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Good for my mother: FHA Chief Brian Montgomery on reverse mortgages (Part I)

Feb 26, 2008

Marrying the docs with the processJason King and Pete LeFebvreenterprise content management (ECM) system, loan origination system Image-enabling your LOS Over the past few months, mortgage industry publications have been filled with stories on different aspects of the downturn in the housing market. This downturn has affected everyone from homebuilders and appraisers to mortgage originators and technology vendors. Opinions differ as to how long this will last before the market recovers, but in the meantime, mortgage companies must do everything in their power to increase efficiencies and keep losses to a minimum. A key component to streamlining processes, reducing expenses and increasing loan profitability in any mortgage origination outfit is an effective document management strategy. However, there are numerous hurdles to overcome when implementing a document management strategy. According to TowerGroup Research Director Craig Focardi, one of the biggest obstacles is the inability to securely share electronic files. Most traditional methods such as fax and e-mail are vulnerable to attack—leaving the information being transmitted unprotected and available to anyone with the gumption to go after it. Then, there's the people factor. The time-consuming, labor-intensive loan origination process is prone to mistakes, especially when the process is managed entirely by people and paper. Documents get lost, damaged or overlooked, and critical steps are bypassed, forgotten or ignored. In addition to being frustrating and costly, these mistakes can also create significant headaches for lenders in the areas of compliance and loan marketability. Missing and/or incomplete documentation could lead to serious legal repercussions from regulators and to decreased sales to the secondary market. A bad report from either of these constituencies ultimately means massive losses for a lender. Another roadblock that could affect profits is slow loan delivery to investors. The traditional, paper-based process for electronic loan closing and document delivery involves numerous time-consuming steps that can delay the delivery of documents to the closing agent by as much as 24 hours, which further delays the sale of the loan to the secondary market and, ultimately, causes a delay in needed profits. Given all of these complications, it's important for lenders to manage the flow of documents from the point of origination to closing. One of the ways to do this is by integrating an enterprise content management (ECM) system with your loan origination system (LOS). According to the Association for Information and Image Management, a non-profit organization dedicated to the understanding and advancement of ECM, ECM is "the technologies used to capture, manage, store, preserve and deliver content and documents related to organizational processes. ECM tools and strategies allow the management of an organization's unstructured information, wherever that information exists." However, it is not enough to simply manage your content. An ECM/LOS integration assists originators in eliminating as much paper-based loan processing as possible, which results in significant cost savings in terms of paper usage, printing, labor, shipping and storage. It also allows originators to streamline internal processes by marrying the loan documents to the origination system and then automatically managing the process by routing the needed documents and the associated steps to the appropriate employee. An ECM system should also serve as an integral part of an organization's strategy for maximizing how the content is used. ECM systems are useful to mortgage professionals because they allow business processes to be automated while replacing physical documents with electronic files. When you look at the internal workflow within an LOS, there are a number of ways in which an ECM can be integrated and improve the process. The right LOS will not only be customized to fit your business model, but it will also have quality control features that begin at the point of sale and continue through post-closing. An ECM system assists in the loan process from the beginning by allowing an originator to scan the borrower's loan documents or import electronic documents directly into the ECM system so that the LOS automatically associates those documents with the correct loan file. The documents are stored electronically within the ECM system's repository, automatically indexed for easy search and retrieval and can be accessed through the LOS interface without having to switch between programs. Not only does the electronic storage allow originators to become more organized, but it also solves the problem of losing or damaging a paper loan file. Next, documents are automatically routed for review and approval based on the internal business rules. This enables an underwriter to pull a borrower's entire loan folder within the LOS interface, rather than going between a computer screen and paper folder to verify and enter information. Documents can also be pulled according to the date, loan number or last name, which further streamlines the process and cuts down on the time that it takes an underwriter to process the loan. Once a loan has closed, the ECM integration allows the loan officer to continue to streamline the process by electronically accessing an audit view of the loan package. The data in the closing documents that has been captured in the ECM system can then be compared with the existing record in the origination file. The borrower will also experience the benefit of being able to complete his review of the loan documents in as little as 10 minutes—versus 45 minutes to an hour. The key to a successful integration is to identify points early in the process where documents can be viewed. Originators often wait until after the closing to scan and view documents, which means they don't take advantage of the benefits an ECM system brings to the actual loan process. As a result, originators should seek out a system that allows them to view the right files at the right time. There may be standard settings, but it's important to find an ECM system that allows the user to modify or extend the system's capabilities. Ease of operation is another key factor. It's important to modify your LOS so that it allows the user to easily access the ECM system when processing a loan. One way to do this is to put the viewing in context with the information the originator is accessing so that documents can appear on the same screen. For example, create a function, such as a keystroke, that can be used to open the document viewer. Then, once the user has opened the first list of documents, they can be cross-referenced and linked to other relevant files. Viewing all of the required information on one screen cuts down on time and reduces human error. ECM and LOS integration also provides benefits in the advancement towards e-mortgage. For e-mortgage adoption to occur, there has to be greater connectivity and cooperation among all parties involved in the process. Currently, there is very little organization regarding the flow of documents and information between parties such as the lender, the document preparation company, the closing agent, the mortgage investor, and so on. As e-mortgages become more of a reality, an ECM/LOS integration will make adoption easier because the infrastructure and processes needed to connect all of those invested parties will already be in place. In addition, integration provides two-way, secure, cost-efficient document delivery—a current concern in the e-mortgage arena. By creating digital loan documents, lenders can easily compile the document and index information into an electronic file that can be delivered to the investor immediately after the close of the loan. Not only does this save the lender the cost of printing and shipping huge loan files, but it also saves the hassle and expense of creating multiple copies of loan documents. Electronic loan file delivery also speeds the loan purchasing and funding process. Increasingly, mortgage companies are integrating their LOS with an imaging solution. The companies that are still relying on manual processing should search for companies that have established an alliance to receive the expanded and enhanced capabilities through a joint partnership. Companies that make this step will be able to better manage their pipelines, provide better service to customers and improve process efficiency. Jason King is director of financial services for Hyland Software, the developer of OnBase, an integrated enterprise content management software suite. He may be reached at [email protected]. Pete LeFebvre has been the executive vice president of Tennessee operations for Gallagher Financial Systems since 2004. He may be reached at [email protected].
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