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Take Things To The Next Level

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Sanjeev-MalaneyThe wake of the housing crisis bore an avalanche of regulatory changes, which has resulted in soaring compliance risks and operational costs. Lenders are increasingly concerned about data integrity and quality control during the loan process, and this focus on data integrity has significantly increased total loan production costs. Given the increased costs associated with complying with ever-changing regulatory requirements, total loan production costs are not only soaring, but in many cases rising compliance costs have made loan origination unprofitable.

As today’s lending environment becomes more complex, traditional document management models pose a significant hurdle for maintaining quality control and controlling costs throughout the lifecycle of a loan. Also, legacy LOSs have failed to keep pace with the amount of automation required to cope with the rising cost of loan origination. Increasingly, lenders are being forced to reevaluate their operations to ensure that their document and data management operations have sufficient automation and adequate data integrity controls to satisfy compliance requirements without increasing costs.

As lenders increasingly turn to technology to automate much of the loan life cycle, they are in fact moving toward a straight-through processing (STP) model. The concepts of straight-through processing (STP) were originally developed to describe debt and equity trading and payment transactions that are conducted electronically without the need for re-keying data or manual intervention. Although the goal of “same day settlement” that the STP model promised equity trading has not been realized, the concepts of STP are applied in financial markets today to improve the certainty of settlement, minimize operational costs, and reduce systemic and operational risk. The mortgage industry can realize similar benefits, and others, by applying the concepts of STP to the loan origination process. When the STP model is applied to mortgage loan origination, much of the loan process is automated, resulting in up to an 80 percent reduction in labor. With STP, loan turn times are reduced, costly labor is eliminated and compliance is easily managed.

Today, many key steps in the loan lifecycle are labor-intensive and error-prone. The practice of “stare and compare,” for example, in 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 costly – and errors are common. Since the STP model reduces up to 80 percent of manual labor, human intervention is required only when something that is flagged by an automation engine needs to be validated. Using this exception-based processing model not only speeds the loan lifecycle, but also helps lenders better optimize the time of their most knowledgeable staff members.

As another example, loan data could be extracted and put through a rules engine to automate pre-funding and post-close quality control. Only if the loan application has a data point outside of the rules parameters would it then be sent to a human for review. This standardizes the process, increases productivity, lowers cost and minimizes quality risks.

Historically, it’s been feasible for lenders to send only a small percentage of loans through a quality control process, despite the growing pressure from regulatory oversight for more control and thoroughness. Typically, quality control is performed by in-house staff or an outsourced third party late in the origination process, or even after a loan closes. This drastically reduces the ability to take cost-effective corrective actions, and leaves the lender vulnerable to compliance risks. With the STP model, quality control moves to the front of the loan process and it becomes feasible to perform quality control for 100 percent of loans.

As the mortgage industry continues to evolve, and data integrity and quality control move front and center, lenders need to rethink the traditional ways of doing business. In the past, a focus on quality control meant increasing total loan production costs to the point of unprofitability and slower loan turn times. However, with the adoption of STP as a way of introducing quality control throughout the loan lifecycle, lenders are able to shorten loan turn times and ensure data integrity by using technology to automate most of the loan process. This not only reduces labor costs, but also eliminates compliance risks and buy backs that result from data integrity issues. In today’s competitive and regulated environment, adopting an STP model gives lenders a sustainable competitive advantage.

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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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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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The Two Faces Of Imaging

Imaging remains the most dominate electronic format for eliminating paper. Paper cost $1.30 per page cradle to grave. Paper scanned to image cost ~ $0.30 per page. By scanning paper as soon as you can, will save a dollar per page.

E-Signing never produces paper and in the mortgage industry, its application can make for a paperless transaction. Adoption of E-Signing or E-Closing remains in single digits. In addition, most of the paperwork that produced the underwriting to closing process came in as paper, faxed or imaged and is sent via email.

One of the biggest challenges E-Signing has had to face is non-reputation whereby the electronic document is secured in such a way that if tampered with, it can quickly be determined.

