Two trends are gaining traction among lenders as ways to betterservice their borrowers: Using technology to provide consumereducation during mortgage e-closings, and allowing qualifiedborrowers to choose and alter the terms of their loans, accordingto several consumer lending experts.

Art Tyszka, general manager of residential lending for theMinneapolis, Minn.-based Wolters Kluwer Financial Services,predicted that as a result of the CFPB's deep and ongoing interestin consumer education and mortgage e-closings, more lenders willbegin to use e-closing technology in the mortgage closingprocess.

“We have seen e-signatures more on the front end of theprocess,” Tyszka explained. “Consumers are able to more easily signand initial application documents electronically because that hasbeen where most of the efficiency and cost savings has come from.But the CFPB is really very interested in the consumer experienceand understanding in the e-closing process, and I really believethat is where financial institutions should prepare toinnovate.”

Tyszka did not predict exactly what form the innovation mighttake, but said that he had already heard of firms experimentingwith online video technology to help consumers understand theirrecusal rights, for example.

“Maybe the e-closing process won't let you e-sign a documentuntil you watch this 30-second video clip,” he said. “Or maybe ifthe borrower hovers the mouse over a certain clause or element of adocument, a little video pops up to explain that.”

Tyszka pointed out the technology that permits these types ofinteractions already exists, and that consumers who are alreadyfamiliar with the concept of online learning are probably wonderingwhy lenders have not already deployed it.

He also mentioned that lenders should be prepared to innovatewhen it comes to data collection and reporting. The CFPB has showna strong interest in collecting more data from financialinstitutions during the mortgage loan origination process, he said,therefore financial institution lenders should start preparing toinnovate in the areas of data collection, storage, reporting andsafeguarding.

Tyszka said he foresees lenders building on their existingprocedures, but perhaps the most disruptive innovation on thehorizon will be allowing qualified borrowers to change the termsand interest rates of their loans, according to Keith Kelly,co-founder and CEO of Rate Reset, a fintech startup offeringsoftware to drive that innovation.

Kelly stated that “consumer controlled lending” will benefitboth consumers and lenders: It gives consumers the chance to tailoran existing loan to meet their changing economic or lifecircumstances without going through the time-consuming process ofrefinancing, plus it allows lenders to easily service theirborrowers' needs and help prevent them from refinancing their loanswith other lenders.

“If I know that I can go onto a website at 3 a.m. and cut mymortgage rate or extend my auto loan at my own lender, why would Irefinance my loan to get that rate or extension with anotherlender?” Kelly asked.

The concept also allows lenders to attract new borrowers whodesire the ability to set their interest rate or term on anexisting loan. Currently, Rate Reset's products only apply tomortgages and auto loans, but Kelly said the company is developinga product that will let qualified consumers change the terms onrevolving credit loans, such as credit card loans.

Currently, 26 credit unions and a handful of banks use at leastone of Rate Reset's products, and the firm just signed a deal withIMM, a major provider of e-signature software, which could move itstechnology out to as many as 650 more banks and credit unions.

The Linden, N.J.-based IMM will incorporate Rate Reset's technology into new productsthat it will offer its client banks and credit unions beginningthis fall, the companies said.

“IMM views our new partnership with Rate Reset as an opportunityto unite like-minded technology companies to deliver innovativesolutions to financial institutions and their customers,” IMMpresident/CEO Chuck Klein said. “We look forward to bringing ournew solutions to market this fall that will create an engagingconsumer experience, improve operational efficiencies and increaserevenue streams. We feel technology collaborations, like ours withRate Reset, are critical to driving the financial industry and itstechnology evolution forward.”

Kelly added, “The current process for loan acquisition andretention is extremely inefficient and, in the case of loanretention, can be nonexistent, and therefore presents a significantbusiness opportunity. IMM recognizes this opportunity, and we aredelighted to work together to leverage our technologies for thefinancial services industry and thereby bring greater innovation tothe marketplace. This is a very positive development for ourorganizations and the financial industry.”

Leonard Mills, founder and research director for PI Analytics, aWashington-based financial services consulting firm, estimated thatRate Reset could strongly influence the lending market,particularly for millennials.

“Right now I would call this a niche product, but only becauseso few people know about it,” Mills, who is also a former executivefor both the Federal Reserve and Fannie Mae, said. “From aneconomic perspective, I think the market is potentially huge. Froma marketing perspective, they need to make it known to morepeople.”

Mills predicted millennial borrowers in particular would bedrawn to the transparency and ease associated with switching loanterms through Rate Reset's approach.

“This is a generation that doesn't understand or have patiencefor a lot of processes,” Mills said. “They don't understand whythey wouldn't be able to change their loan terms online or why theycouldn't know and understand their new interest rate before theyhit the button.”

Mills pointed out that since this generation already uses PayPaland similar P2P technology to pay their friends and family members,they should be highly comfortable performing these types offinancial transactions online.

As more consumers learn about and use this technology, morefinancial institutions will begin to offer it, as they may fearlosing borrowers if they do not, Mills predicted.