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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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It’s About Time

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JohnLevyA 1975 BusinessWeek article predicted a forthcoming paperless office, forecasting that in the year or two following, paper would become obsolete in business environments. It is clear that the thoughts behind this article were wise, perhaps a bit ahead of their time. But in reality, the amount of paper office workers created and utilized actually increased significantly after 1975, more than doubling year over year until 1999.

Based on the advent of new technology and greater environmental awareness, paper usage peaked in 1999 at 143 percent per U.S. worker and then began declining in 2006 to 127 percent, per U.S. worker, which reflects the downward trend of a traditional bell curve. The amount of paper businesses use continues to trend downward, and it appears we are finally seizing the opportunity to create the paperless office once described in that original insightful article.

The technology that was actually needed for a paperless office was nowhere in sight 40 years ago; however, we now have access to the technology to support that vision. Although many mortgage companies have yet to fully embrace paperless operations, most have adopted electronic processes in some capacity. Recent advances by the IRS, FHA and other industry organizations suggest that the reality of the eMortgage is right at hand. Therefore, it is important for industry leaders to understand the primary factors that have come together over the past 10 years to create a perfect technology storm, allowing the paperless office to finally come to fruition:

Hardware – If you follow Moore’s Law, which was established in the 1970s, it states that processing power for computers will double every 18 months. Based upon this hypothesis, we should now have more than 33 million times more computing power in 2014 than was available in 1975. This dramatic rise, as well as huge increases in processing horsepower and memory are among other factors which give us the computing foundation for the paperless vision of long ago.

Software – The software of today’s era is capable of performing functions that simply could not have been imagined a few decades ago. Current software capabilities that have paved the way for paperless offices include the development of a multitude of industry standard file formats including PDF, electronic business documents, eSignature and workflow technology. For mortgage processes that involve countless documents, a number of signing parties and many operational steps, these software technologies have been revolutionary in helping to complete previously paper-based transactions much faster and with far less personnel or resource requirements. The evolution of software now enables a paperless process to remain electronic from onset through final transaction completion.

Additionally, the cloud processing environment with which we have all become accustomed to, regardless of industry, represents a major advancement that could not have even been imagined in 1975.

The cloud now provides us with a multi-tenant processing environment, hosting the software applications that can automate transactions and processes in an even more secure environment than paper-based transactions.

Bandwidth & Infrastructure – Internet speeds continually improve, as does the way in which network infrastructures within business offices interconnect. High-speed bandwidth has significantly impacted consumers’ lives, giving them Internet access from their homes (and everywhere they go with smartphones and tablets) to read, shop and bank. Today, consumers can shop for rates, view documents and even initiate the mortgage process online, from any location. Increased bandwidth now allows financial institutions to securely collaborate, share and exchange information instantly and totally electronic. The secure infrastructure that is now in place provides audit trails for attribution, secure PDFs, encryption methodology for document integrity and is critical for mortgage companies to handle consumers’ non-public, personal information using paper-free methods.

Regulations & Legislation – The ESIGN Act, signed into law in 2000, and the Uniform Electronic Transactions Act (UETA), passed one year prior, set the stage for the paperless office to become reality in the commercial business space. These laws provided the basis for existing paper-centric processes to become electronically accepted. Both acts state that if a law requires a record or a signature to be in writing, an electronic record and/or signature satisfies the law, and a record or signature may not be denied legal affect or enforceability solely because it is in electronic form.

While ESIGN and UETA are not considered new regulations anymore, their impact and effectiveness are still being felt. Varying interpretations continue to evolve, especially with the formation of the Consumer Financial Protection Bureau (CFPB) and its assessment of how electronic records and signatures may be utilized to allow consumers simplicity, convenience and ease-of-use while adding new levels of compliance requirements. These acts have also become critical to driving other industries, including government agencies, toward paperless practices. For instance, they set the stage for the Internal Revenue Service’s (IRS) acceptance of electronic signatures on forms 4506-T in 2013, and later forms 8878 and 8897.