Imaged documents should have the same process ensuring that if altered it too can be quickly determined. E-Signed or imaged, contract documents must be securely managed from criminals working identity thief as well as remaining above reproach for originally.

Best practices for maintaining images can go far beyond just protecting them; let’s see what else can be done.

PaperClip provides two applications for imaged documents with tremendous efficiency gains. PaperClip develops Document Recognition technology where it “Finger Prints” every page just like CSI. Therefore if pages are questioned, they are submitted to the Finger Print Library and quickly identified to who they belong to (associated metadata).

Closing Event – PaperClip captures the closing documents on their way out the door to the closing table. This big PDF closing document is then finger printed and stored. After the closing when the documents are scanned, PaperClip can compare it with the original PDF and identify whom it belongs to, missing pages, re assemble pages for the desired stacking order and detect some fraud all before it reaches post-closing and servicing.

Secondary Market – When these loans are bundled for selling into the Secondary Market, both the seller and buyer can collect the necessary documents and present them to the original pages ensuring the buyer has the original documentation supporting the loan. In addition, reports can be generated on what documents or pages are missing.

Electronic document manage has a role in reducing cost and process improvements. Remember, we can process electrons better, faster and cheaper than atoms.

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See What I Mean?

Every time my kids get home from school I bother them to do their homework. I’m sure they think I’m a broken record. Similarly, I’m sure that you think I’m a broken record because of how often I talk about paperless technology. But this technology is catching on. For example, a provider of cloud-based document sharing, imaging and management solutions for mortgage lenders, announced that in 2013, it experienced significant growth as it increased the number of U.S.-based staff by 180 percent and its monthly recurring revenue by 66 percent, in addition to achieving other major milestones.

In January 2013, Capsilon acquired DocVelocity, a document imaging distributor of Capsilon’s technology, from Flagstar Bancorp. Following the acquisition, the company adopted the DocVelocity name for its imaging system. Capsilon has continued to update DocVelocity to provide increased productivity and flexible access for customers. The updates offered throughout last year included batch delivery of loan packages to investors and service providers, improved performance and automatic updates for the Desktop App and camera capture for the DocVelocity Mobile App. In addition, Capsilon now offers users of DocVelocity access to a variety of educational classes designed to train them how to more successfully manage and process their mortgage documents.

Capsilon introduced new Network Delivery capabilities that enable DocVelocity users to deliver secure and compliant loan packages to leading GSEs and financial institutions in December 2013. Lenders can deliver a single loan package or a group for batch delivery to Chase, Citibank, Flagstar Bank, Wells Fargo Bank, Fannie Mae, Freddie Mac and the Federal Housing Authority according to their prescribed formats and protocols.

The company also opened new offices in Troy, Mich. and Irvine, Calif. to better manage Capsilon’s dramatic growth. The new offices enable expansion of services and support capabilities for mortgage lenders and investors throughout the United States.

“Throughout 2013, our company enhanced DocVelocity and built the national infrastructure to enable Capsilon to increase market share and continue to provide innovative technology solutions to the mortgage industry that focus on increasing profitability and facilitating compliance,” said Sanjeev Malaney, chief executive officer of Capsilon. “These efforts offer a solid groundwork for our continued expansion in 2014.”

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For Those In The Mortgage Market This Is No Time For The Weary

*This Is No Time For The Weary*
**By Tony Garritano**

TonyG***You can’t rest on your laurels. You have to keep moving forward and keep adjusting to meet market needs. Too often established vendors think that their work is done. That’s just not the case my friends. A good example of how a vendor has done the opposite can be seen in what Capsilon is now doing with DocVelocity. Here’s the scoop:

****DocVelocity now includes an advanced printer driver, local page caching and page streaming to speed up the way mortgage documents are imaged, stored, downloaded and viewed. The updated printer driver enables users to print documents from their desktop applications with reduced file sizes, making them more efficient for uploading, downloading and storage.

****Intelligent page streaming downloads images only as they need to be viewed by the user, providing a visible performance improvement. Additionally, when users download a document from the cloud to their desktop, images are locally cached to increase speed when needed again.

