The state of today's mortgage market demands smarter processing than what was performed just one year ago. One area of the lending process that is critical to the successful transfer of a loan from origination to servicing is the post-closing process.
Post-closing processing can be defined as those processes performed by a mortgage company during the transition from loan funding to servicing. These steps are critical in order to optimize servicing and to ensure delivery of a final loan package that can meet investor requirements. The specific activities differ from company to company based on the final destination of the loan, but generally include:
- Central file receipt and shipment identification (usually barcode labeling).
- Loan file imaging, which should include making the images available to a wide variety of departments regardless of physical location.
- Quality assurance audits to assure the quality of the loan transaction and completeness of the file (this can include both collateral and credit file audits).
- Data scrubbing to ensure proper loan boarding.
- Packaging and delivery of the collateral file.
- Trailing document tracking and follow-up.
- Credit file storage.
In today's hesitant environment, the challenge for many lending organizations will be to continue fulfilling post-closing functions while at the same time making productivity improvements by introducing new technology. It is critical that an organization be looking at process improvements today, so that when the market rebounds these efficiencies can be realized when volumes are higher. Some areas to consider for improvement include technology use, facilities layout, and control measures.
Technology improvements
Technology improvements can be realized in a variety of different ways. An organization should carefully examine the software being used to support post-closing operations. Does the code base allow for customizable applications to be created as the post-closing process is adapted to meet the needs of the current environment?
Is the application written to support the needs of the project, or is the project forced to accommodate the quirks of the application?
New software improvements allow for developers to build, test and release new applications within a shorter cycle, limiting the exposure to costly mistakes resulting from shifting business requirements. Once the core component of the application has been developed, additional features can be designed and released as they are needed in the organization.
Another strong argument for the use of newer software languages in a post-closing environment is the introduction of applications that support Web-based user access. This approach allows for more people to access key processing data across a larger geographic area.
Centralizing all data into one digital repository allows for multiple users to access the data independent of location. In addition, granting access to key post-closing functions via the Web can allow different parts of an organization to separate and perform parts of the post-closing process regardless of physical locations.
One example of an interactive Web solution to the post-closing process is an application that allows users at remote locations to create shipping manifests of incoming documents, create a shipper waybill, and tie them together without having the end user leave the Web portal.
Facilities layout
Building layout can have another big impact on the amount of efficiencies that can be gained in a post-closing process. Is it possible that a mortgage company's defined post-closing space is so small that it hampers the process? Does the provided post-closing space allow for controlled access to the work in the queue.
Unrestricted access often means that critical files can be delayed as a result of files disappearing or being moved to mislabeled piles. It is critical that documents flow through the process using a disciplined methodology. An organization should carefully examine the number of physical barriers in place to restrict access to certain post-closing functions.
One example of this is to limit employee access to incoming documents from remote locations to only those individuals who have the responsibility of receiving the files. Restricting access allows these employees to accurately account for all incoming files, eliminating the time spent on shipment disputes and the tracking of missing files.
Another efficiency that can be realized as a result of a well-planned workspace is balancing the floor space needed for the post-closing specialists to perform their function while minimizing the distance the documentation will travel. Layout adjustments can be beneficial if you have the luxury of reconfigurable space.
Control measures
Implementing control measures within a post-closing process can also increase efficiencies within an organization. To properly identify and implement the right control measures, a careful review of the standard operating procedures that govern the current processes should be done. If these standard operating procedures are well-documented, they can be the foundation of measures used to gauge the effectiveness of the post-closing department.
If the standard operating procedures are not well documented or dated, time should be allocated to outline the desired process. One common mistake of mortgage company personnel in determining the activities within a post-closing process is to overlook the smaller details that are still very critical in moving the files through the entire process. Once the process has been carefully documented and the organization has questioned the validity of each process, control measures should be applied to the most critical steps.
A control measure that can be of value to an organization is the use of barcode labels on all incoming files. Implementing a database tracking system designed to work in conjunction with these barcode labels would allow for the tracking of files from one process point to another. Applying these control measures could aid in the reduction of missing files and allow for time studies to be done on various parts of the process.
At times throughout the process, one must ask: ‘Is this really a core competency of ours, or is the post-closing process something that we have to do as a result of what we do well?’
First and foremost, a company's core competencies should be emphasized. Careful analysis might reveal that a post-closing process is not a company core competency, and greater emphasis should be placed on defined competitive advantages (e.g., current broker or correspondent channels, pricing, approval process) within the loan origination process. Valuable resources and energy can be wasted on processes that aren't generating revenue.
So how can you profit from technological advances, improve process efficiency, and increase accuracy of the process without the additional costs that come with process improvement?
One effective solution to the unpredictable nature of the post-closing process is to integrate a seamless outsourced solution to your lending process. An outsourced solution can provide advantages to a mortgage company in the above listed areas.
Thorough planning and clear communication of your goals can help your organization see the benefits of outsourcing the post-closing process. Now is the time to take advantage of the lower mortgage production volumes. Use this period to realign company strategies and shed those processes that are not in line with company goals and objectives.
Jon Maughan is vice president at Security Connections Inc. in Idaho City, Idaho. He can be reached at (206) 552-8302 or jmaughan@security-connect.com.