Of significance to the mortgage industry this year was the Federal Housing Administration’s (FHA) policy change allowing e-signatures on the vast majority of mortgage documents. Announced January 2014, this policy change signifies a milestone and will likely propel the mortgage industry further toward completely paperless processes. In some cases, eMortgages – or fully electronic mortgage transactions – have even been realized, and will likely be much more common after December of this year with additional regulatory changes.

Security – Over the years, many have questioned whether the paperless office can be a secure one. In addition to software becoming more secure in recent years, overall, we now have the means to truly protect the integrity of signed electronic records. There are encrypted documents and tamper evident seals on electronic records, complete audit trails, in addition to various levels of authentication safeguards on both desktops and mobile devices. Without the ability to securely execute documents – regardless of the transaction type – they would simply not be practical for consumers or the financial institution. Who would sign or review an important loan disclosure document that could not be protected? What lender would collateralize or accept a sale, such as a mortgage or even a portfolio of mortgages, which could one day be considered invalid?

ESIGN also dictates requirements for using an authoritative copy documents, which bring additional value to financial institutions that want to securitize or collateralize their electronically completed loans. eVaulting creates a secure original record of the chain of custody for transfer of electronic documents to a secondary market buyer or investor. This has become crucial requirement in the financial industry, enabling institutions to establish ownership and/or control of these transferable e-signed documents.

We have certainly come a long way since 1975. The ideas presented in that original BusinessWeek article are finally beginning to ring true, and it is all benefiting the mortgage industry. It is providing consumers with ease-of-use and convenience throughout a mortgage transaction while allowing institutions to deliver mortgage services in a less resource-intensive manner. It really doesn’t matter what industry you’re in – being fully electronic is easier, less expensive, more expedient, and processes are more secure when they are paper-free. They really had the right vision back in 1975; now 39 years later we can finally seize the opportunity to increase productivity, reduce operating costs, allow for consumer channel choice by adopting the paperless office.

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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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Market Analysis: Advancing The Cause Of Paperless Processing Further

*Advancing The Cause Of Paperless Processing Further*
**By Tony Garritano**

***Anyone who has purchased a home is familiar with the stack of paper that has to be signed to finalize the loan transaction. Less known are the challenges lenders face to get the loan to the closing table–complex interactions behind the scenes, multiple participants needing access to the same file and regulation requirements for data transparency. PROGRESS in Lending has learned that Xerox Mortgage Services is helping lenders simplify the process with new features for its BlitzDocs intelligent collaboration network. Here’s the scoop:

****To help both internal and external participants work together more effectively, BlitzDocs’ new advanced workflow capabilities automatically queue loans to accelerate the process from origination to closing. In addition, using the new manager dashboard, lenders can track loan status and better manage productivity and workload across various people and processes.

****BlitzDocs now also provides annotation capabilities that allow lenders to easily edit, sign and comment on paper-based images and electronic documents rather than printing out documents to hand write notes or add signatures. BlitzDocs supports multiple versions of annotated documents so lenders can choose what is viewed by third parties and which version is sent to investors. Lenders also benefit from an audit trail showing who made the notes and when.

****“The enhancements made to BlitzDocs are well thought out and take our paperless collaboration to the next level,” said Jennifer Edwards, vice president of Town and Country Banc Mortgage Services, Inc. “BlitzDocs continues to help us simplify our processes and allows us to connect with all necessary parties from origination to post-closing.”

****Lenders working with Xerox Mortgage Services benefit from an extensive network of BlitzDocs certified partners and providers, now including Medallion Analytics and MRG Document Technologies.

****“To save time and adapt to industry regulations, lenders are recognizing that basic imaging is not enough – they need to extend collaboration beyond their own business,” said Nancy Alley, vice president and general manager of Xerox Mortgage Services. “Xerox is driving this industry change with new technology and a growing network of partners that make it easier for loan participants to work together to meet borrower needs and stay one step ahead of changing regulations.”