If there was ever an industry in need of automation, it would be the mortgage lending industry.
This industry is plagued by time-consuming and error-prone, paper and labor-intensive processes, front-end systems that do not communicate efficiently with back-end systems, and third-parties that are often not integrated into the process electronically. These problems are exacerbated by the huge volume of loans that are generated each year (nearly 5 million new consumer mortgages alone). Content management is a key enabling technology in solving these problems.
The inefficiencies in lending in the mortgage banking industry start at the loan origination process, which encompasses five steps: 1) Application submission; 2) Underwriting; 3) Closing and funding; 4) Post-closing; and 5) Shipping and delivery.
While paper remains a fact of life in each of these steps, it has an especially big impact on the loan application submission process, which accounts for over 70 percent of the manpower required to produce a loan. This step drives the production of loans to consumer, business and institutional clients from the initial application to the funding and processing of the loan in a core accounting system.
The effectiveness of loan application processing is a linchpin to success in lending.
However, paper-based and semi-automated processes make it difficult for lenders and third-party processors to cost-effectively approve and originate loans to consumers, businesses and institutions. In fact, there are four main challenges that arise:
High loan processing costs: The average net cost to originate a loan rose 23 percent between 2013 and 2014, resulting in an average loss to lenders of $194 per loan, according to research from the Mortgage Bankers Association.
Long cycle times: Historically low interest rates have not only meant a rise in mortgage volumes, but also an increase in processing backlogs. It took lenders an average of 46 days to close a loan in 2014, Ellie Mae Market Trends reports.
Lack of visibility: Disjointed systems for processing loan approvals results in rekeying of information, poor visibility into the status of loan applications, and delays in responding to customer inquiries.
Compliance risk: Creation of the Consumer Financial Protection Bureau, and the significant penalties and fines it can levy, has raised the stakes of complying with regulations such as TILA-RESPA (Truth in Lending Act-Real Estate Settlement Procedures Act).
Intelligent capture solutions address these challenges by providing five critical capabilities:
To learn more about how content management can address these challenges and improve the profitability of mortgage loan processes, download a copy of this free ebook. It outlines how content management can be used to address these challenges.