Two trends are gaining traction among lenders as ways to better service their borrowers: Using technology to provide consumer education during mortgage e-closings, and allowing qualified borrowers to choose and alter the terms of their loans, according to several consumer lending experts.

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

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

Tyszka did not predict exactly what form the innovation might take, but said that he had already heard of firms experimenting with online video technology to help consumers understand their recusal rights, for example.

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

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

He also mentioned that lenders should be prepared to innovate when it comes to data collection and reporting. The CFPB has shown a strong interest in collecting more data from financial institutions during the mortgage loan origination process, he said, therefore financial institution lenders should start preparing to innovate in the areas of data collection, storage, reporting and safeguarding.

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

Kelly stated that “consumer controlled lending” will benefit both consumers and lenders: It gives consumers the chance to tailor an existing loan to meet their changing economic or life circumstances without going through the time-consuming process of refinancing, plus it allows lenders to easily service their borrowers' needs and help prevent them from refinancing their loans with other lenders.

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

The concept also allows lenders to attract new borrowers who desire the ability to set their interest rate or term on an existing loan. Currently, Rate Reset's products only apply to mortgages and auto loans, but Kelly said the company is developing a product that will let qualified consumers change the terms on revolving credit loans, such as credit card loans.

Currently, 26 credit unions and a handful of banks use at least one of Rate Reset's products, and the firm just signed a deal with IMM, a major provider of e-signature software, which could move its technology 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 products that it will offer its client banks and credit unions beginning this fall, the companies said.

“IMM views our new partnership with Rate Reset as an opportunity to unite like-minded technology companies to deliver innovative solutions to financial institutions and their customers,” IMM president/CEO Chuck Klein said. “We look forward to bringing our new solutions to market this fall that will create an engaging consumer experience, improve operational efficiencies and increase revenue streams. We feel technology collaborations, like ours with Rate Reset, are critical to driving the financial industry and its technology evolution forward.”

Kelly added, “The current process for loan acquisition and retention is extremely inefficient and, in the case of loan retention, can be nonexistent, and therefore presents a significant business opportunity. IMM recognizes this opportunity, and we are delighted to work together to leverage our technologies for the financial services industry and thereby bring greater innovation to the marketplace. This is a very positive development for our organizations and the financial industry.”

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

“Right now I would call this a niche product, but only because so few people know about it,” Mills, who is also a former executive for both the Federal Reserve and Fannie Mae, said. “From an economic perspective, I think the market is potentially huge. From a marketing perspective, they need to make it known to more people.”

Mills predicted millennial borrowers in particular would be drawn to the transparency and ease associated with switching loan terms through Rate Reset's approach.

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

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

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