The old document-centered mortgage process of the last two decades is changing. Lenders must leave the time-intensive, paper-intensive loan cycle and focus their resources on a data-centered process. The transition to a data-centric workflow will better equip lenders as a whole and revolutionize the mortgage industry we know today.
Although the benefits of migrating away from a document-centered mortgage cycle are impressive, there is often some hesitation within the industry. While resistance to change is not an uncommon phenomenon, the crash of 2008, resulting in stagnation of the housing market, have made lenders gun shy to invest in new technologies. In all actuality, the continued use of today’s loan origination systems will only further repress the recovery of the mortgage industry as lenders remain heavily restricted by a tedious, inefficient method of loan generation.
The effectiveness of data-driven technology will be multiplied by embracing process services. Business Process as a Service (BPaaS) leverages the data from tomorrow’s mortgage operating systems and provides the services needed to reduce costs and cut even more time out of the loan cycle.
The problem with doc-driven loan origination
Document-driven processing is no longer the best option for mortgage lenders to work with. The outdated process wastes valuable time and money, does not scale well and lacks the level of transparency investor’s desire. Even some current solutions that market themselves as eMortgages continue to rely on document-driven processing, which results in little to no change in the amount of time spent working through the loan lifecycle. The loan document still has to pass through origination, processing, underwriting and closing one by one, which prevents other staff members from working on the loan simultaneously.
The total process still takes anywhere between 17 and 150 days to complete and results in a total cost ranging from $1,000-$2,500. Utilizing a factory-style work process was reasonable when loan files were still paper documents, but the style is obsolete. Not only does this approach to processing require more time and money, but it does not provide the desired level of transparency, often preventing investors from evaluating their loan until after closing.
Data-driven loan cycle saves time and money
The differences between document-driven and data-driven workflow may look subtle form the outside, but the result is dramatic. The key is a mortgage technology platform that feeds the standardized loan data to all pieces of the loan cycle in real-time, eliminating the “factory line” of today’s systems. By relying on data over documents, lenders have the freedom to work on pieces of the loan they want without having to wait on their partners to finish, thus reducing cycle time.
By building the workflow around a central datacenter, the lender enables multiple departments to work on the loan at the same time. In conjunction with this technology, automated decisioning capabilities provide for a more streamlined process, virtually eliminating the need for manual evaluation and quality checks with each step of the loan cycle. The automated decisioning function can also immediately evaluate data within specific criteria to provide a final assessment.
Data-focused origination also provides clearer transparency and more accurate risk analysis. As origination staff and underwriters finalize the loan for closing, investors and secondary marketers can access the loan file at any step. This provides them the ability and flexibility to evaluate risk, set pricing and arrange mortgage-backed security (MBS) packages in parallel with the loan working its way to closing. When a data-centric loan platform is combined with process orchestration, the average lender can cut up to 30 percent of more off the time and cost needed to complete a loan.
Introducing the MOS
As technology in outside industries, such as mobile, continues to change and advance, mortgage technology is heavily influenced by the success of these industries various operating systems which results in the implementation of similar offerings tailored to mortgage and lending. For example, since the introduction of Apple’s iPhone in 2007, companies have scrambled to develop applications (apps) iPhone users can download directly to their device based on what they are interested in.
This philosophy can be transferred to the mortgage industry in that no lender has the exact same technology needs as another. The latest advancements in mortgage technology now allow lenders to add apps to their mortgage operating system or “MOS” to meet their specific needs. If the lender no longer sees a need for an app, it can be removed without impacting the functionality of the MOS and its remaining apps. Just as iPhone users vary in the way they use their phones, lenders vary in the way they prefer to conduct business. Data-driven systems grant lenders the ability to select the apps they want in order to tailor their loan system as they see fit. By allowing for multiple apps to be added to the MOS, lenders now have the power to expand the clientele they serve due to the variation of services available through the apps.
Add on BPaaS to maximize efficiency
While data-driven automation services are one of the fastest growing areas of technology growth, lenders can also benefit by moving business process services to the cloud. Traditionally, lenders who wanted to utilize a third-party service for processes, such as settlement services would have to sign extensive monthly contracts and pay for a certain amount of bandwidth, regardless of whether it was used or not. BPaaS builds on the benefits of cloud-based software by providing processes and expertise through a pay-per-use model.
Much like data-focused software removes the barrier of expensive installations, BPaaS does not require a heavy upfront investment in new infrastructure, which enables fast entry into new markets and smooth setup of operations in new geographies.
For example, a lender can work with a BPaaS service to provide support for mortgage origination, enabling interaction between the many players and parties involved in the transaction. They could enhance that support with document management to streamline communications—and all of it is available on demand, in real-time.
Ultimately, BPaaS enables lenders to have greater end-to-end flexibility and effectiveness in their operations and provides options that can dramatically improve processes without requiring a massive influx of capital.
BPaaS can be as extensive or as minimal as necessary to meet the lender’s needs. BPaaS solutions can enhance individual parts of the process or re-tool the entire workflow into an effective end-to-end workflow. BPaaS is also a real consideration for lenders facing major changes, such as acquisitions or entering new states. The ability to apply the same technology standards easily across the entire enterprise makes a combination of data-driven technology and BPaaS a lower cost, lower risk option.
Based on the current capabilities of data-driven systems, the reign of document-driven technology seems to be coming to an end. By embracing new technologies that allow for customized programs and improved functionality, lenders can better manage their employees and improve client satisfaction.
Roger Hull is vice president of Genpact Mortgage Services. Roger leads the ongoing development of the company’s Quantum Mortgage Technology. His email is [email protected]