The mortgage self-service model.

Author:Hoffman, Debbie K.

During the last decade, there have been many changes within consumer-driven industries due to continuously evolving technology. One of the significant changes allows consumers to have options in accessing their personal information from companies with which they have had some sort of transaction. This is more commonly referred to as "self-servicing." [paragraph] Many consumers now have the choice to purchase groceries, order food and check baggage on airlines without interacting with a live representative. [paragraph] In the financial industry, such consumer interaction has been evidenced by increased use of online banking and investment trading. In fact, in an October 2013 article in the Financial Times titled "The Rise of the Digital Bank," a London-based principal at Washington, D.C.-based McKinsey & Co. stated that more than two-thirds of banking customers are likely to be self-serviced by 2018.

Though slow to start, this self-servicing business model is now gaining momentum in the mortgage industry as well.

What is self-servicing?

Self-servicing allows consumers--in this case the borrower-to interact with mortgage lenders and servicers on their own terms and from their computers or mobile devices.

In the mortgage servicing context, self-servicing provides a platform for consumers to, among other things, check their unpaid principal balance and status on escrows, obtain payoff balances, retrieve and submit documentation, and apply payments to accounts immediately.

The concept of self-servicing in the industry is not entirely new. At the beginning of the 21st century, there were companies that provided self-service mortgage origination and mortgage servicing to consumers utilizing many technologies that are crucial to self-servicing. In "Self-Service Mortgage a Gradual Evolution," his August 2012 article in Mortgage Technology magazine, author Scott Kersnar stated that companies such as E-LOAN and DeepGreen Bank provided the aforementioned services. Today's practices do not significantly differ from those early practices that began in the early 2000s.

Mortgage servicers--who have embraced self-servicing technology more than mortgage originators--utilize online portals to allow borrowers to view and make changes to their accounts. Companies have recently expanded their offerings of self-servicing tools due to advancements in technology, and there has been an increase in the number of companies that are embracing this new method of servicing.

Companies utilizing and providing self-servicing

Banks have been utilizing forms of self-servicing as early as 1997, when Mortgagebot--acquired in 2011 by Toronto-based income fund Davis + Henderson--allowed Internet users to submit mortgage applications online. The ability to use an online application in lieu of dealing with a live loan officer, coupled with continuous technological innovation, has helped spur the development of self-servicing applications designed to be as efficient as possible for the user.

One example of this efficiency is seen in the services offered by the Baltimore-based Hope LoanPort[R] (HLP). HLP was formed for the purpose of exploring a more robust communication strategy to better serve homeowners at risk of foreclosure. The company uses a Web-based tool that helps to streamline the home-retention process by allowing direct transmission of borrower applications and information to mortgage servicers. This streamlined process offered by HLP proved to be an invaluable service during the mortgage crisis when the market was rampant with foreclosures.

Another example, Pleasanton, California-based Elbe Mae, in July 2014 launched a product called Encompass Consumer Direct[TM], which allows potential homebuyers to complete an online, self-service loan application in less than 15 minutes. More recently, there has been an increase in the number of lenders and servicers gradually moving toward complete integration of self-management by borrowers, from the origination stage all the way...

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