****“We’re very impressed with the increased speed of the newest DocVelocity desktop application,” said Bruce Clarke, chief technology officer of Michigan Mutual Inc. “The faster solution is making our users more productive.”

****“DocVelocity’s improved desktop application makes optimal use of system resources to provide users a better overall experience,” said Sanjeev Malaney, chief executive officer at Capsilon. “The latest updates enable lenders to use DocVelocity faster and more effectively than ever before.”

****So, DocVelocity is advancing. I hope that others are, too.

Lender Looks To Imaging

*Lender Looks To Imaging*
**Chooses A Vendor**

looking-out***Founded in 2006, Box Home Loans was created in order to focus on one kind of borrower and one kind of loan. PROGRESS in Lending has learned that Box Home Loans, a trusted mortgage lender located in Lindon, Utah, has recently developed a proprietary loan origination system and chose Axacore’s XDOC system for their imaging solution. Here’s why:

****“We have used XDOC with two different off-the-shelf LOS’s for five years, and found it to be stable and intuitive. Recently, we have developed a proprietary LOS, and we chose XDOC as our imaging solution. We couldn’t be happier with it. Without question, it is the most competitively priced solution on the market. Secondly, with its API’s we have been able to achieve a deep level of integration that has opened doors for the management and workflow of documents that we didn’t know existed. The application is very flexible and customizable,” said Jeffrey Reeves, Co-Founder of Box Home Loans.

****Box Home Loans’ concentration on a specific borrower has allowed them to operate with extreme efficiency and the ability to slash prices for their clientele. In 2009, Box Home Loans joined the Republic Mortgage Home Loans family, a direct mortgage banker that has been in business since the early 80’s. The financial backing of Republic Mortgage has allowed their concept to blossom into a multi-state endeavor that is growing exponentially.

****“Box’s no nonsense and fresh approach to their business and technology make them a great partner. In only a few weeks’ time, Box was able to fully integrate XDOC into their proprietary LOS system creating secure document management workflow features that are only available through a tight integration,” said Steve DeBlasio, National Sales Manager of Axacore.

****XDOC is Axacore’s electronic document management solution. It gives users the ability to find documents in seconds and mitigate security risks.  With the XDOC solution you can share, organize and secure the data that powers your business. The team can annotate and share notes seamlessly, thus making workflow more efficient.  XDOC is a completely configurable platform that integrates easily with other core office solutions.

Tech Acquisition Moves Forward

*Tech Acquisition Moves Forward*
**By Tony Garritano**

TonyG***We broke the news that Capsilon acquired DocVelocity earlier this year. The acquisition is moving forward smoothly. Capsilon has merged its Katalyst and DocVelocity imaging systems into a combined offering, called DocVelocity, and it is available to all lenders. Here’s the scoop:

****Until recently, the Katalyst and DocVelocity services were sold to different segments of the mortgage banking market. With Capsilon’s acquisition of DocVelocity, the company is now able to better serve the entire market. The unified system is scalable to meet the needs of both large and small mortgage lenders.

****Capsilon developed much of the technology that DocVelocity marketed and sold from 2007 until its acquisition. Lenders who previously bought from DocVelocity will benefit from this consolidation, as they now have a direct relationship with the company that develops and supports the technology. In addition, certain optional capabilities, such as mobile access and enterprise interoperability, previously provided only by Capsilon to its own customers, are now available to all new and prior DocVelocity customers.

****All customers will benefit from the combined product lines, whether they bought from Capsilon or DocVelocity, as they all will now use the same, unified technology platform and receive consistent support, training and services offerings.

****Sanjeev Malaney, chief executive officer at Capsilon, noted, “The unified DocVelocity system enables Capsilon to serve small, medium and large mortgage lenders equally well with single industry-standard solution.”

