BLOG VIEW: What’s at the heart of the mortgage industry? Some might argue it is underwriting, or compliance, or the secondary market, or the performance of loans. And although all of those are important areas, none of those facets of the mortgage process would be possible without proper documentation.
But in an increasingly digital world, how does this impact the generation, sending and recording of mortgage documents? The simple answer is that the focus should not be on the “paper,” but on the data that drives the mortgage process. So, in working toward that new electronic workflow, business should no longer be driven by the documents themselves, but, rather, by the data contained in them.
Shifting the focus away from static, physical documents and toward dynamic data positively impacts all of the primary audiences involved in a mortgage transaction – borrowers, lenders, investors, title insurers and the government. Because data-driven documents save dynamic data points that hold the required data for each individual loan, lenders, borrowers and regulators are able to more quickly zero in on the information most relevant to them.
Data drives the lender’s product
Proper data drives a lender’s product. Document providers can take the data directly from the lender’s loan origination software (LOS) and dynamically build the necessary documents. Data integrity is essential to the process because when invalid or incorrect documents are included, new documents have to be generated, disclosures have to be resent, or loans have to be pushed back from investors. This happens at great expense to the lender and at great impact to the borrower’s satisfaction level.
On the other hand, if the lender has worked to ensure system data integrity by training loan officers, applying internal reviews, building checks into its LOS, defining business rules with its doc prep system and utilizing data to drive its documents, the information on the documents will always be correct.
Subsequently, from the disclosures, to the closing table, to the transfer, to servicing, the documents will be generated using the same “good” data set as the original loan information in the database. Hence, any new investor that buys the loan will have the correct data and documentation. Its benefits include smoother post-closing processes, fewer expensive corrections and mitigation of the audit risk that can cost lenders dearly.
Data drives the borrower experience
Borrowers have a unique relationship with their lenders. While the lender is selling a loan to the borrower, the mortgage is really a means to an end for the borrower – a way to purchase a home.
Consumers depend on the expertise of their trusted loan officers. The borrower contributes to this process by providing old financial documents and signing new ones. Because the documents are central to the borrower experience, they are the key to providing a great experience.
When the lender drives the mortgage lending process with data, it controls the borrower experience. The lender does this by ensuring that the documents being presented to the borrower aren’t excessive or redundant and will result in a fully compliant loan.
Doing this, the lender can ensure that the borrowers only have to sign once on the correct set of documents. Asking borrowers to sign again because incorrect documents were sent can affect the level of trust in their lenders. By avoiding this scenario, the borrower has enhanced trust in the loan officer, and his or her overall satisfaction improves.
Data drives compliance
Next year, the government will change the rules regarding its Uniform Closing Dataset (UCD) file, requiring lenders to provide information about the specific documents they delivered to consumers. This is a direct result of too many inconsistencies between the data Fannie Mae and Freddie Mac have been receiving and the documentation that comes out of the closing.
This is an impactful illustration of the industry catching up with our data-centric model for document preparation. For lenders that are already leading their processes with data, the UCD becomes a redundancy layer. In addition, every regulation – from qualified mortgage safe harbor, to the TILA-RESPA Integrated Disclosures rule – requires a strong data file to track the documents provided to borrowers and signed at the closing table.
For lenders that are leading with documents rather than data, it will quickly become a stark wake-up call to transition to a document preparation provider that can eliminate inconsistencies by driving loan processes with data.
Harry Gardner is executive vice president of e-strategies for Docutech, a provider of compliance and documentation technology. Founded in 1991, Idaho Falls, Idaho-based Docutech offers a wide range of solutions to institutions all over the world – from document generation and imaging support, to e-delivery, digital signatures and print fulfillment.