Paper is the residue of success in the mortgage business, to paraphrase Branch
Rickey, the former president of the Brooklyn Dodgers. [caption id="attachment_5417" align="alignleft" width="266" caption="Paperless"]
[/caption] Succeeding in the mortgage business, especially on the origination side, means that piles of paper will be collected, sifted through, reviewed, checked, and rechecked. Every borrower knows that to receive a mortgage, he must gather his tax forms, his bank and investment statements, fill out several forms and hand them over to a loan officer or a mortgage broker to begin the origination process. For many lenders, vendors, and servicers, their offices are littered with boxes, filled with manila folders that will eventually be picked up and stored. It's an archaic process, one that wastes time because handling paper is inherently slow, expensive, and documents can be misplaced or lost. I’d like to believe that only a small number think this is the way to run a business, and most stick with paper processes because they think, erroneously, that it’s more flexible. To be sure, paper has been the mother's milk of the mortgage business, accepted as a fact of life, virtually since its inception. But increasingly, I've come to realize, the industry can live without it, can thrive without it. Deploying automation and paperless processes are faster, less expensive than manual, error-prone paper processes, and they are a key to generating profits and staying a step ahead of the competition. As a result of technology, lenders close more loans with fewer people, suffer fewer mistakes, and spend fewer dollars to do it. Consider the following:
- $122: The cost of paper from point-of-sale to closed loan.
- 870: Number of sheets of paper that the average loan requires.
- $38.92: The average per loan cost of the paper alone.
That's why some mortgage companies have begun to invest in technology with the aim to eliminate paper, reduce overhead, speed the process and ensure adherence to investors' guidelines and compliance with regulations that have emerged following the real estate bubble. Unfortunately, too often efforts to go paperless focus on creating a rigid “Image Repository,” one that offers no benefits other than as a mere electronic archive. However, even that is an encouraging sign because it means that lenders are are open to the possibility of going paperless. Already, several high-profile lenders have migrated thousands of paper documents and created digital versions. The electronic archive, by anyone's estimation, represents a significant improvement for borrowers, lenders, servicers, and investors, but clearly there are further steps that can be taken. Archives play a significant role in creating easier, faster access to documents than hard copies of documents. Also, an archive neither addresses the issue of workflow, nor does it streamline the origination process; it simply does not remove enough of the costs from the business. Lenders are beginning to understand that to generate greater efficiencies, to deepen cost savings, and to ensure that mortgage operations always comply with regulations, requires an electronic document management (EDM) platform. It eliminates paper and supports the lender from the point-of-sale, through servicing and the secondary market, creating a straight-through-process. A well-designed EDM, delivers the flexibility of paper, and several other benefits as well. For instance, several people can view the documents through the Internet at the same time. Documents can be located with a click of a mouse, they can never be misplaced or lost, and a natural or man-made disaster will not destroy them. Moreover, these platforms provide a tracking tool that monitors each change to a document, such as user views, mark-ups, print-outs, e-mails, as well as the user's name and the date and time he made the changes. Employees who make additions or modify annotations, including text boxes, highlights of sections, redacts of sensitive information, or creates a check mark or a “sign here” box, can decide who else in his shop can view his work, and can decide who can view the changes. I am just touching the surface of what these systems can do, but this level of control cannot be attained with an archaic paper-based system or an over-the-hill “image repository.” During the Internet bubble years, many firms thought that licensing “technology for technology's sake” was reason enough to sink money, sometimes lots of it, into a technology that offered little chance of a return on investment. Those days are over. Today, buyers need a solid ROI that they can believe in before they make a buy decision. Rest assured, EDMs pay for themselves several times over, and quickly. Lenders and others that perform their due-diligence can realize the benefits of EDM and achieve an ROI in about six months. That's pretty fast. And it liberates users to judge the residue of their success in efficiencies gained, not boxes of loan files.
Matt Strickberger is media counsel and the chief Internet officer for RGA PR. He was the editor of Mortgage technology magazine and the editor of several Wall Street-related publications. To ask a question or to forward a comment, email him at firstname.lastname@example.org.