Too often lenders are satisfied with technology that they judge to be “just good enough” to meet their needs even if it means settling for slow legacy systems, and clunky, rigid paper-based solutions rather than implementing technology that automates processes.
New technology brings the promise of improved processes—and most lenders understand that. But the technology sometimes causes problems, some unforeseen, some commonplace, some potentially devastating, such as dinged corporate reputations, long learning curves, and dissatisfied borrowers.
Changing systems exposes lenders to risks they are unwilling to assume, and may remind them of expensive, embarrassing lessons learned the hard way—through failure. To be sure, the mortgage landscape is littered with banks that licensed software—often origination systems that cost millions of dollars and that were never implemented.
So, perhaps with some justification, many still cling to legacy systems, the devil they know. But, their attitude is changing, and new systems, the devil lenders don’t know, are receiving long overdue second looks.
That’s because, lenders can no longer afford to ignore the potential gains from sophisticated automated communication with vendors, borrowers and other business partners—not to mention regulators. The goal is to rely on the Internet to speed processes, to eliminate bottlenecks, to improve efficiencies.
A first, best step for many technologists is to adopt technology that will be flexible and that does not require manual intervention. The result is better control over their lending, servicing, and other processes, as well as the capability to operate seamlessly without relying on dreaded paper-based processes to handle mortgage loans. But before that can happen, paper documents, emails, faxes and dated platforms, need to be replaced and barriers to efficient processes eliminated.
According to some estimates, transmissions that come in through traditional sources, scanned documents, email attachments, or hard copies of documents may represent only 5% of a firm’s process, but are responsible for as much as 70% of the problems.
That’s a costly way to do business, especially when alternatives exist.
Another factor driving lenders to consider licensing new platforms is the stricter regulatory environment the mortgage business operates under: They recognize that to thrive they need to replace inefficient technologies and substitute digital documents for paper. Paper makes doing business from origination to securitization—and don’t forget compliance—more difficult than it has to be, more expensive, slows processes, and represents a competitive liability.
Some lenders are working toward making their internal processes as automated and as free of paper as possible. Once the technology is in place, the result is flexible systems, with accuracy that will approach 100%.
One huge benefit derived from automation is that an audit trail is produced that can be stored and retrieved. When the Consumer Financial Protection Bureau or other regulators ask for reports, creating them does not require gathering files, much less running around trying to locate misplaced documents, but merely requires pushing a few buttons on a key board and generating a report.
In other sectors of the mortgage market, the speed of communication is already increasing. No longer, for example, do appraisal management companies fax or email appraisals. Instead, appraisals are delivered through the Internet to Fannie Mae and Freddie Mac. Adoption of this technology, though the result of a regulatory decree, exemplifies efficiency gains and cost savings derived from automation.
Some lenders have begun to finds ways to handle documents that were not delivered in an electronic way, for instance, adopting bar code technology or automatic form identification. Many progressive firms combine data in their document systems with the metadata in the documents. Then they incorporate that into their decision and workflow engines—to speed loan processing, increase accuracy, reduce the chance of buybacks, and improve efficiency.
Lenders that replace underperforming technology and manual processes with automation and cutting-edge technologies position their businesses to maximize profits and improve performance across their shops.
Matt Strickberger is the managing partner of OnPoint PR and Consulting LLC, a public relations firm that represents lenders, servicers, technology companies and others. He was editor of Mortgage Technology magazine from 1997-2000. If you have comments or suggestions for future columns, email him at email@example.com.