The mortgage industry has long struggled to ensure the quality, transparency and auditability of loan information. The recent uptick in buyback requests in the market has left lenders scrambling. In recent years, regulators have worked to ensure that proper oversight is in place to authenticate loan information throughout the loan process and to promote data quality controls.
Data integrity, maintaining the accuracy and consistency of loan data throughout the loan lifecycle, continues to be a challenge for the mortgage industry. Over the past few years, regulations have made operating in the industry increasingly complex. Operating in this increasingly complex environment has forced lenders to search for ways to manage these new compliance requirements, while still maintaining loan volumes and remaining profitable. Faced with these new challenges, the industry is discovering that traditional lending technologies are not up to the task. To achieve true data integrity that drives business objectives today, lenders must adopt more advanced document management technology solutions that not only increase operational efficiency through paperless processes, but also ensure loan health through data capture and validation, and automate compliance efforts.
LOS as System of Record vs. Source of Truth
Many lenders mistakenly believe that their LOS, as their system of record, provides an accurate picture of the data associated with a loan. In reality, an LOS simply acts as a system of record, storing and listing information, which can be entered incorrectly or mistakenly changed over the lifecycle of a loan. While the best sources of data associated with the loan are the original documents used in the loan process, LOSs don’t provide the lender with the appropriate tools to easily locate the data on the original documents and compare it with what is in the LOS. The only way to maintain data integrity is to use document management technology that makes it easy to compare data in the system with the data on the original documents. This technology enables the lender to determine discrepancies in the data, missing data, or missing documents, replacing the time-consuming, costly, and error-prone “stare and compare” process commonly used today.
In addition, many lenders are realizing that the document imaging “feature” included with their LOSs don’t meet the demands of today’s lending environment. The benefits of using a document imaging system that is separate from an LOS are many. Doing so takes advantage of the advanced capabilities available in a top imaging solution, such as the ability to capture documents from multiple channels (email, fax, print driver, etc.) to a single inbox, and automated document recognition (ADR). With ADR, loan documents are automatically sorted, recognized, named, and indexed for the user, significantly improving the efficiency and accuracy of the loan processes.
Achieve Long Term Loan Health
Accurate data means higher quality underwriting, it’s that simple. Technology designed to ensure data integrity improves the consistency and quality of loan information from all sources and reduces the risk of fall out during origination.
Paper-based processes in the mortgage industry include loan applications, disclosure management, submission of loans from branch offices or TPOs to centralized underwriting, verification of documents and data for completeness and correctness, sharing documents with service providers, dealing with changes at closing, and packaging and delivery of loans to investors. It is unfathomable to think that there is any way to manually safeguard these processes from error. With today’s document management technology, it is possible to identify loan defects early on, instilling confidence in the lender and investor that a loan is comprised of sound information, and reducing the chance of a loan slipping into default and minimizing the repurchase risk for lenders. With document management technology that aids in data integrity, the ability to manage risk is greatly increased.
Regulators have created wide-reaching rules requiring the accuracy of loan files and the maintenance of a comprehensive record of signed documents. The key to ensuring compliance and preparing for an audit is employing a document management system that supports and facilitates accurate reporting. The best document management technology solutions remove manual entry processes and their inherent risks, and also provide an audit trail from the beginning to end of a loan’s lifecycle.
Effectively communicating with and receiving accurate information from the multiple parties involved in originating a mortgage is just the beginning of what a lender should strive for. To navigate the increasingly complex regulatory environment, lenders must rely on technology that offers them easy access to and full control of their entire universe of loan data. A comprehensive document management system tracks missing or incomplete documents, validates the data used to make lending decisions, and records the history of changes made to any piece of data. When an audit does arise, standardized workflows and reporting functions further streamline processes and help facilitate further investigation. If a lender stores paper loan files in boxes or in storage rooms, they put confidential information at risk of theft. If paper loan files are destroyed, there is no way to fully recover that data. Cloud-based document management systems store all loan files in the cloud, meeting retention requirements and allowing them to be securely accessed from any location. In the event of an audit, an automated system enables lenders to gather information rapidly and have the history of all corresponding communications relevant to that loan at their fingertips, stored in a single repository.
Tougher regulations have changed nearly every aspect of the lending process, prompting a shift towards a more quality-focused lending model. The rate of change in the regulatory environment of the mortgage industry is staggering, and lenders have found themselves navigating a much more complex market than ever before. To remain competitive, lenders must address data integrity and risk management with sophisticated technology, making their processes leaner and more efficient. Using technology solutions to simplify the origination of new loans reduces risk, increases customer satisfaction and enhances profitability. Applying a document management system to loan origination is a practical way to apply tools to meet business goals and manage compliance cost-effectively. Lenders must remember that the integrity of loan file data is a determinate of the lender’s profitability. Re-engineering these processes with secure and reliable automated workflows allows for higher productivity, lower cost per loan, reduced errors and duplicated efforts, higher quality loans and better compliance.
About The Author
With more than 17 years as Capsilon’s Founder and CEO, Sanjeev Malaney has proven himself as a visionary, a pioneer and a leader when it comes to the quest for transforming the mortgage industry. Capsilon builds intelligent tools that transform the way mortgage companies work. The Capsilon platform uses data and AI to radically improve workflows, automate manual tasks and enable smarter decision making at every step, boosting productivity across all mortgage functions. 15% of all mortgages in the U.S. touch Capsilon’s platform.