Understanding The News: The Mobile Technology Advances Keep Coming

*The Mobile Technology Advances Keep Coming*
**LenderMobile Enhances Its Offering**

***PROGRESS in Lending has reported on a few vendors getting their feet wet in the mobile space. One of those vendors is LenderMobile, a provider of mobile mortgage loan applications for iPad computers. Now we have learned that the vendor has added two new features to its LenderMobile+ flagship application in response to users’ requests. Here’s the full details on how this vendor hopes to take this space mobile:

****The new imaging feature lets loan originators and borrowers take photos of documents with the iPad camera and add the images to loan files through cloud computing technology. Plus, the new loan notes feature lets users add notes to a loan file directly from their iPad.

****On the iPad screen, loan originators can click the new photo button of the LenderMobile+ app to take pictures of documents for a loan file, such as W-2 forms, tax returns, paystubs and drivers licenses, and do so from anywhere, from a borrower’s home to the local coffee house. Or users can choose from the iPad app’s library of photos to add to a loan file. This feature gives users the option of cancelling photos, so they can re-take photos of documents if not satisfied with the original ones.

****Once added to a loan file on an iPad, the document photos in the LenderMobile+ app are then validated and processed in the LenderMobile computing cloud and can be sent to a lender’s LOS. With the app’s photo feature there is no need to scan, email or fax documents.

****The new LenderMobile+ loan notes feature enables loan originators to add notes to individual loan files. A loan notes form is available on the screen for each loan file where users can type and save their notes in a free form text.

****“We’re making our iPad app more useful to users when originating mortgages,” said Iavor Boyanov, chief technology officer and co-founder of LenderMobile. “The new document photo feature is great for loan agents on the go who need copies of borrower loan information quickly to avoid any processing delays. And more and more loan agents requested the ability to write and add notes for particular loan files from their iPads, and we delivered.”

****The LenderMobile+ iPad app uses cloud computing technology to bring mortgage origination capabilities to the screen of any iPad user who has downloaded the mobile application. Loan originators using the app can complete all the required mortgage application forms, save the loan data and securely submit them to their LOS. Borrowers can electronically sign the loan application directly on the iPad. Loan agents also can order vendor services from their iPads, such as credit reports and review them in real-time with borrowers.

****LenderMobile+ can generate individual loan files, enabling users to add documents and other data to the file as well as deleting documents that are no longer necessary. Uploaded mortgage forms are automatically checked to see if they have been completed and electronically signed. The app handles all the necessary file generation for lenders, such as files for Fannie Mae’s DU 3.2. Data files can be written based on DU 3.2 specifications for a new file.

****The LenderMobile+ application can be downloaded at no charge from the online Apple App store. A monthly subscription is required for loan originators using the LenderMobile+ app to order services from third-party vendors and submit mortgage loan documents to their LOS. The subscription is available on www.LenderMobile.com

Market Analysis: A New Paperless Integration Launches

*A Paperless Integration Launches*
**By Tony Garritano**

***I’m a cheerleader when it comes to talking about paperless processing. So, anytime I hear about vendors making it easier for lenders to go paperless I have to share that news with you. Today I learned that ProLender Solutions, Inc., a paperless lending software, has a new electronic file delivery integration with Provident Funding. The interface allows lenders to simplify and accelerate the file delivery process through a fully integrated ImageCenter. Here’s the full story:

****“Provident Funding is excited to have a full integration for image file delivery completed with ProLender,” said Eric Wilson, Director of Correspondent Operations at Provident Funding. “The integration process was the smoothest we’ve had with any vendor due to ProLender’s exceptional programming response time and approach to a customized solution.”

****From within ProLender’s ImageCenter, the user clicks a button to transmit the investor package directly to Provident Funding. ImageCenter intuitively selects the required images, generates the investor package and uploads it into the Provident Funding system. Within seconds a confirmation is returned to the user when the upload is complete.

****“By integrating imaging file delivery to Provident Funding, ProLender clients now have the ability for point and click loan delivery from their computer,” said Kevin Roczey, President at ProLender Solutions, Inc. “No more wasted paper, wasted time at the copy machine or expensive overnight packages.”

****The interface provides flexibility and speed for the delivery of the investor file. Users may upload the full investor package or send individual documents as needed.