What is a Mortgage POS and Why Lenders Require One

January 15, 2022 — Mortgage point-of-sale (POS) platforms provide lenders and borrowers with simplicity, speed and transparency. Of course, this is compulsory for the digitally dependent borrowers, never without a device in hand. POS-less lenders simply won’t attract the attention of this swelling demographic. Even the less tech-savvy consumers may be surprised how simple the mortgage application process has become, compared to their last prolonged paper palooza.

What is a POS?

A POS platform is the ‘freeway and the GPS’ between lenders and their borrowers, enabling the two-way engagement and helping parties navigate in an efficient and effective manner. Borrowers can apply for loans from any digital device, get and submit requisite documentation and monitor tasks and status throughout the process. POS platforms deliver digital collaboration.

Those within the industry commonly refer to a POS as the front-end ‘borrower portal,’ which, when utilized to its fullest capability, is also intended to add tremendous efficiency (and cost reduction) to the loan processing back-end operations. Remember the ‘garbage in, garbage out’ analogy from computer class back in the day? In loan originations, investing in the front-end pays even more dividends on the back-end processing and closing activities.

Mortgage POS Imperative

Some Examples of Two-Way Engagement

While almost all popular mortgage POS platforms are far more robust than what is described below, this brief list is intended to provide you with the general idea of the ‘centralized digital back and forth’ POS platforms provide.

  • From their digital device of choice, anywhere and anytime, borrowers apply for a mortgage, providing basic finance needs and contact info
  • Lender instantly provides ‘thanks and welcome’ materials, as well as required compliance disclosures
  • Most reputable POS platforms have eSignature capabilities as well as integrations with credit, verification, flood, product and pricing and other type vendors
  • Lenders instantly use this data and automation for borrower qualification analysis
  • Lenders and borrowers can each upload and provide documentation
  • Lenders can issue conditional pre-approvals, which is critically important to get the borrower ‘off the market’ from loan shopping
  • Lenders maintain current application status, available to borrower anytime
  • Loan closing coordination

Mortgage Loan Officers (LOs), and their supervisors, can usually set custom parameters to efficiently manage their application pipeline based upon tasks, toll gates, status, due dates and more. This can be a monumental in ensuring forward movement and proactive communication.

Why Lenders Must Have a POS Platform

Simply stated, lenders just won’t survive long-term without capturing the digitally dependent borrowers, as their numbers grow exponentially. Consider these stats from December 2021:

  • Online applications have grown 30% annually (Federal Reserve Bank of New York)
  • 69% of homebuyers would prefer to handle their mortgages entirely online (Fannie Mae)
  • 61% of new mortgage borrowers used an online application to apply for a loan (Ellie Mae)
  • In 2020, millennials accounted for 53% of home-purchase mortgages (Ellie Mae)

Also according to Ellie Mae, 55% of online mortgage applicants prioritize simplicity over all else. Absolutely nothing makes the mortgage application process easier than a feature-rich and robust POS. Other important factors, per the Ellie Mae survey, include reduced time to close at 53% and fewer in-person interactions at 49%.

Financially Speaking…

It is imperative for mortgage lenders to keep up with workflow and automation technology to remain competitive, the best viable path to combat the ongoing rising costs to originate. Let’s break the financial benefits down into bite-size chunks.

Productivity & Speed

  • Ability to increase the size of pipelines managed
  • Reduced overhead via higher LO and back-office staff productivity
  • Reduced processing time by 10 days, or 20%, on average (Federal Reserve Bank of New York)
  • Better agility to handle notoriously common application volume spikes

Conversion Rates & Margins

  • Smarter up-front borrower screening and qualification abilities; Better conversions
  • Improved market share by meeting digitally savvy borrower expectations
  • Increase margins per loan originated; Work on the best, skip the rest

Compliance & Quality

  • More data. More control and advantageous use of it
  • Higher loan quality via more task automation; Hard and soft stops
  • Substantially lower risk and eventual default rates; Originating smarter, not harder

What’s not to like here? Better conversion rates, increased market share, processing faster with higher quality and compliance (with penalty avoidance) – while saving a boat load of money to re-invest in more tools and technology.

POS-itively the mentality of best-in-class leadership.

In Summary

Many within the mortgage industry complained for decades that other industries enjoyed a more forward-thinking culture of technology advancement. However, we have since made tremendous progress thanks to changing consumer expectations, a more entrepreneurial spirit and the attention of massive venture capital funds. Opportunity attracts opportunists – but beware, they are not all alike, or qualified. We have seen our share of high IQ techies from Silicon Valley trying to force fit solutions into a mortgage market they just don’t understand.

At this point in the read, we hope you have come to agree that now is not the time to be late to the party, instead becoming an early adopter or fast follower. Doing nothing actually translates into something – the rapid deterioration of your lending business. Keep in mind we are not a tech vendor and have no incentive to deploy scare tactics as a sales approach. We are the foremost vendor marketplace analysts serving the mortgage and credit union domains. We have no skin in the game other than attempting to offer sage advice.

Homebuyers increasingly demand such POS technology, which often becomes the center of the relationship with borrowers. Many of your competitors have not only already deployed it, they are likely at a stage of leveraging learnings to tweak and extract even more value out of their POS.

Your challenge is to define your end-to-end business needs, then begin your vendor due diligence. Separate ‘must-have’ versus ‘nice-to-have’ requirements. Consider whether you only need certain POS modules (functions), and whether you will ever likely deploy everything the POS has to offer. Choose wisely!

 

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Related Reads

Benefits of Deploying a Mortgage POS

Guide: How to Select a Mortgage Point-of-Sale (POS) System

 

About Us

Scott Roller founded 3W Partners LLC and Vendor Surf (www.VendorSurf.com), each dedicated to revolutionizing sourcing of vendors in the mortgage and credit union ecosystems. The companies monitor and report on the service provider market to provide participants what they need to excel in today’s market. Scott@VendorSurf.com