Mortgage Process as a Service: How It Became A Lender’s Best Friend

Mortgage Process

When the housing markets in the US crashed due to a slump in the economy toward the end of the last decade, there were various factors attributed to it. This, after all, saw the end of a period of immense growth, and advances for the US housing industry.

One of the main factors was subprime mortgages. Due to instability, the rates of property finance went up noticeably, and this eventually saw the prices of Residential Backed Mortgage Securities and houses go up as well.

A lot of private loan originators and investors in the finance industry had to close down their businesses and left a gap wide open for Government Sponsored Enterprises to capitalize on the unstable market. This led to more instability in the private sector was now government dominated.

People started looking for other favorable options, as not everyone was content with such a setting in the private markets. Private players began using Mortgage Process as a Service (MPaaS) in the last few years. This brought some relief to a sector where it was badly required, and it has the ability to bring back a better market for the private players.

Here are some of the reasons MPaaS was introduced:

  • There will be less time spent on activities like repurchases, leading to lower default loan rates. People will get access to better quality service via access to better and more accurate information when they are processing a loan.
  • This would help both, investors and originators alike. Collecting and presenting the data in a much more organized way will help originators make better decisions on credit underwriting, while investors would be able to get better due-diligence reports.
  • There will be lower risks now due to guaranteed quality loans and there will be more data transparency, leading to more private investments.

Banks were able to save a decent amount of money with the usage of MPaaS. Not only did it operate on a pay-per-use model, it also saved money by removing the cost of ownership for things like technological infrastructure, applications, people, and platforms.

Here are a couple of reasons why consumer lending in the US is ready to use MPaaS:

  • There is a chance of decreasing repurchase risk. This would only happen if the trust and faith of the RMBS investors can be gotten back with better risk-management skills.
  • There have been positive signs, apart from economic and industrial parameters, for the private players with government initiatives to increase the number of private players and decrease the GSEs.

Lenders now have access to the process, technology, and people—thanks to the emergence of MPaaS in the market. There are options of transferring responsibilities like ownership risk to mortgage software solutions providers. This would only be possible though if a pay-per-use model was in place. This not only allows to measure till which extent a lender’s process has been executed, it also brings down the risk of compliance and repurchase.

What can be gathered from above is the fact that there will need to be better measured in place in terms of improved risk management and visibility for decision makers in lending companies.

MPaaS/BPaaS can become an independent information mediator. This would provide better quality data for banks that need better risk management. Banks will now have enough chance to meet the tests that will arise out of this new system, as lenders can now look after their business processes more efficiently on a platform provided by MPaaS.

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