There will always be challenges in the mortgage business, but I’m optimistic for 2013 and beyond. Even with the uncertainty of pending regulatory changes, housing will always be a major driver of the economy. Transferring assets (whether houses or promissory notes) and the applicable funds, in addition to all of the auxiliary transactions as part of the home buying or refinancing process, in the digital age is a challenge the industry is meeting head-on.
Greater adoption of e-mortgages and e-signing is one healthy sign. The early adopters five years ago were motivated to streamline file exchange for faster capital return. That’s still critical but a new parallel driver is proving regulatory compliance and managing loan quality. Allowing regulators, investors and borrowers to have a better understanding of who viewed and signed what and when, has never been more crucial. Until recently, processes were considered transparent if participants in the mortgage supply chain could access loan status and updates when needed. Now, transparency has been redefined as clarity around data, decisions and processes. In short, it is being able to “show your math” for all the factors involved in every disclosure, closing, and servicing decision.
Although the industry has spent most of its time on the originations side of the business, it’s equally important on the servicing side. As the private secondary market shows signs of life again—and already demonstrated in the GSE market—investors have their own expectations of transparency, including digital transfer of standardized loan information and automated verification of completeness of each loan. In many cases, those things are not fully supported by core lending systems, especially in the secondary market, which requires deep, loan-level data; remote viewing of documents; and easy, secure transfer of documentation through electronic delivery of a single loan file or bulk loan export.
With all this juggling going on, one of the biggest questions I hear in the industry is-can smaller mortgage lenders really compete with the big guys? The answer is an enthusiastic “yes”! Depending on the size of your organization, an incremental paperless initiative can be deployed on a smaller scope and then expanded to leverage the benefits into the next subprocess of origination and/or servicing.
Recognizing the need to rethink the workflow surrounding whatever lending subprocess you want to start with is a prudent first step. But there are subsequent things that will help put lenders of any size on a clearer path. I call the list “The 8 Things to Do after You Say Hello (to the Idea of Paperless).” They include:
1. Identify what you have (or have access to) already, such as document integration points and existing technology.
2. Involve representatives from all your lines of business. Since all departments are affected by going paperless, this synchronization creates opportunity for new efficiencies.
3. Know who will manage the process configuration once it’s live.
4. Don’t automate bad processes; fix the pain points now and remember to consider compliance and security for all workflows.
5. Include legal/compliance team members in your implementation group. They can provide useful feedback on streamlining processes, and their collaboration is critical for process mapping.
6. Design processes that focus on long-term needs, including electronic discovery and audit trails.
7. Protect document usability. Consider authenticity, reliability and trust worthiness. Documents have a lengthy lifecycle and electronic copies will need to be provided to downstream systems internally and externally.
8. Have a feedback loop in place, and use it when appropriate, including comments from line staff as you go live. Freeing them up from routine tasks via automation so they can focus on what can’t be automated, is a key goal.
Develop a business case for paperless that demonstrates to executive management how adoption enables the sharing of the right information—including visual documentation, too—at the right time to the right groups in the supply chain. How effectively financial institutions can capture, store, find, associate and deliver loan information are what will be their strategic differentiations in the future. This strategy will help lenders manage more loans and, ultimately, will allow you to compete against bigger players by nimbly creating quality loans that you can sell without repurchase risk.