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].
