Not The ROI You Expected?

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Are you achieving the operational efficiency gains and ROI expected from the document management tool included with your loan origination system (LOS)?

In today’s highly competitive mortgage market, lenders are forced to deal with rising costs to originate loans, the need to minimize risk, and are compelled to respond to constantly changing regulations. This puts intense pressure on lenders to seek out ways to gain efficiency while reducing costs and minimizing risk.

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The right document management and delivery solution automates business processes throughout every step of the mortgage lending process, resulting in increased operational efficiency and enterprise-wide cost savings.

To respond to this need in the marketplace, many LOS providers have private labeled or bolted on document management tools to their LOS, but expectations don’t always match reality. While this was often done to “check a box” on a RFP and appease lenders, many lenders quickly realized that what they were getting from their LOS-provided document management tool did not provide the efficiency and competitive capabilities they had hoped for.

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Many LOS providers have private labeled or bolted on document management tools to their LOS, but expectations don’t always match reality.

Not all document management and delivery solutions are created equal, nor do they provide the same level of ROI.

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LOS providers have a hard enough time maintaining their core technology and meeting constantly changing regulations and delivering advancements to the LOS. As a result, most LOS providers fall short in delivering document management capabilities that yield high levels of efficiency.

On the other hand, an independent document management company solely focuses on what it does best, which is to develop and provide innovative, feature-rich enterprise document management and delivery solutions that incorporate best practices and years of experience. As a result, operational efficiency gains and ROI are delivered throughout the entire mortgage operation and beyond.

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Not all document management and delivery solutions are created equal, nor do they provide the same level of ROI. When comparing document management solutions, let’s look at a number of key features that will impact your ability to maximize cost savings, minimize risk across the organization and produce the greatest efficiency gains.

Let’s start with the ability to quickly and precisely deliver loan files and data electronically to investors, HUD for FHA insuring, servicers, subservicers, QC firms and MI companies.

LOS-provided systems require lenders to create and manage their delivery “bundles” which takes time to set up, adding manual work to the back office staff.  In addition, many LOS-provided systems do not include one-click delivery; instead lenders have to create a PDF “bundle” for each loan and then upload the PDF. This creates multiple unneeded steps, is more error prone and creates inefficiencies in the process.

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Lenders that take the time to explore the benefits of independent document management and delivery solutions realize significant efficiency gains.

The right independent document management and delivery solution includes an integrated electronic loan delivery application.

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The right independent document management and delivery solution includes an integrated electronic loan delivery application with the following capabilities:

>> Preconfigured delivery profiles that meet each recipient’s specific requirements and desired stacking order.

>> Secure, one-click delivery to each recipient’s server.

>> Notifications and alerts when required documents are missing.

>> Ability to preview loans in the recipient’s stacking order prior to delivery.

>> Real-time delivery status monitoring and audit reporting.

>> Single loan or bulk loan delivery.

These must-have capabilities maximize lenders’ secondary market execution and significantly minimize suspense issues and lock expiration penalties.

Another area that is typically lacking in the LOS-provided system is the use of optical character recognition (OCR) to automate document identification and indexing. The right independent document management solution leverages integrated, full text OCR of structured, semi-structured and unstructured documents.

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In addition, lenders can request an independent document management provider to “train” their unique, custom documents and program-specific documents so the OCR technology can correctly identify and file the documents. This eliminates time spent by lenders’ staff repeatedly naming and indexing their unique documents.

Another point of differentiation is LOS-provided systems typically have limited methods for document upload and capture. The right independent document management and delivery solution provides multiple methods for document upload and capture, including drag and drop, virtual printing, email tools, web portals and automated batch import of documents (e.g. appraisals) to all participants in the loan lifecycle, saving lenders time and money.

Many LOS-provided systems have a narrow set of acceptable file formats. Whereas, the right independent document management solution provides support for a wide array of file types that can be stored in their native format.

The advantages don’t end with the superior functionality provided by the right independent document management solution. For LOS-provided systems, the story usually ends with residential lending.  But if you truly want to experience increased operational efficiency and enterprise-wide cost savings, shouldn’t the use and functionality of document management technology extend to all lending areas and business processes within the financial institution?

Enterprise use of an independent document management and delivery solution supports any paper-intensive process and can be used for Servicing, Commercial Lending, Consumer Lending, Human Resources, Accounting, Policies and Procedures, Marketing, and Contract Management to name a few.

In addition to the numerous examples that have been discussed to help you make a more informed decision between a LOS-provided document management system and a “best of breed” independent document management solution, here are some additional big picture items that significantly impact your risk and long-term efficiency gains.

When viewing this decision holistically, it is critical to understand the impact that working with a provider whose core competency is LOS technology vs. Document Management.  Which provider has the knowledge, expertise, and experience to truly deliver the cost savings that document management can provide to your entire organization?

When the technology being used was not created by the LOS, but instead is private labeled vs. being created by the independent document management and delivery solution, who is better able to provide superior customer support?

Who is better equipped to make needed and timely updates to the solution?  Which provider is solely focused on the document management solution vs. which provider is trying to implement all the regulatory changes required in the LOS and doesn’t have time to make document management enhancements in a timely manner?

In today’s mortgage market, speed, operational efficiency, and access to information is critical, especially when responding to changing market conditions while trying to gain a competitive advantage.  Therefore, performance and speed should factor into your document management decision.  Many SaaS LOSs slow down or bottleneck at certain points during the day or most critically, at month-end.  What impact will this have on your productivity and business?

What happens if/when you replace your LOS? In fact, this happens quite often according to the STRATMOR Group, which shared highlights from its 2016 LOS Technology Insight Survey, gauging lender satisfaction with their loan origination systems (LOS). As Senior Partner Dr. Matt Lind explains, “despite the incredible operational disruption that comes hand in hand with a system change, 30 percent of lenders said they were not satisfied with their LOS, an increase from 28.7 percent in 2015. Of these, 19 percent are actively seeking a replacement for their current system and 11 percent are already in the process of implementing a new LOS, regardless of the fact that such a change can consume significant resources and disrupt an otherwise thriving mortgage origination platform.”

If your document management system is tied to the LOS-provider, when you change your LOS, you also will have to completely replace your document management system and processes adding significantly more disruption and definitely more cost. Some companies experience hostage type negotiations just to get their loan data.  Consider that headache doubled if you have to negotiate for your digital loan files as well.

If you change your LOS, and your independent document management and paperless process remains the same, you will experience significantly less change management, little to no disruption to mortgage operations and greatly mitigate organizational risk.

Lenders that take the time to explore the benefits of independent document management and delivery solutions realize significant efficiency gains and increased ROI, while simultaneously enhancing their ability to mitigate risk.

About The Author

Cy Brinn
Cy Brinn is President of VirPack, McLean, Va., a provider of document management and delivery technology to the mortgage banking and financial services industries. He has been involved in creating and delivering innovative technology for residential and commercial mortgage origination and servicing since 1986. He can be reached at cy.brinn@virpack.com.