Tried And True Solutions

According to the MBA lenders saw a net gain of $224 on each loan they originated in the first quarter of this year – down from $575 in the fourth quarter of last year. The drop was due mainly to higher per-loan production expenses. These expenses – which include commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a study high of $8,887 per loan in the first quarter, which is up from $7,562 in the fourth quarter. So, how do lenders streamline their origination process so it’s faster and less costly without giving up quality? Wayland Pond and Kelli Himebaugh of VirPack have some ideas. Here’s how they see the current mortgage market:

Q: Describe how you first got involved in the mortgage industry.

WAYLAND POND: My best friend from high school recruited me to VirPack when it was a startup. I remember interviewing with Michael Coar, VirPack’s founder and CEO, and I was struck by his passion for mortgage technology and his mission for VirPack to provide the mortgage industry with a platform for the paperless management of loan documents from origination through post closing, including fully indexed electronic loan delivery to investors and business partners. 17 years later, and I’m proud to say we have achieved that mission and our passion is stronger than ever.

KELLI HIMEBAUGH: Similar to Wayland, in 2003 I was recruited to a sales role in the mortgage industry by a personal friend that worked for a midwestern bank with a national home equity lending program. In 2007 when the market and economy started to collapse, I was fortunate to meet the owner of a small LOS technology company that was hiring for their first sales role. In 2008, I transitioned to a different LOS company that I represented in different roles until 2016 when I joined VirPack. I met Wayland and the VirPack management team in 2010 while exploring a vendor partnership, and I was extremely impressed with VirPack’s technology and the positive impact that electronic document management would make in our industry. When the offer came last year, I didn’t hesitate to accept the opportunity to join the VirPack team.

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Q: How has the industry changed since you first entered the space?

WAYLAND POND: There have been numerous changes over the last 17 years, but technology innovation and adoption are at the top of the list. When VirPack was founded, the Internet was a shadow of what it is today. VirPack’s first product was a desktop application that scanned loan documents, automatically indexed the documents (via barcode recognition) and stored the indexed loan files in our imaging system. A short time later, we pioneered electronic loan delivery with the release of the first version of our delivery application that provided lenders with the means to exchange data, documents and images with their investors and business partners. Fast forward to today, and the industry thrives on web-based, software-as-a-service (SaaS) applications such as VirPack’s Document Management and Delivery System (DMDS).

KELLI HIMEBAUGH: In the last 3-5 years the bar has been raised for technology automation expectations, a primary example is integrations. Today, lenders have higher expectations for integrations that both reduce human interaction and are triggered by a status or milestone change in the loan process. VirPack has responded to these higher expectations with integrations like our partnership with DocuSign. VirPack’s Document Management and Delivery System (DMDS) automatically imports and indexes eSigned documents into the borrower’s loan file as soon as the eSignature experience is completed, eliminating the process of manually importing these signed digital documents and filing them.

Q: What can you say hasn’t changed during the years that VirPack has been in the space?

WAYLAND POND: Despite technology innovation, the industry continues to struggle with reducing the cost to originate and service loans, and eliminating the manual processes associated with collecting, indexing and managing loan documents. The number of pages in the average loan file has soared in recent years. According to VirPack’s Mortgage Origination Loan File Statistics Report, more than half of all residential loan files now exceed 500 pages and 43% of all conventional loan files contain between 600 and 900 pages. Lenders need to deploy technology that will reduce costs and improve operational efficiency.

KELLI HIMEBAUGH: To provide an example regarding the struggle to contain and reduce origination costs, VirPack recently partnered with an independent mortgage banker that had been utilizing a different imaging solution for more than 9 years. The owner of the company shared in the very first sales call that the next stages in the successful growth of their business were dependent on a new solution to gain efficiency to deal with increasing loan file sizes, along with the need to automate the document workflow and improve the borrower experience. This requirement was key in their strategy to grow volume and profitability by mitigating costs, primarily the need to not hire more operational staff. VirPack’s DMDS definitely checked all of the boxes for their paperless needs, and our workflow and tasking functionality provided the answer for their cost containment requirements. Our rule-based workflow features provided the automation requirements they had been looking for.

