Millenium finance for cast offered by ILS.

Those involved in mortgage lending can expect the new millennium to focus on having everything faster, better and cheaper. "This is contrary to 20th Century folklore, which said you can only have two of these, but not all three," points out Lee Howlett, president of Integrated Loan Services (ILS), as he and his staff gathered for their annual predictions for the coming year. "In the next century, consumers will demand it all and the technology will allow lenders to give it all," he said. Here are the ILS expectations for the coming year in mortgage lending and support services.

More Home Equity Loans

Look for more emphasis on home equity loans in the coming year. "Our experience tells us that whenever the mortgage business slows (which we expect next year), lenders replace lost volume with home equity business," said Dave Stokes, executive vice president. "During 1998 and 1999, there was such an active re-fi market that we predict an especially high volume in home equity business. Look for it to get especially hot in the spring."

Bundled Electronic Reports

Next year we will see two trends coming together - bundled service and electronic delivery of reports. "In our company, we've already seen the beginnings of this with the enormous interest in our Automated Collateral Assessment Reports," points out Howlett. "Over this past year, we've had a 250 percent increase in usage. And we've seen a change in the kind of lenders using this product. Originally, it was traditional mortgage lenders. Now, we see usage by the secondary market - Fannie Mae, Freddie Mac, credit unions, smaller banks and even mortgage brokers. We expect growth in these areas next year. We also forecast that the next generation of automated appraisals will involve bundled products. Expect to see automated consolidated reports that include pre-screens for flood determination, credit, title and appraisal. More reports will be delivered and stored electronically without ever being put on paper. Web-based order sites will become smarter and more customized to auto-select products based upon a lender 's product/risk management matrix."

Borrowers to Look for Multiple Channels for Origination

Next year borrowers will heat up their use of alternative channels of origination. Expect to see originations through net branches, affiliated financial services and web-based outlets. "The forerunners are there and we expect that borrowers will eventually have 10 ways of getting a loan instead of just the old hometown retail loan officer," said Michael Kaprove, national vendor manager and regional vice president of Sales for ILS' Northeast Region.

Convenience Closings

With more banks outsourcing the closing process, there will be a move toward new closing methods. These will include bank branch closings, witness closings performed by notaries, mail-away closings (where customers sign documents and send them back), phone closings and some testing of video conference closings. "This whole trend is being driven by banks that are looking for ways to lower their costs and by consumers who become more knowledgeable about the alternatives,' said Howlett. "The goal is for closings to be cheaper, quicker and better. Consumers want to close faster and they demand more convenience, especially when they have more options."

The One-Stop Financial Center

The newly passed banking legislation in Congress has finally given the green light for banks, insurance companies and brokerage operations to offer the same or similar products. This lays the groundwork for the one-stop, full-service financial center. "We expect regional banks to start acquiring more insurance agencies so that they can cross-sell insurance and loan products in light of this trend," said Stokes. "We anticipate that larger banks will tie-in with established financial services companies."

Merger Mania Beyond Banking

The new millennium will bring a merger of loan support service companies. Expect to see title companies continue taking over those that provide appraisals, credit checks and flood insurance. By doing this, such companies will be able to keep pace with the growing needs of regional and national banks for loan support services.

Continued Bank Consolidations

"Everyone will be scrambling for power and position in a newly reshaped banking marketplace," said Stokes. "Look for small and mid-sized banks to position themselves for take-over. As part of this process, we forecast that a number of mutual banks will change to stock banks, which will give them the potential to leverage shareholder value."

Stable Interest Rates

"We expect little change in interest rates next year," said Howlett. "Rates don't move in an election year and we expect the Fed to stay on the sidelines during this one. Because of the number of Americans invested in the stock market, Federal Reserve chairman Alan Greenspan is watching the stock market closely. But, even if the stock market goes down, we expect he'll only readjust rates by no more than a quarter point."

E-Chameleons to Dominate

The financial institutions that survive and thrive will change their business strategies and adapt to the on-line requirements of consumers. "They will have to know how to make the most of technology, be willing to experiment with new products and be able to respond to the changing demands of larger and larger institutions," points out Kaprove.

Order and Delivery Over the Internet

Next year, expect to see more ordering of product over the Internet and more electronic delivery. "We expect greater use of the Internet for core business and non-consumer-related business transactions," said Stokes. "Right now companies use it to deliver reports. We expect more use of it to monitor results as the closing process progresses."

Renewed Interest in New Technology After Y2K 

Look for renewed interest in electronic delivery once lenders get over the psychological hump of Y2K. "Decisions on technology were held off this year because of the fear of Y2K glitches," said Kaprove. "Resources were tied up preparing for it. Once the New Year comes, lenders will again focus on new technology."

In looking forward, Howlett said "There is no doubt that the industry's appetite for change will continue to grow. Fueled by the needs of increasingly savvy consumers and advancing technology, the pace of change will accelerate. We expect it to be nothing short of interesting."