Now that the refinance boom is fizzling out, mortgage lenders are presented with the perfect opportunity to reassess how they do things. According to a report from BearingPoint (McLean, Va.), imaging documents and automating more processes will create a great deal of flexibility for this otherwise paper-intense business.
Yet the industry has been talking about these issues for years. Lenders know what they need to do, but such factors as cost of the new technologies have held them back, says Lowell Alcorn, a managing director in the firm's lending and leasing practice. "As with anything in the lending industry, you have people out in front doing this well and others who aren't," he explains. "Price has something to do with this, but the cost of technology is coming down now and the functionality is getting better. After the refi boom, lenders finally have a chance to take a step back to see how they can do this better."
According to the report, if financial services firms embrace four particular drivers--cost reduction, adjusting staff to demand, reducing loan application cycle times and taking new products to market more quickly--they can be well on their way to modernizing their lending systems. "Those drivers are the things every lender wants to do," states Lowell. "Coming off the refi boom, there's great pressure to reduce cost. They want to quickly introduce products too, which may be a conflicting goal since that requires the implementation of new processes. But it is possible to do all this with technology today."
"All these drives are very interwoven," adds Tim Davis, also a BearingPoint managing director. "There are solutions out there to help the players address business processes, cost containment and refinement."
Of course, rolling out the new technology requires a good amount of work and planning. "I don't want to imply this is an easy thing to do," asserts Lowell. "You have to use an almost phase-like process. This is how we've seen it work best [among our clients]. You capture the documents first, then look at the workflow and automate it and determine which tasks to move to the lowest cost alternative."
At this point, digitization is occurring in the post-closing process to help consolidate signed papers as they come in. "If you scan these, you can bring them back together more easily," says Lowell. The ultimate goal is to move document imaging further out so that it occurs earlier in the process. "Not having the documents physically in one person's possession is important," explains Davis. "With digitization, there's no more waiting for interoffice mail or FedEx."
Digitization is essentially the first step in the process toward mortgage lending efficiency via automation, they explain. Once this is achieved, business rules engines must be developed to help move the files along in a workflow to more effectively delegate tasks among employees. This type of automation is especially beneficial to those lenders with operations in other countries, notes Lowell.
Done correctly, BearingPoint predicts digitization and automation can help lenders realize a 50 percent reduction in costs. This savings comes from a greater ability to right-size staff levels and to introduce products to market in a more timely fashion, explains Lowell.
Using the right plan of attack is vital to the success of updating the mortgage process, states Davis. Both emphasize the phased approach, where each phase produces a foundation upon which to build the next. "Using the right plan of attack with good periodic check points along the way is how this should be done," relates Lowell.
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