage technology. Completely paperless systems are becoming the norm at mortgage companies. In years past, loan officers, processors, underwriters, and funders had to be in the same office, or the paper mortgage file had to be shipped around for each party to look at it.
Now, most lenders use a system that scans in the borrower’s paperwork and holds it electronically. Each document is viewable by any employee with the proper computer security access credentials. That means the loan officer and underwriter could be in different cities or even different states, looking at the same file at the same time. This technological capability was more embraced by mortgage lenders in 2013 – hence quicker processing times.
Estimate how long it will take to close your loan. Contact a mortgage professional.
Will Mortgage Processing Times Improve More in 2014?
What if 2014 shows another 15 percent reduction? Or 20 percent? As time goes on, lenders will find ways to provide an even better customer experience.
The ultimate goal is that the initial loan file contains all the material needed for the underwriter to approve the loan, reducing or eliminating cumbersome loan conditions, or stipulations the loan must meet to be approved.
All industries benefit from efficiencies. And when they do, so do their consumers. Increased automation, a more intelligent approval system and progressive quality checks should help keep mortgage rates competitive as mortgage lenders find ways to generate more loans.