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This is an ebook based on quantitative and qualitative Ocrolus research with customers and mortgage professionals. To read the full ebook and view the accompanying illustrations visit the landing page here.
Table of Contents
Executive Summary 3
Automating Mortgage Workflows 5
Embracing Change Management 6
Building Trust and Efficiency 8
Ensuring Transparency 10
Optimizing LOS Integrations 11
Streamlining Income Calculations 12
Improving the Due Diligence Process 14
Conclusion 16
Executive Summary
A recent Ocrolus survey of 260 lending professionals identified a number of roadblocks in the retail mortgage process, ranging from a low appetite for technology to a lack of transparency and frustration with loan origination systems. In addition to quantitative insights, 18 respondents provided qualitative analysis during one-on-one interviews. Some of those comments are included anonymously in this eBook.
Among the key findings from the survey, document review and validation is the biggest pain point for workers tasked with mortgage processing (32%), followed closely by completion of forms in loan origination systems (31%). Document sorting (17%) and income calculations (16%) were also mentioned frequently as significant pain points.
When it comes to addressing the pain points, 90% of those surveyed said a tool that could automatically capture income information from submitted documents would be valuable, with 35% saying it would be extremely valuable. A similar percentage of respondents (90%) said a data comparison tool that could capture all the disclosed loan estimate fees, and show a side-by-side comparison, would also be valuable.
Understanding how technology can address pain points related to mortgage workflow, and pave the way for the adoption of automation, is important for decision-makers who want to streamline digital mortgage processes. Listening to what loan personnel on the frontlines need–and providing solutions that address those needs–is how mortgage lenders will get buy-in that ultimately pays dividends through increased efficiency and lower costs.
This eBook will help decision-makers better understand mortgage workflows and how to use technology to streamline the process. Among the key areas of focus are using accuracy to build trust, ensuring transparency, and optimizing the integration of third-party software solutions. Other important components that will be discussed include automating manual tasks, streamlining income calculations, and improving fraud prevention.
Automating Mortgage Workflows
Successful implementation of automated solutions for mortgage processing encompasses all four stages in the evolution of a loan, and helps the stakeholders responsible for each phase. While there is sometimes overlap in responsibility, each step is usually managed by one individual, with closers making the final approval decision.
Each stage in the mortgage workflow process can benefit from automation:
Origination: Automation helps expedite the process of both completing and analyzing loan applications.
Processing: For processors, automation makes it easier to sort, organize, and validate loan documents.
Underwriting: Technology can help underwriters identify anomalies in loan documentation and flag potential problems with the lender or the property.
Closing: Once the underwriting team issues a “clear to close,” automation can facilitate the entire workflow, including calculation and verification of borrower data, final costs, and fees.
Embracing Change Management
Mortgage lending decision-makers have to carefully balance a desire for automation with what can be a relatively low appetite for technology among the employees who process loans. Some employees may view technology as a threat, either as the result of past failures and complexity or because it threatens their job security. But, ultimately, technology needs to be part of a proactive change management strategy.
The key for achieving buy-in is to implement user-friendly technology that complements human-centric processes, instead of replacing them. Successful adoption results when both process and technology are well-aligned. According to the Stratmor Group, investing in technology is just a starting point; Lenders also have to factor humans into the equation, because they will account for 90 percent of the costs related to using that technology.[3]
When human experts are the focal point of mortgage workflows, the adoption rate for technology increases. In these situations, automation is being used in tandem with the human brain to enable people to make decisions faster and more accurately.
A mortgage mantra for lenders is to focus on assisted decision-making, transparency, and user control. Mortgage experts are accustomed to a workflow in which they constantly check and double-check the data. Technology needs to be intentionally designed with the goal of augmenting that process, not replacing it.
Excelerate Capital, for example, is using automation to expedite the review of loan documents. Technology has reduced underwriter document review time from two hours to less than 30 minutes. The mortgage lending firm is now on track to automate the review of more than one million documents annually.
Reducing friction for employees requires the integration of technology with a relatively low learning curve and a clear synergy with existing mortgage workflows. Automation that offers clear value-added benefits helps alleviate worker concerns related to issues such as data integrity or job security. Moreover, it’s important to recognize that many veterans in the financial services sector are wary about tools that over-promise and under-deliver. As one underwriter said: “I will prove the machine wrong!”5
While there may be some reluctance when it comes to adopting new software, survey data reveals that technology that automates documents for income validation is a high priority for mortgage lenders. Other pain points that automation can address include the completion of forms, document sorting, and income calculations.
