December 12, 2017
Transitions are never easy. Not for individuals, organizations, or for society as a whole. They tend to be messy and confusing periods of time, with lots of looking back to the past and wondering, “Was it really that bad?” But occasionally the fog clears, you get a good look at the changes in action, and it once again becomes evident that the pain of progress is worth it.
This is also the case when it comes to employing technology to streamline the mortgage application process and to reduce the amount of time employees spend having to compare paper-based forms and applications with their digital, online versions.
There is now a consensus across the banking and mortgage sectors of the finance industry that paperless transactions present a better, more accurate, more efficient way of getting things done. Yet 9 out of 10 transactions are still done on paper. Why? Because change is hard, and traditional ways of doing things are deeply ingrained in a system.
Nevertheless, the economics of going digital are also prompting new interest in finally making the shift. Scaling costs and streamlining has become more important than ever. "Despite rising average production volume, production expenses grew to $8,060 per loan — the second highest level reported since the inception of our study in the third quarter of 2008," said Marina Walsh, MBA's vice president of industry analysis to the NationalMortageNews website in early December 2017.
AI Foundry has shown that automation can slash costs by up to 30% while doubling throughput. But for companies to achieve those savings, they need to work with reliable partners, develop and implement robust technology solutions, and get widespread employee buy-in to a roadmap that explains to them how and why they need to change the way that they conduct their work.
One of the ways that digitization drives throughput and increases customer satisfaction is by eliminating the rekeying of information. The capture of information is where mistakes often creep in and derail the process. It’s very labor intensive and time-consuming, and it takes place behind closed doors, leaving the applicant outside of the process and waiting passively to hear whether they have been approved.
Electronic mortgages can be engaging and simple, and far more transparent in the ways that they gather digital data that already exists online. As a result, the customer is always aware of the status of the application and should be more comfortable with the entire process.
Stare & Compare
Originating a mortgage on paper means that, at some point during the application process, the data will need to be extracted from a document, digitized, and saved correctly. This happens in one of two ways: via manual input, when an employee enters the data into a spreadsheet by hand, or through some form of scanning device that uses Optical Character Recognition software (OCR) to cherry pick and transfer the relevant data that has been captured on paper.
This paper-first method means that an employee will be required to check that the two versions of the loan application are consistent. This act of comparison is known as ‘stare and compare,’ and it’s a significant burden on many organizations and their employees. Stare and compare must happen at several points during the application in an effort to maintain the accuracy of the information captured.
Let’s run through a typical paper mortgage process to see how many times Stare and Compare’ is likely to occur.
The Traditional Mortgage Application
Typically, the process begins with a pre-qualification process where the mortgage lender will gather financial information to determine what kind of property one can afford. This is followed by the actual application process where one fills out forms and supply documentation for processing. These initial phases definitely require Stare and Compare, because while the application form may be filled online, the information on it needs to compared to paper documents supplied by the applicant.
At this point, the lender opens a file and begins by appraising the property, sending out for bank statements and credit reports, and gathering all the relevant documentation in one place. Processing then begins; it involves putting together a package ready for evaluation, some of it electronic and some of it paper. Stare and Compare is inevitable at this stage as all the information from various sources comes together.
The underwriter will then take a look at the package as a whole and decide whether the purchase is viable or if more information is needed before continuing. At this point, the process will likely be mostly digitized, as the information gathered will have been verified via Stare and Compare.
The Value of Digital First
During the multi-step process outlined above, there are numerous opportunities for errors to slip in and affect the viability of the loan. Going digital first is a sure-fire way of cutting down on those errors. Automation is faster, more accurate, and provides much-needed transparency which ultimately leads to fewer errors.
The benefits of switching to an agile mortgage:
1. Automation helps increase per loan revenue.
2. Maximizes utilization, improves margins.
3. Implements a solution that helps organizations scale.
4. Delivers higher loan volumes.
This in turn leads to an increase in productivity and improved accuracy with advanced classification and extraction. It helps employees meet their KPIs/SLAs with reduced manual processes, strengthens customer loyalty and retention, and increases the profitability of the entire enterprise.
The fact that 90% of transactions are still paper-based feels like a huge opportunity for organizations looking to reach a new generation of homebuyers to create products and processes that speak directly to the paperless ways of working that are so widespread in the mobile-first, digital economy.
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