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Q: What has VirPack learned from talking to lenders in the last year?

WAYLAND POND: Two things are consistent with our lender conversations over the last year. First, production costs continue to rise and lenders are not achieving the operational efficiency gains and ROI expected from the document management tool provided by their LOS. More often than not, it is private-labeled or bolted-on and the lender’s requirements and expectations are not being met. Second, many lenders prefer to leverage software solutions from vendor partners that are subject-matter experts and have a mission and culture that aligns with theirs. They recognize that through these partnerships they can close the gaps in their mortgage operations and workflow and avoid the disruption that comes with converting to a new costly, enterprise LOS.

KELLI HIMEBAUGH: Also, there’s no denying the digital mortgage race and its appeal to the millennial generation and tech-savvy consumers, but we’ve learned it’s not an all-or-nothing/one size fits all approach. Not all lenders are ready to fully embrace the digital mortgage and sacrifice the relationship-driven mortgage origination experience that is tried and true. Lenders are confident they can find a balance between the traditional approach and utilizing technology that will provide innovative communications in real time, workflow automation and improve collaboration between borrowers, production, and operations teams.

WAYLAND POND: VirPack’s journey with mortgage lenders over the last two decades supports this balance with the latest features in document management and workflow solutions, along with our portals designed for borrowers and third party originators that provide the real time data and document updates to improve the borrower/lender experience.

Q: Can you tell us more about the Rapid Deployment program that VirPack launched in 2017?

WAYLAND POND: Traditional document management technology implementations are often costly and time consuming, and I’m pleased to share that our rapid deployment program has streamlined DMDS implementations and our customers are up and running within weeks. We’ve accomplished this by harnessing best practices from lender deployments across the country and eliminating duplicate and labor intensive activities. By leveraging preconfigured document management software, lenders can quickly automate business processes throughout every step of the mortgage lending process while supporting retail, wholesale and correspondent lending operations.

KELLI HIMEBAUGH: And, because lenders are not starting with a blank canvas, they can readily turn their focus to leveraging additional capabilities and advanced functionality that further optimize their operations including — automated document recognition and indexing using optical character recognition (OCR), rule-based workflow and tasking, customizable web portals for third party originators and borrowers and deeper integrations with other technology partners.

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Q: What are the required capabilities that a lender should put on its document management technology evaluation?

WAYLAND POND: Lenders should pass on a technology provider that does not have a) document management capabilities that include OCR to automate the identification and indexing of documents, and b) integrated one-click delivery of loan files and data electronically to investors, HUD for FHA insuring, servicers, subservicers, QC firms and MI companies. For maximum functionality and efficiency, a vendor’s document management offering needs to have strong integration features, such as gateways to external data sources and web service APIs to exchange documents and data. These capabilities are essential to enable document management to be an integral part of a broader, cohesive loan processing and management solution.

KELLI HIMEBAUGH: Enterprise solutions like the LOS provide high value if their ancillary solution components are enterprise compatible and tightly integrated. LOS providers today are not focused on document management enhancements, but instead are focused to develop and implement all the regulatory changes required in their technology to mitigate risk for lenders, and rightfully so.  And, if their offering is a series of bolt-on technologies that are subject to secondary, delayed support services and are not designed to adapt to atypical scenarios, then lenders can lose thousands of dollars each year in what is perceived to be an included or “free” feature of their enterprise platform. Lenders have to consider technology like VirPack that solely focuses on its core competency and what it does best — developing and delivering innovative, feature-rich document management and delivery solutions that incorporate best practices and years of experience.

