ACH Provider Expects Check Conversion to Gain Steam

Ventanex here, a privately held technology firm that facilitates electronic payments, is making a push into the mortgage banking arena, in part because the firm believes demand for "check conversion" services is on the rise.

Company executives told MSN recently that they have already been hired by a number of mortgage bankers. The company says it can reduce the direct transaction fees that mortgage servicers are paying for phone and Web payment options.

In addition, Ventanex says it helps servicers reduce costs further with a check conversion service that turns paper checks into electronic payments at a servicer's lockbox for receiving payments. Ventanex says servicers can reduce the cost of paper check processing by 30% to 50% by using the company's check conversion process, which turns checks into automated-clearinghouse payments when a consumer's payment arrives at a lockbox.

The key to Ventanex's value proposition is that it uses one platform to support all automated clearing-house payment options, which can significantly reduce costs and enhance the collection process, according to company CEO Kelly Green.

And while automated payment options are gaining acceptance from consumers, most still pay by check. Currently, Mr. Green estimates that 15% to 20% of borrowers pay their mortgage bill through an electronic option, but in many cases they must pay a fee to do this, and that serves as a deterrent.

But servicers are starting to convert paper checks to electronic transfers, and legislation enacted last year to facilitate electronic check clearing, informally known as the Check 21 Act, may speed the trend toward check conversion, according to Ventanex.

"The long-term benefit is that we also provide electronic check conversion for them, which pretty much every mortgage servicer is investigating right now," Mr. Green told MSN.

The check clearing for the 21st Century Act (Check 21 Act) means consumers will see electronic fund transfers on their banking statements and will likely increase consumer acceptance of the check conversion process, according to Ventanex COO Christopher Sanders.

Converting checks to ACH payments at the lockbox means that turnaround time improves and the number of checks returned for insufficient funds can be reduced. Mr. Sanders notes that ACH payments generally outpace paper checks in the payment clearing process, meaning that an ACH mortgage bill will likely beat other bills being made by the consumer at about the same time.

"A 15% to 20% reduction in the return rate is what we would typically see in the mortgage world," Mr. Sanders said.

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