Tapping into the Power of Technology to Simplify the Mortgage Process

In today’s society, we want things to be fast, inexpensive and accurate. This attitude is prevalent across a wide variety of industries. From fast food orders to Internet service, we are a very demanding customer base. As customers demand more and more from companies, organizations must decide how they can best serve them, while cutting their own costs and meeting necessary regulations. For some, that includes streamlining business processes through automation or providing customers and employees with secure Internet access to certain files. One thing is certain – the key is technology.

One industry that is a leader in embracing technology is the financial industry. Technology can help improve many aspects within financial institutions. In this article, we will discuss the mortgage process and how technology can help simplify the process for the borrower and the lender.

The basic mortgage process consists of numerous steps and generally takes about 30 days to complete. Each step has the potential to take substantial time and require significant documentation.

• Prequalification – During this step, the lender gathers financial information about the borrower. This helps to determine how expensive a house the borrower can afford. Depending upon the number of programs for which the borrower qualifies, there may be several prequalification figures produced. Time estimate: 1-2 days.
• Application – This signals the official start of the loan process. This step involves the borrower submitting a completed mortgage application to the loan officer, including supporting documentation such as a list of previous employers and payroll stubs. Time estimate: 1-2 days.
• Verification – During this stage, the lender reviews the information that the borrower provided and determines whether the application is complete. The lender requests credit reports, property surveys and appraisals and sends out requests for verification. Any other information needed to allow for processing of the loan is also requested at this time, such as employment records, bank deposits, etc. Time estimate: 3-5 days.
• Processing – Reports, verifications (as they arrive), surveys, appraisals, tax returns, pay stubs, W2’s, etc. are reviewed during processing. If any anomalies are found, an explanatory document from the borrower is required. Time estimate: 20 days.
• Underwriting – All the information gathered thus far is placed before the underwriter during this stage. The underwriter determines if the loan is approved. More information may still be requested at this juncture. A private mortgage insurer may need to be brought into the picture at this point. Time estimate: 2 days.
• Closing – Once the loan is approved, closing is scheduled and the appropriate documents are prepared. At the closing, the lender pays the seller, the borrower buys the property, and final documentation is signed and completed. Time estimate: 1-2 days.

Anyone who has gone through the mortgage process knows that it is rather file intensive and time consuming. The need to be compliant with federal regulations complicates this further since there are many regulations that come into play. A few of these include the Real Estate Settlement Procedures Act (RESPA), the Equal Credit Opportunity Act (ECOA) and the Truth in Lending Act (TILA). In order to meet regulatory and company policies, keeping good records in today’s day and age is not just a good idea; it is required.

If you could improve customer service, speed up the lending process, decrease costs associated with the lending process, simplify compliance with federal and state regulations, establish a disaster recovery process and improve accuracy and efficiency, would you do it? With technology, all of this is possible. Both the reduction in implementation cost and the return on investment make it an option to seriously consider. With a good electronic document management (EDM) system, all of these goals can be attained and more.

• Improving customer service - An EDM system allows banks to store items electronically, rather than in hard copy, file folder format. Related items can even be kept together to make loan processing easier. Rather than having to sort through physical files whenever a specific piece of information is needed, representatives can search for and access items electronically. This translates into improved customer service when borrowers are able to get accurate answers to questions more quickly.
• Speeding up the lending process - Instead of a manual, paper-based system, organizations can automate their processes and replicate them electronically to expedite the steps they are performing manually. This can even extend to automatically launching workflows when a new document, image or object enters the system and requires action by one or more employees. Workflow processes can be used for signatures, approvals, initiating further processing, and more. For example, in the mortgage process, the loan processor can bundle all of a borrower’s information together electronically and flow it in its entirety to the underwriter. Then, if the underwriter determines that more information is needed, it can be sent back to the loan processor with the request.
• Decreasing costs associated with the lending process - When an EDM system replaces hard copies with electronic information, employees involved in the lending process are able to search for and retrieve information faster. Another advantage offered in many EDM systems is the ability for employees to work remotely over the Web, either via the intranet or the Internet. This type of accessibility results in less time spent shuffling paper copies between the loan officer, loan processor and underwriter. It decreases the chance that files could be misplaced or lost and translates into cost savings.
• Simplifying compliance with federal and state regulations - EDM systems can help organizations become compliant with regulations via their record management tools. Some systems offer email management features that can be used to keep all email messages related to a loan together with the documents, forms, etc. that pertain to that loan. Audit trails are also available in EDM systems. These trails provide detailed information on actions taken that are related to a specific document during the loan process. For example, you may wish to find out which employees viewed a specific credit report associated with a loan. Audit trails would allow you to find this data. Electronic record retention systems can allow you to set backup, redundancy and destruction dates for files based on your timelines or those set forth by regulations to which you must comply.
• Establishing a disaster recovery process - Another use for the record retention system is to allow you to maintain files offsite in the event a disaster should occur. It is vital that files can be retrieved should a natural disaster or other catastrophic event occur.
• Improving accuracy and efficiency - EDM systems allow you to store varying components related to a loan in one place electronically, including email messages, faxes, forms, paper documents, etc. By keeping all the related files in a central repository for easy search and retrieval, employees are able to quickly and accurately investigate any anomalies or answer questions that may arise.

For more information or to schedule a demonstration, please Contact DocFinity now.