Insider Profile

Wayland Pond is senior vice president of sales and marketing at VirPack, where he has spent his entire 17 year mortgage technology career promoting the benefits of document management and delivery technology and collaborating with lenders, investors and technology providers to improve operational efficiency. Wayland was instrumental in pioneering the mortgage industry’s first electronic delivery of a loan package that included data, documents and images. In his role at VirPack, a leading provider of document management, imaging and delivery technology to the mortgage banking and financial services industry, he oversees the sales and marketing team and partners closely with the product management team to ensure customer and lender feedback is incorporated into the company’s technology solutions. Wayland also serves on the Board of Directors at VirPack.

Industry Predictions

Wayland Pond thinks:

1.) Lenders will continue to be cautious about compliance therefore page counts in files will continue to increase.

2.) More LOS and other industry technology providers will offer APIs to support their clients’ desire to integrate with best-of-breed technology providers.

3.) More investors are going to require electronic loan delivery and will not provide best pricing if delivered another way.

Insider Profile

Kelli Himebaugh is the National Account Executive with VirPack, a leading provider of document management and delivery technology to the mortgage banking and financial services industries based in McLean, VA.  Kelli is a proven sales leader who brings more than 20 years of housing finance experience and 10 years of experience in mortgage technology to VirPack. Prior to joining VirPack in 2016, she served as vice president of customer experience with Altisource Origination Solutions. In this role, she was responsible for managing client relations and operations support across four business units. Prior to her work at Altisource, Ms. Himebaugh spent 8 years with Mortgage Builder, a loan origination solutions provider, where she served as corporate vice president overseeing business operations, client services and sales.  She is also a member of the Executive Team at PROGRESS in Lending Association and was named in “the 50 Elite Women in Mortgage” by Mortgage Professional America magazine.

Industry Predictions

Kelli Himebaugh thinks:

1.) Home affordability and mortgage qualification will worsen due to rate increases and slow income growth.

2.) More non-bank owned investors will enter the secondary mortgage lending market.

3.) Rental home rates will continue to rise faster than incomes due to lack of inventory.

Easing Document Management Woes

VirPack has released the latest version of its Document Management and Delivery System (DMDS). DMDS version 3.5 includes new capabilities that will deliver additional document management and operational efficiencies to VirPack’s customers.

“With DMDS version 3.5, VirPack produced several innovations that deliver meaningful efficiencies and time savings that create a competitive advantage for our customers,” said Cy Brinn, VirPack’s COO. “There is no question that this upgrade builds on our reputation as a technology leader, one that focuses solely on document management and imaging solutions that simplify and automate business processes.”

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Enhanced User Interface

Several user facing pages in DMDS 3.5 have been updated with cleaner layouts, sortable columns and improved searching with savable filters. This makes it easier for users to review pending work and access key operations including: Tasks, Workflow, Index, Deliver, Upload and Status.

Expanded Task Management System

While Task Management has been a core capability of DMDS for several years, DMDS 3.5 provides more options for defining and configuring tasks and assigning them to users. New task notifications automatically alert a user when a time-sensitive task is due soon or is past due, and department managers receive alerts and daily summaries about the number of tasks that are due soon or are past due. In addition, due dates can now be configured for business days and holidays, and the Task page now displays additional user and file information with support for user-defined and savable search filters.

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New Rule-Based Notifications of File and Document Changes

DMDS 3.5 now supports additional rule-based notifications giving users the option of receiving automated alerts when changes are made to a file or individual document container in addition to subscription-based alerts. Rules can be based on file level information and/or user information found in a database or business system.

Larger Page Thumbnails in the Index Application

To save time when reviewing and indexing documents, and/or to confirm content on an image without having to open it, DMDS 3.5 now includes larger page thumbnails in its Index application.

Default Settings by User Type

Also added to DMDS 3.5 is support for default user settings based on user types. When user types are defined and combined with access rules, DMDS can control access to specific files and document containers that users have access to and when they have access to them. This new feature saves time when adding new users and ensures compliance by establishing the appropriate security and access controls by default at a system level.

