In a Tighter Market, Lenders Need Real-Time Data Across the Enterprise


BLOG VIEW: For some time now, lenders have recognized the value of real-time data, notably in the origination process through using real-time verification of income and employment when evaluating borrowers, as well as real-time status updates for appraisals and title services, among others. We are even seeing use of real-time (or near real-time) alerts to support portfolio management on the servicing side. Yet, lenders still lag behind other industries when it comes to leveraging real-time capabilities throughout the organization.

Despite embracing modernization when it comes to borrower experience and loan processing in the origination phase, many mortgage lenders still find themselves reliant on an outdated batch processing approach when it comes to back office operations and management of their branch network. This is especially pervasive within lenders’ accounting departments and is often based on the fallacy that batch processing provides a greater level of control over accounting data. The reality is that operating with a “batch mentality” only creates an illusion of control due to its primitive constraints – something that is exacerbated in a tighter lending market like we see today.

While batch processing was initially introduced to decrease errors within accounting data, in a modern business environment, it is actually creating bottlenecks in the system. This makes it more difficult to effectively correct errors when they inevitably occur because staff often choose to operate outside of internal systems and rely instead on disparate tools like Excel spreadsheets, leaving the accounting system to serve simply as a repository for data.

Because human beings are inherently fallible, errors happen. The problem (beyond the error itself) is that in a batch processing environment, these mistakes are permanently locked into the data. Once they are identified, it then becomes even more laborious for staff to go back and correct the issues, (such as posting to the wrong general ledger account) through reversed entries. Even when an error is corrected, because there are multiple steps to do so, branch managers then have difficulty seeing how and where it was fixed, leading readers of the related reports to question the data being presented.

Unlike other industries, mortgage loan accounting features a large total number of individual transactions within each loan. Current, challenging market conditions have revealed a need for lenders to be able to respond more quickly to individual market conditions and leverage fresh, accurate data to guide smarter financial decisions, such as branch-level marketing investments. As branch managers’ compensation is often tied to their branch’s profitability, mortgage lenders need better internal control over that data to ensure that branch managers’ individual compensation is not mistakenly disclosed across the organization.

In today’s tight real estate market, lenders are evaluating their books much more closely (and critically), so access to timely data and information has become more important. When the mortgage market is “hot,” lenders are understandably more concerned with driving loan volume than managing operating expenses. However, that focus has now shifted, and lenders need to identify the correct areas to cut costs (or even redirect more spending) based on data-backed financial decisions. By extending the adoption of real-time data and modernization throughout their enterprise, lenders will be in a better position to successfully navigate the current environment.

Joe Ludlow is vice president for Advantage Systems, a provider of accounting and financial management tools for the mortgage industry.

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