Digitizing the Back Office Pays Dividends
Blog: Kofax - Smart Process automation
Automating the mortgage-loan post-closing process creates cost, customer-service and competitive advantages
Originally published in the scotsmanguide.com
Mortgage originators face numerous challenges in their back-office processes, including traversing multiple systems to validate data and performing “stare and compares” across multiple documents.
These manual processes can be cumbersome and increase significantly the risk of compliance errors. They can even become obstacles to meeting business goals, such as improved speed to market and reduced labor costs.
The loan-origination cycle is a complex process made up of many subprocesses, or phases. In the loan-application process itself, there are at least four subprocesses, including completing the application, providing disclosures, obtaining consent and ordering vendor services.
In many organizations, strategists and managers are focused on the front end of the origination process. This is where customer interaction occurs most frequently, and improvements at the front end can greatly improve an organization’s speed to market.
The post-closing process, however, shouldn’t be the last piece reviewed for improvement opportunities. Post-closing — consisting of loan delivery, indexing of final documents and performing quality checks — has recently taken on new importance in the mortgage industry. It has become particularly critical in light of record foreclosure volumes, the robo-signing scandal and subsequent regulations and scrutiny.
The recent historic foreclosure volumes exposed great weaknesses in the loan-document management procedures of many servicers. This was, in large part, because of processing delays involving documentation. Many mortgage originators and servicers now have new policies and procedures in place for document management, auditing and reporting to ensure that documentation is completed and in compliance. Many are now tackling a tremendous backlog of foreclosures and contested buybacks — guaranteeing continued scrutiny of their loan-documentation processes.
Until 2008, it may have been possible to overlook the importance of loan-document management, particularly in post-closing units that are not profit centers. That’s no longer the case. Today, if a servicer’s post-closing document environment lacks clear and consistent management, then its team will spend hours working with multiple jurisdictions to search for files and related documents instead of handling mission-critical responsibilities.
Process challenges
Mortgage post-closing starts immediately after a loan closes and includes loan delivery and the final indexing of the mortgage file. These files include important trailing documents — such as deeds of trust, tax records, assignments, modifications, mechanic’s liens, assumption agreements, Uniform Commercial Code (UCC) records and judgments.
Thereafter, a post-closing data-integrity audit is conducted to check for any loan deficiencies. Loan files are delivered to systems via the Web, scanning, faxing and e-mailing, and are then indexed. Indexing typically involves an intensive manual classification process to separate the documents into various “buckets,” or categories, for the files. The more complex the system, the more difficult it can be for post-closing specialists to locate the documents required for the final phase of post-closing: data-quality checks and review.
According to the Freddie Mac Quality Control Best Practices guidelines, originators must maintain a variety of documents for review and reverification purposes. Among them are credit, employment, income and asset documentation; appraisal and inspection documents; and an underwriting summary, the loan application and sales contract.
In particular, this quality-control review should include the following documents:
- Notes and riders;
- Security instruments and assignments;
- Mortgage-insurance certificate or policy, or mortgage-guaranty certificate;
- Modification or assumption agreement;
- Title binder or final title insurance policy (both if available), or other evidence of title;
- Plat or survey;
- HUD-1 settlement statements or other closing statement;
- Leasehold estate documents;
- Hazard insurance policy or certificate;
- Flood insurance policy or certificate or flood-zone determination documents;
- Underwriter’s approval and any conditions of closing; and
- Closing instructions.
The data-integrity review of the sampled mortgages must ensure that loan data is accurate and consistent. If a key number for a mortgage is missing or inaccurate, Freddie Mac must be notified in writing within 30 days of the discovery.
Process opportunities
The arduous processes and related challenges with document collection, data-quality checks and quality-control reviews tell us there is great opportunity for improvement in the post-closing process.
C-level executives and loan-processing managers want more than just image-enabled workflows. They need business processes to be streamlined and automated in order to differentiate their organizations from the competition. They also want secure, predictable and easy-to-manage processes that allow staff to focus on servicing customers rather than handling documents.
C-level executives and process managers need their organizations and change agents to drive key areas for improvement in customer service, capacity, quality, security and control while realizing top operational efficiency goals, such as reducing processing times, costs, errors, lost documents and risk.
To meet these challenges, mortgage origination and servicing organizations are turning to smart-process applications (SPAs) to address the critical areas of the loan-origination post-closing cycle. SPA software automatically classifies each document by reading and understanding the content. Once a document is classified, it can be routed to the correct workflow queue.
Automating the post-closing process with SPA solutions helps to make each step of the process more efficient. It assures documents are easy to find in the system and makes clear who is charged with reviewing them. This significantly reduces the amount of manual labor devoted to document reviews and data checks.
Creating workflow computer dashboards also can enhance efficiency even further. These dashboards graphically illustrate analytics and detail information about supporting documents — such as proof of ID, W2s, credit checks and more — as well as their expense and the number of documents per channel.
When organizations digitize and transform their processes, they increase the value of their investment by reducing costs and locking in strategic and long-term benefits. Optimizing the mortgage post-closing processes improves the customer experience, reduces labor costs, creates a competitive advantage and ultimately helps to grow business.
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