Lenders Have A New Attitude Toward Paperless

It used to be that you had to convince lenders about the benefits of going paperless. Boy has that changed. I’m seeing more and more lenders realize the benefits of at least doing more things paperless. For example, BofI Federal Bank recently selected VirPack’s Document Management and Delivery System as its enterprise document management and delivery solution. Here’s why:

BofI Federal Bank, headquartered in San Diego, CA, is a nationwide branchless bank that provides financing for single and multifamily residential properties. With more than $4.8 billion in assets, BofI Federal Bank distributes its loan products through retail, correspondent and wholesale channels.

“BofI Federal Bank wanted to enhance and streamline its end-to-end paperless loan process in the residential, commercial and multifamily lending operations,” said Brian Swanson, executive vice president and chief lending officer at BofI Federal Bank. “We selected VirPack’s Document Management and Delivery System for its robust functionality, intuitive interface and ability to integrate with our residential and commercial/multifamily loan origination systems.”

VirPack’s Document Management and Delivery System will increase efficiency in BofI Federal Banks’s retail, wholesale and correspondent lending channels to streamline document intake, automate document recognition and indexing and avoid delays that have afflicted many lenders because of new regulations, swollen loan files and reduced staff levels.

BofI Federal Bank also cited VirPack’s Borrower and Originator Web Portals, which enable BofI Federal Bank’s consumer and business customers to securely upload documents, track loan status and securely communicate with the bank’s staff, in selecting VirPack.

“There is no question that VirPack has developed a sophisticated platform that delivers on our promise to customers of providing a very effective document management and delivery technology that improves throughput, while shortening turn-times and cutting costs,” said Cy Brinn, VirPack’s COO. “In an environment in which lenders are forced to deal with greater regulatory scrutiny and economic pressure than ever before, lenders rely on VirPack’s solutions to ensure compliance, increase capacity, and deliver high levels of service without having to hire additional staff.”

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Doc Management Vendor Reaches Out

VirPack, a long time provider of Document Management and Delivery solutions, has launched the VirPack Partner Network, which provides lenders with “One Click” access to service providers and investors as well as increased throughput, accuracy, and lower costs. “The VirPack Partner Network was created to enable lenders, origination service providers and mortgage investors to integrate their services into the VirPack Document Management and Delivery System,” said Cy Brinn, VirPack’s COO.

“VirPack is focused on providing expanded service ordering and investor delivery choices for lenders. We work continuously to provide them with increased origination efficiency and to help them achieve a zero defect rate when manufacturing mortgages,” Brinn noted.

The VirPack Partner Network provides lenders and servicers with the ability to order and receive services throughout the loan lifecycle—from cradle to grave—directly through VirPack’s Document Management and Delivery Platform. Lenders can also order services outside of their loan origination system, which reduces the time required to move documents into their document management system’s loan files while eliminating manual labor and filing errors. Clients will have more choices of service providers and pay lower fees than in the past.

In addition, given the rapidly changing secondary market forces, lenders want the widest array of One Click investor delivery choices they can have. Because DMDS automatically compiles loan documents in the investor’s unique stacking order and file format, lenders prefer to deliver to investors who participate in the VirPack One Click investor delivery network.

To be sure, investors expect the highest level of accuracy and efficiency when receiving loan files, communicating with lenders, and document requests, and the VirPack Partner Network achieves those goals. “The new features we provide for loan delivery receipt and two-way communications about loan delivery status and follow-on document requirements from investors was included for that purpose,” said Brinn.

“Ordering services through the VirPack Network means greater accountability and efficiency because documents ordered from a participating service provider are delivered automatically into the Document Management and Delivery Platform,” said Tony Eelman, Chief Operating Officer at FBC Mortgage, LLC. “When we order services through this platform, we are buying them direct and can negotiate a price. That price is almost always lower than through a loan origination system.”