Ultimately, mortgage lenders need to make it clear to employees that the primary objective of new technology is to augment human brain-power with computer automation. By developing a change management framework that balances technology with user experiences, lenders can ensure that workers' needs are tightly integrated with new automation processes.
Building Trust and Efficiency
The lifeblood of mortgage loan processing is accurate data. The more technology can help to ensure data accuracy, the faster it will be embraced by sales, underwriting, and closing teams. Facilitating accuracy also will improve the quality of submissions to underwriting and improve borrower experiences.
The criteria for trust changes depending on what stage of review a mortgage is in. But all key stakeholders rely on a trusted process:
Loan officers, who are at the top of the funnel, are often more open to technology because their jobs depend on filling the pipeline with applicants.
Processors also are quicker to embrace technology because it expedites workflow and they know the data will be checked for accuracy further into the process.
Underwriters and closers are much more wary about ceding too much control to automated processes.
Every typo or missing piece of information can be seen as a major failure when 100% accuracy is required. There is very little wiggle room to make corrections once a mortgage goes from closing to funding. A mistake that needs to be rectified past the funding stage can be very costly and time consuming to rectify. One of the important internal selling points for technology is that it can help prevent these types of errors from turning into expenses.
Successful mortgage lending requires that key stakeholders trust each other, the borrower and loan information, and the analysis at each step in the process. Accuracy is mission-critical for performing analytics; making loan decisions and building trust entails both workflow transparency and actionable data.
As one underwriter said: “Automation is good, but a lot of manual entries are still required for accuracy.” Another added: “The industry has very little tolerance for errors.”
Automation that reduces errors and improves quality will help build trust. For example, underwriters will be more open to automation if they can clearly see that it improves the accuracy of information they receive from loan processors.
Ensuring Transparency
Another crucial factor for building trust is transparency. Mortgage teams need to be able to easily track, verify, update, and record during every step in the process. As digital mortgage standards evolve, using automation to improve transparency will lead to more trust, better accuracy, and improved regulatory compliance.
Technology that creates an accessible audit trail starts with well thought out form design. Mortgage specialists also want and need to review exactly how automated calculations were made. In addition to being able to review the process, they also want the ability to make changes. Giving lenders the ability to control and edit loan documents ensures transparency and reinforces trust in the entire process.
Survey data reveals that one of the most significant pain points in the mortgage process is the lack of transparency. This includes a shortage of details about the source of information and/or the methodology used for calculations. It also relates to sub-optimal communication about loan status changes and updates. For instance, nearly 70% of respondents to the Ocrolus survey said it would be valuable or extremely valuable for stakeholders in the mortgage loan workflow to understand how income calculations were derived.
As one loan officer observed: “Underwriters expect us to post our calculations, but they never share their calculations with us.”
About 95% of mortgage lenders surveyed by Ocrolus said they would find value in a tool for comparing 1003 data provided on a uniform residential loan application with information captured from other supporting documents.
Automation that introduces standards to facilitate transparency leads to a more trusted mortgage workflow process. Technology has the power to help foster a holistic system in which all of the key members of the lending team work together toward a common goal.
Optimizing LOS Integrations
One frequent complaint from mortgage loan professionals is that loan origination systems (LOS) can be inefficient and difficult to use. Optimizing LOS integrations requires that lenders:
Understand that the UX internal stakeholders have when working with automation technology will ultimately influence whether they embrace it or shun it.
Implement third-party solutions that are multifunctional, customizable, and tightly integrated with LOS software.
Provide a seamless ecosystem in which everyone―from loan officers and processors to underwriters and closers― participates in the decision-making process.
Improve workflow efficiency by integrating both internal and external services with LOS tools.
Develop highly transparent functionality that makes it easy to review previous work done on a loan application.
Build a responsive system that expedites the workflow process.
“I don't look at every single document, but it breaks your rhythm when you have to wait a minute to load something,” said one loan processor.
Streamlining Income Calculations
Income calculations have become more time-consuming, thanks to the increase in non-traditional borrowers using cash flow rather than credit scores to qualify for a loan.
