The last blog spurred some really creative thinking. In particular, Bob DeCecco, a senior vice president at Opteum Mortgage, wrote, “As a CPA, I can tell you through many years of ROI and financial modeling experience ... revenue, not just cost savings cures all ills. During this very rapid decline in origination market share, lenders will have to focus on increasing originations by leveraging bleeding-edge technology that allows us to do a better job fulfilling the entire 360-degree customer and partner experience, not just the loan closing process.”
I can't agree more. Capturing the borrower and improving the process for them will be the differentiator going forward. If you can keep old borrowers coming back and attract referral business, you'll be ahead of the game. And technology is the answer to how you make this happen. Here's how it works:
First, embrace SMART Docs. Hold on; don't stop reading as this isn't going to be a technical pitch for SMART Docs. This industry views SMART Docs as a vehicle for enabling electronic closings and electronic mortgages, but that's shortsighted. What SMART Docs really does from a business standpoint is such that it brings together data, page views and electronic signatures all into one electronic file. So, why should lenders care?
Once you have access to the data you can do any number of things with it. Of course the most obvious thing to do is to embrace full or hybrid e-closings. Borrowers can view non-legal documents online and click sign away. From there an e-notary can come to the borrower's house to witness the borrower e-sign the four or five remaining documents, like the HUD for example. For borrowers interested in this route the lender has just turned a very stressful process into something the borrower can do in the comfort of their own home. Now you've created a customer for life who will remember how easy it was to close on a mortgage.
But let's say your borrower doesn't want to do a full or hybrid e-closing, how does the borrower benefit from SMART Docs technology in this case you might ask. Just think about how many redundant documents a borrower has to fill out to get a mortgage. Wouldn't it be nice for the borrower to fill in his/her name once and that information is automatically populated in all other documents that a borrower sees so he/she doesn't have to keep writing their name and other routine information? SMART Doc technology allows the lender to access the data and transfer it to other applications, documents, etc.
Now the borrower reports to his/her friends, family and new neighbors that he/she only had to fill out their name and other data elements once and it was automatically on all the other documents that the borrower saw from there on out to closing. Making mortgage documents simple for the borrower equals a better borrower experience and a greater chance of creating a customer for life and referral business as well.
For those selfish lenders that only want to know how it benefits them, just think of how many times Sally processor has to rekey data elements, and more importantly how that can equal more errors, which can make for a nasty process that upsets the borrower and opens the lending institution up to possible litigation if those errors go unchecked. SMART Docs include a tamper-evident seal and an audit trail so the manager sees all the changes, who made them, when they were made, etc. From there red flags can be built into the system to alert the manger if Sally processor does anything wrong the second she does it.
And MISMO is in the process of making SMART Docs easier for the lending community to embrace with the forthcoming release of SMART Docs v. 2.0. The genesis of this change to v. 2.0 goes back to early 2006, noted Roger Gudobba, a senior principal at Wolters Kluwer Financial Services and a member of the MISMO Governance Committee. “We talked last January about the adjustments that need to happen to certain documents that change during the workflow of a loan. While the SMART Doc spec needs to be able to fit those collaborative documents, it also needs to maintain the integrity of that document at every step,” he said.
“So, for things like a security instrument, once they get signed at closing that's not the end of the process because they get sent to the county recorder who has to mark that document. With the original SMART Doc spec that presented some challenges for county recorders and others that have to change a mortgage document. We won't change the note because that's what is accepted by both GSEs and MERS. In designing 2.0 we wanted to do something that would accomplish everything they were looking for.”
So MISMO is moving to a compound document format. In computing, a compound document is a document type typically produced using word processing software, and is a regular text document intermingled with spreadsheets, pictures, digital videos, digital audio and other multimedia features. It can also be used to collect several documents into one.
It's basically a way of collecting documents in an automated fashion in a single location, but at the same time allows for individuals to change just those documents that they're working on. Further, by making the compound document ZIP-based it allows the industry to use a data compression method that is very popular in business today.
The workgroup tested the new concept with the HUD. As we all know this document is always changing before, during and after closing. The new doc format allowed for a truly collaborative HUD, which should be music to the ears of the entire mortgage industry.
And if you ask Mr. Gudobba what the response from both the lenders and GSEs when this change was announced, you'll be surprised to hear that everyone present was excited about the update. “There were a number of lenders present and everybody conceded that the workgroup did a good job at exploring and explaining all the options. Both GSEs were there and everybody, including vendors, lenders and investors, agreed that this was the best way to move forward,” he pointed out. “This will help e-mortgage adoption because we're trying to move the process forward by resolving the little bumps in the road.”
Will SMART Docs bring about world peace? I guess not, but if it can create a better process for the borrower, a more efficient process for the lender and keep the lender more compliant at the same time, all the better. We're not talking world peace, but we are talking peace of mind for the borrower and the lender alike.
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