Among the investors VirPack delivers to are Wells Fargo, Flagstar, Citi, Chase, FHA, PennyMac, BBT, Homeward, Opus, GreenTree, Franklin American, Roundpoint, PHH, Pingora, 360 Mortgage Group.

VirPack provides service ordering and delivery interfaces with a wide array of service providers including StreetLinks, LoanLogics, MGIC, StoneHill, Global, Cenlar, Tena, MRN, ServiceLink, Allonhill, and Adfitech.

Up to now, clients had access to the Investors Delivery functionality within VirPack’s DMDS. That option remains, though many investors have begun to transition to upgraded platform.

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Unlocking The Value Of Documents And Data

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TME-Alec-CheungEver since the ESIGN Commerce Act of 2000, the mortgage industry has gradually adopted electronic signatures as a way to improve the efficiency of the mortgage transaction and to speed up the pace of commerce. No more waiting for mortgage documents to be sent via courier for paper signature. No more faxing of signed documents while originals followed in the mail. With the growing acceptance of electronic delivery and signature of documents, workflow has become more efficient, more secure and easier to monitor for status.

The mortgage industry has not yet completed its journey though. We still have not transitioned to a completely electronic workflow and the vision of a totally electronic mortgage has not been realized. There have been many real external barriers to progress. Not until last year did the IRS officially accept electronically signed documents for the request of tax transcripts; and as of this writing, the FHA has STILL not issued their formal guidance on the acceptance of electronically signed documents, though that is expected very soon.

Other impediments that are more industry-related remain as well. There is the matter of needing paper printouts for many county recordings and for investors. Because state laws vary so widely, legal experts will still often advise that it is safer to have the actual mortgage note in hard copy rather than in an electronically signed format. These obstacles will eventually fall as technology continues to improve, as early adopter banks prove that electronic formats are viable, and perhaps most importantly, as the Consumer Financial Protection Bureau takes up the mantle in 2014 of championing the eMortgage and forcing the necessary changes to make that a reality.

But there is also an additional hindrance, a more subtle one that if not recognized may in the end prove to be the most persistent because it is not caused by a lack of technology or an external constraint, but by the very way the mortgage industry has incrementally adopted electronic fulfillment. This hindrance has to do with the way banks deploy electronic delivery and signature as a series of add-on projects rather than as a holistic system that ties together the entire mortgage process.

Why does this matter? Because the mortgage workflow is a complex, multi-step process that involves many participants, is very document centric, and heavily reliant on the data within those documents to ensure quality, compliance and a positive customer experience.

When the delivery of documents and the exchange of crucial data within those documents is implemented merely as a feature to be added to process support systems, it results in a fragmented approach that is constrained by the very activities it was meant to support. There is in fact a sizable missed opportunity to leverage documents and data across the mortgage lifecycle from one participant to the next in order to better monitor compliance, to mitigate fraud, to enhance quality and to deliver a truly superior customer experience.

Siloed Approach to Delivery

To understand why this has happened, you have to look at how we arrived at our current state.  The adoption of electronic delivery and signature in mortgage has frequently been driven by a series of loosely related but nonetheless individual triggers.

The first of these is compliance. Banks often end up adopting electronic delivery and signature only when triggered by new regulations. Appraisal deliveries are a good example of this. When the CFPB stated that lenders would have to provide borrowers with copies of appraisals for all mortgages and not just higher-priced ones, it forced banks to prioritize the electronic delivery of appraisals as a high priority initiative in order to be able to meet the 3-day delivery time period mandated by regulation.

Overcoming legacy processes and a “the way it’s always been done” mentality is a second factor. Just because something is legal doesn’t always mean that businesses will change their processes right away. When they do change, it often comes one step at a time. It took the IRS till just last year to finally begin accepting electronically signed tax transcript request forms. This was just ONE form and though glad for the progress, it’s yet another example of how the migration to electronic delivery and signature has unfolded in a piecemeal fashion.