Automation can help lenders verify income documents more quickly and more accurately. Having access to accurate borrower data speeds the application process for loan officers and enables faster processing and underwriting. The ability to make lending decisions quickly also improves efficiency, increases customer satisfaction, and reduces costs.
One of the automation features that adds the most value is the ability to capture and identify the source of income-related data from borrower documents. Tools that facilitate income calculations based on different scenarios are also helpful.
Another innovation that enhances income calculations in LOS integrations is a customizable interface that enables loan officers to make adjustments based on the type of documents being provided by the borrower. The result is that multiple income calculations can be done instantly, without the need to review copious paper forms in order to model various scenarios manually. This is particularly helpful in supporting faster evaluation times for non-traditional applicants.
“I want to have the ability to distinguish between income types, and the ability to read income tax returns and calculate,” said one loan processor.
In fact, the vast majority of mortgage lenders surveyed (90%) said that an automated tool that captures income-related information from loan documents would be of value to them. (See Q9 chart)[14]
Improving the Due Diligence Process
In addition to streamlining LOS integration, technology can improve the due diligence process. It also can help reduce or eliminate manual processes. That level of automation enables lenders to focus more on validating and analyzing borrower data and less on ensuring that every piece of data is entered correctly.
Replacing legacy manual processing is not intended to supersede human employees. Automation is an assistive technology that should augment the work being done by mortgage specialists. While some technology solutions will eliminate the need for human action, the goal is to facilitate value-added analysis and other tasks that are best done by humans.
Automation shifts tedious, repetitive tasks and mind-numbing busy work from people to machines. For example, according to the Ocrolus survey results, over 45% of respondents are still spending time manually entering employment and credit information. Automation can ease the burden and costs associated with performing those tasks.
Implementing automation solutions enables stakeholders in the mortgage loan process to focus on delivering faster and more accurate decisions. It also can help improve the accuracy and speed at which income and tax documents, in particular, are reviewed and verified. Because this data informs other calculations, lenders put a high premium on accuracy when processing and underwriting a loan application.
Reducing the volume of manual tasks can improve the overall efficiency of the entire mortgage process. In cases where self-employed borrowers are providing additional documentation, automation helps to facilitate an increase in data without increasing the overhead and time required for processing and analysis.
“It takes time to search for tax records and validate information outside of the system,” said a loan processor.
Identifying suspicious activities is a manual process in the traditional mortgage workflow. But technology can enable lenders to focus on inconsistencies, with potential red flags resulting from automated analysis of borrower documents and data.
Technology can be a powerful tool for reducing fraud. Automated document review can help to verify borrower data as well as potential malfeasance by internal or external bad actors. For example, an automated process can determine if an appraiser has a history of inflating values or if a file has been tampered with. It also can help validate whether bank statements and other borrower documents are authentic.
Automation is well-suited for helping to review income and asset documents, which are often the source of fraud risk. Artificial intelligence can be used to detect inconsistencies and to identify information that borrowers may not have disclosed. This can range from undisclosed properties and hidden debts to bankruptcies and forged documents.
Technology can also help standardize a fraud reporting process that has historically been unique to each financial institution. Streamlining the fraud review process can reduce the number of bad loans while enabling faster lending decisions.
“I check to make sure there aren't additional houses, undisclosed homes, or debts,” said one loan officer. “Afterwards, I review the findings and read through them to make sure nothing else is going on in the file.”
Conclusion
Technology is increasingly being effectively deployed to help mortgage lenders automate processes for everything from applications to underwriting.
While there is some trepidation about technology, survey data underscores a desire among mortgage specialists for automation that auto-populates forms, and reduces manual data entry. Instead of spending time on document review and data validation, euphemistically referred to as “stare and compare,” lenders want solutions that will improve the process. The key for mortgage lenders is knowing that they can safely rely on technology for validation of important information, such as addresses, credit data, employment records, and personal financial statements.
Well-designed integrations of mortgage automation solutions, combined with good user experiences, results in benefits for lending organizations, their employees, and their customers. Lenders that put the right tools into the hands of their employees will reap the rewards.
To learn more about document automation for mortgage origination, visit www.Ocrolus.com/mortgage, or contact to one of our mortgage experts via sales@ocrolus.com.
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