HousingWire sat down with Paul Anselmo, founder and CEO of Evolve Mortgage Services, to find out how the company is helping lenders redefine and enhance their business in a tight market, and what an eMortgage should really look like.
Q. Evolve offers a wide range of software and services to the industry. What’s the overarching vision in what you choose to provide?
A. The vision has always been to change the way loans are bought and sold, and we relentlessly think of ways to bring innovative and forward-thinking solutions to our clients. Whether we’re performing the initial underwrite, loan closing, closed loan due diligence review, or anything in between, we seek to improve the quality of the loan manufacturing process.
Long before the eMortgage or Digital Mortgage changes that have occurred in the last few years, we saw the benefit in moving the diligence piece further up in the food chain of the origination and closing processes. That’s how we’ve been able to offer creative solutions like Transferable Diligence, where takeout investors and aggregators recognize our underwriting as a component of the pre-purchase audit, and therefore reduce fees to our lender clients.
Our clients are then able to offer lower rates and fees and thus drive more business back to the investors and everyone comes out ahead.
And of course, SigniaDocuments, which is the only doc engine built entirely on Category 1 SMART Docs so the files can be electronically diligenced throughout the origination process and after closing.
That’s a huge difference because documents are delivered as a stream of data in a standard format, which can be read by a machine with 100% accuracy, eliminating the need for a second look by an investor. There is no way that an OCR engine can do that.
Q. Mortgage lenders are struggling to keep the right balance of staff as they look to grow in a low-volume environment. What specific areas are the biggest pain points right now?
A. I think it’s really the balance between staffing and production volumes and the direct effects on margin. People are putting off layoffs because they are never popular, and no one wants to be in the news. I think the biggest pain point goes to the cost factor. Even when you take out LO comp, costs are really high.
By offloading specific services to a third party such as Evolve, lenders are able to keep proper staffing levels as volumes continue to fluctuate.
For many clients, we handle a constant amount of their volume, say 10%, but we also handle any time they have a rapid increase (if rates drop or their products become more popular). This way, they are not constantly managing how many underwriters they need as FTE, which often leaves them understaffed during peak times and overstaffed during slow periods.
On the closed loan side, we have very efficient processes in place to handle constantly growing volumes of loan acquisition reviews. We offer support of both Conventional and Non-QM loans originated by correspondent sellers and have been in the business since the early 90s. Our cohesive, proprietary software allows us to bifurcate the diligence review process and compartmentalize loan reviews to subject matter experts.
Many of our clients license our technologies in their organizations allowing for a seamless integration with Evolve while enhancing their productivity. This creates a highly specialized yet cost-effective and scalable model that delivers best-in-class service to our clients.
Additionally, as the industry shifts and lenders are looking to expand their offerings to compete in the current environment, we are seeing a new wave in non-QM lending emerge. Lenders are coming to us to help set up and provide fulfillment for entirely new channels such as non-QM or correspondent so they can quickly enter a new space. Through Evolve they can have a team in place ready to accept applications with no time spent on hiring, training, and ramping up new people.
Q. Underwriting is such a critical function. How does outsourcing underwriting to Evolve work?
A. Underwriters are in very short supply. We lost a whole generation of new underwriters coming into the mix because of the financial crisis. We’ve structured ourselves internally so that work is broken down to individual steps, allowing our underwriters to focus exclusively on underwriting files and not worrying about ancillary items like ordering third-party reports.
This makes us a very desirable place to work for an underwriter who wants to work independently. We are able to pick from a large pool of candidates who want to work within our model, so we have strict requirements around skill and experience for any candidate we would consider.
This approach combines efficiency and productivity, making us six times more productive than our customers. Further, we keep all of the underwriting onshore because we know some companies are sensitive about their data, as well as the quality of the underwriting and customer support. Time zones and turn-around times are simpler to manage and more in line with what our customers need.
Q. When it comes to delivering a true eMortgage, what is Evolve doing differently than other providers?
A. SMART Docs. SMART Docs are so powerful that it’s a wonder more lenders are not using them for their eMortgage solutions. SMART Docs give you the power to electronically diligence the entire file before, during, and after the loan closes – no more stare and compare.
Further, because SMART Docs are native XML, they can be formatted, created, and delivered with 100% accuracy 100% of the time. Signature lines are automatically built into the document so a processor or closer doesn’t have to manually ‘tag’ a PDF to create a “digital” experience for the borrower.
Most providers only deliver PDFs that someone has to go in and tag so the borrower can sign electronically. This is a slow and manual process that can dramatically decrease the economic benefit of going “e” for lenders.
And, should anything happen to that loan down the road, someone will need to do a “stare and compare” at the docs to see where the errors are. SMART Docs enable electronic diligence but are further programmed to be more compliant and accurate.
SMART Docs use geocoding to know exactly which disclosures need to be delivered based on location and loan program. Lenders using SigniaDocuments do not need to have multiple people reviewing doc packages to ensure the proper forms are included.
Q. How does your comprehensive approach to electronic closing reduce risk for lenders?
A. We didn’t decide we wanted to create mortgage documents, and then build a company around that. We are first and foremost a diligence company, and we saw the opportunity to move the diligence piece further forward in the manufacturing process.
We created SigniaDocuments as a result of the errors we see from other doc engines during our diligence reviews, and we saw the power of SMART Docs over a decade ago. We have a unique view into doc creation because we’re able to view all of the docs that come in from other providers through our underwriting and due diligence businesses.
Further, we know that a lot still happens after the loan closes, and lenders are still on the hook for a lot of risk. Other doc companies only focus on the closing, but we support lenders after the loan closes. With SMART Docs, for example, you can electronically diligence a complete file to know exactly what was on the document and what was shown to the borrower, which is why our entire document library is SMART.
Other providers only deliver a SMART note because that’s what the agencies want, but they ignore the significance of the remaining docs, and all the docs will be reviewed if something goes south on the loan down the road.
Q. What’s next for Evolve?
A. We will continue with our mission today, building comprehensive solutions that solve real problems for our clients, and continue pushing the true eMortgage with companies that understand what that means and want to capture all the benefits
As I mentioned, many of our originators are starting up correspondent and non-QM channels, so we offer a turnkey option for that where we can get a lender from nothing to originating and buying loans in a short period of time.
We have an AUS equivalent for non-QM, which is a strategic and very critical component in order to get scale. It gives visibility into eligibility, so lenders can see that a loan just missed being eligible, giving them a roadmap to take advantage of that program. This platform is garnering a lot of interest and we are instituting it for a number of lenders right now.