A third contributing factor is that there are multiple actors involved in transacting a mortgage, and each has its own systems. Lenders rely on loan origination systems. Title agents have their settlement software. Underwriters utilize title systems. Appraisers have appraisal systems and appraisal valuation models. Even income verification vendors for the IRS have their own proprietary systems. These are separate parties, with their own systems, their own buying behaviors and, therefore, they look at the adoption of electronic delivery and signature in their own way.

The last contributing factor is industry standards. This has more to do with data that documents, but it is equally important. It has taken many years for MISMO to achieve a broad level of acceptance as the de facto standard for exchanging mortgage data. Prior to MISMO, two parties that needed to pass data back and forth had to agree on a data exchange format themselves. It was much simpler to do so for very specifically defined data sets in relation to certain documents. With MISMO’s latest v3.1 standard, we now have a commonly accepted standard that will simplify and normalize data exchange for the benefit of all.

Put together, these various factors have resulted in electronic delivery and signature as a technology added onto to (or perhaps integrated into) existing systems. This assessment is not meant as a criticism. If anything, our industry deserves credit for recognizing problems and them methodically tackling them. We have been pragmatic about our approach if nothing else. It just so happens that as we look back, we can see that the end result is a mortgage process that is rather stitched together in terms of workflow and data exchange between multiple participants.

Single Delivery Platform

This uneven approach where electronic delivery is tied to individual systems means we have no opportunity to leverage delivery as an underlying process that can bring the entire mortgage lifecycle together in a more efficient and effective way. After all, the delivery of documents and the exchange of data within those documents is the one process that touches every participant in the mortgage lifecycle. That simple but fundamental insight bears repeating. From application to processing to underwriting to closing to post-close, documents and data are central to every step along the way. They are used to demonstrate compliance. They are analyzed to uncover risk. They are carefully designed to ensure an effective customer experience.

As a mortgage progresses through each phase, the value of the data that accompanies documents grows. During the application and processing phase, the lender sends the initial disclosure so the borrower can review and understand the loan she has applied for – how much she will pay in interest, her rights as a borrower, etc.

At closing, the lender sends the final approved loan package to the settlement agent. A common delivery platform is in the optimal position to compare the data from initial disclosures to final approved loan to corroborate that the loan the customer is getting matches the loan initially applied for and quoted to the borrower. This is an example of how documents and data from one loan phase can be valuable in the next loan phase.

Likewise, after close, the settlement agent can send a copy of the signed loan for delivery back to the lender. Again, with a common delivery platform for document and data exchange, the signed loan can be immediately compared to the approved loan to ensure discrepancies are within quality and regulatory tolerance. The automation and simplification of these checks – QM, RESPA, anti-predatory lending, etc. – can considerably speed up the time it takes for a lender to complete its processing. Faster processing means faster time to loan sale to investors, which directly and positively impacts bank revenue.

* * * * *

It is easy to think of the electronic delivery and signature of documents as an efficiency driver. E-signature vendors are partly to blame for this. It is much simpler to tout the advantages of e-signature independent of the kind of document or workflow you are supporting. Faster transactions. Better audit trails. Simple to use. These are all benefits that vendors typically advertise.

But the actual workflow process being supported is fundamentally important to the value proposition of electronic document delivery and signature. For complex, multi-step processes like mortgage lending that involve many participants, document delivery is the common component that ties many of the activities together.

Furthermore, the data that is accessed via document delivery can help a lender demonstrate compliance, better manage risk and deliver a superior customer experience. Full access to documents and document-related data puts lenders in a position to be able to substantiate that the loan the borrower applied for is consistent with the loan that was approved, with the loan that was actually signed at the closing table, and with the loan that was ultimately sold to investors.

You can achieve this by building numerous custom connections and integrations with the various systems that support the mortgage process, or you can choose a single delivery platform that already has the connectivity in place. One way or another, this will be needed, and it is something that lenders should begin to think about.

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