Solving the Challenges of Maintaining Data Integrity for Mortgage Lenders

Data integrity, ensuring the completeness, accuracy and consistency of data used throughout the origination of home loans, is one of the greatest challenges facing the mortgage industry today. Many lenders find that the inability to maintain the accuracy of loan data during the origination process negatively affects their workflow processes, compliance efforts, and ultimately, their profits. Yet despite the availability of technology solutions that can greatly increase a lender’s ability to ensure the integrity of the data used to make underwriting or purchase decisions, many lenders have yet to take advantage of this technology. As a result, they are plagued with inaccurate, inconsistent or incomplete data that they are betting their companies on.

Without the proper preventive measures in place, lenders struggle with data entry errors, conflicting information that requires risky judgment calls and untold hours spent trying to complete and reconcile data after the loan is funded. As a result of the part “bad” data played in the recent financial crisis and recent litigation, quality initiatives are taking hold across the industry. And regulators are working to ensure that proper oversight is in place to authenticate loan information throughout the loan process.

While the printing, copying, and shipping of paper documents should be a thing of the past, for many lenders, it is still at the heart of the origination process and contributes to the inability to maintain data integrity. A typical loan captures thousands of pieces of data, and the potential for error is huge. While relying on paper exposes vulnerabilities in and of itself, the central issue is the potential for inaccuracies when data is entered or overwritten in a lender’s loan origination system (LOS). Many lenders mistakenly believe that an LOS is a “source of truth” for loan information. In fact, an LOS is primarily a “system of record,” capturing, storing and listing information, which can be mistyped or manually changed over the lifecycle of a loan.

While the best source of data associated with the loan is 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 document and compare it with what is in the LOS. The only way to maintain data integrity is to use data capture technology that has been optimized for the mortgage industry to catch discrepancies automatically. This technology makes it easy to compare data in the system with the data on the original document, and alerts the lender of discrepancies in the data, as well any missing information or documents, immediately.

Not too long ago, it was acceptable to rely on internal staff or outsourced labor to double check loan information for completeness and accuracy. The practice of “stare and compare,” by which a human being looks back and forth across two or more documents to verify that the information is consistent across document types, is time-consuming and error-prone, not to mention costly.

Technology moves quality control to the front of the process by automatically validating the data across loan documents. Rather than send an application to an underwriter, the data could be extracted and put through a rules engine for analysis. Only if the application has a piece of information outside of the rules parameter would it then be sent to a human underwriter for review. This standardizes the process, increases productivity, lowers cost and lowers production risks. The technology would also keep a historical record of any changes made to the data, automatically creating and maintaining an audit trail to assist with compliance requirements.
Without preventive measures in place, including data capture technology, lenders are at risk of making lending decisions (or purchase decisions) based on inaccurate and potentially misleading information. Funding a loan or purchasing a loan based on inaccurate data puts the lender at risk if the loan falls into default down the line. In addition, selling loans based on faulty data greatly increases the risk of buybacks and hurts a lender’s credibility. Today’s lending environment necessitates loan quality through sound underwriting that is supported by technology to streamline business processes and ensure compliance.

By using a software solution designed to ensure data integrity, lenders improve the consistency and quality of loan information throughout the lifecycle of the loan, not just after a loan closes, when it is often too late to remedy. In today’s increasingly competitive lending environment, the focus should be on the data, not the documents. Ultimately, it’s the data that facilitates a high quality business process that meets the lender’s operational objectives and financial goals.

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