As with most industries, the commercial mortgage industry has experienced a great deal of change in the area of technological advancement and its impact on operations. Of the many shifts, however, the push toward the electronic transfer of mortgage-related data has perhaps been the most influential in changing the entire mortgage process.
The capability to successfully automate the capture and transfer of data has existed in varying capacities and showed promise in providing the commercial mortgage industry with significant savings of time and money for both lenders and borrowers.
Commercial servicing companies specifically began converting many purely manual processes that were conventionally paper-intensive into automated technology processes to develop enhanced resources that allowed them to better serve their customers.
One of the first ways the servicing industry began the paper reduction process in earnest began when microfiche was introduced. As some readers will remember, microfiche is processed film that carries images of documents for transmission, storage, reading and printing.
But while microfiche's use did eliminate the shuffling of paper, it also came with its own set of challenges: Microfiche images are commonly about 25 times smaller than the original document size, reducing the image clarity and requiring the use of costly equipment for reading.
Additionally, users were forced to incur shipping expenses when these microfiche films needed to be shared with other parties.
Concurrent with the use of microfiche, the concepts and technology behind digital document imaging were introduced and then continually improved. For some commercial servicing companies, traditional imaging systems were a cost-prohibitive option.
However, the availability of more scalable imaging systems and inexpensive storage facilities made digital imaging technology a more viable – and ultimately, essential – resource for commercial lenders and servicers of all sizes.
The uses of traditional digitized imaging technology required commercial servicing companies to manually print paper documents and reports and upload them into an imaging system for storage in a document repository. These electronic images were then accessible and easily replicated for sharing with other departments, borrowers or investors.
This process eliminated the movement of paper from department to department, reduced the amount of paper used and provided overall efficiencies to the operation.
Beyond imaging solutions
Throughout the years, imaging solutions have provided significant benefits to the industry. At the same time, however, personal involvement and manual processes remained a required component. These burdens were eased as new technologies and integration capabilities effectively guided commercial servicing operations into a more fully automated, truly paperless environment.
By embedding the digitization function directly into an organization's commercial servicing system, these integrated imaging solutions helped servicers realize significant savings, as reports, documents, and borrower and investor correspondence are automatically imaged and electronically stored.
The traditional imaging process is still necessary to image some external documents such as tax information, insurance notes, policies, certificates and proof of insurance, but having these pieces stored electronically makes for easy retrieval and a more complete, electronically accessible loan file.
Any other electronic transfer of data that needs to be generated between a servicer and another vendor or investor can, in most cases, be accomplished through a servicing system's import and export tools.
Next, with the advent of the Internet came a new set of paperless options and electronic requirements for the servicing industry. To remain competitive in today's market, commercial mortgage servicers must offer an online, Web-based approach to meeting borrowers', attorneys', lenders' and investors' requirements for managing their loans.
Servicers are using the Internet to communicate with these partners by giving them the ability to view loan status, histories and related documents online through secure Web sites. This capability provides lenders, borrowers, attorneys and investors with greatly enhanced levels of online service and support, not to mention immediate access to loan information.
Commercial servicers' partners – particularly investors – require not only the ability to view loan information online but to receive electronic correspondence from the servicer any time there are changes or updates related to their loans.
This feature is essential for the commercial mortgage market due to the high value of commercial properties. When something happens on a commercial loan, investors want to know immediately; they do not want to wait until the end of the month to find out that loans are delinquent or that a borrower made a principal prepayment.
Because the dollar amounts can be especially large in commercial transactions, the expedient exchange of information is crucial in making prudent business decisions.
Loan correspondence
Providing information electronically offers a more convenient means of communication, enables the servicer to maintain high customer service levels and ensures all parties are updated in a timely matter.
Exchanging electronic correspondence further eliminates the need to send paper documents and offers a significant cost savings for commercial servicers by reducing printing, paper and postage costs – plus manual labor expenses.
Attorneys, borrowers and investors now have a mechanism to access not only commercial mortgage account information, but also monthly statements, balance sheets, loan activity history, year-end statements and other monthly reports or correspondence at a time of their choosing, further allowing all parties access to up-to-date information as soon as it is available.
The use of electronic correspondence is increasing today. However, commercial mortgage servicers are still required to send paper-based documentation, such as 1098 and 1099 tax information to all clients, as well as monthly payments or borrower notices to a select client base or service provider that still prefers documents by mail.
Thus, in order to mange this process efficiently, servicers require flexible systems that are capable of producing both electronic and paper-based correspondence.
While the Internet and new Internet-based technology have forever changed the commercial mortgage industry, these developments are not without challenges and concerns – primarily worries related to data security. Servicing organizations must work to ensure that the data is secure as all parties involved in the commercial mortgage process rely more and more on the Internet to access and transfer data.
Protecting customer information is paramount. Therefore, access control, physical security, encryption of electronic customer information and monitoring attacks are just some of the issues commercial servicing organizations must constantly be aware of and address.
That being said, with the majority of security breaches that have happened in the last several years, an automated imaging system could help reduce exposure to more traditional security threats and breaches such as physical removal of printed data or hard-copy customer files.
When servicers use an automated system, the security features and tools provided by the system enable management to restrict and control access to files and reports – taking the sensitive information out of the physical reach of employees.
Over the past decade, the impact of new technology on commercial mortgage servicing companies has been tremendous. However, the driving force behind these changes has remained basically the same: streamlining internal processes in order to provide immediate updates and access to information to all parties involved and ultimately, better serve customers.
Dawn Gibbs is president and CEO of Financial Industry Computer Systems Inc. (FICS), a Dallas-based provider of origination and servicing technology to the mortgage industry. She can be reached at dawngibbs@loanware.com.
