Solving the Problem of Paper in Mortgage Loan Origination

Today, banks are facing pressure from all sides. Interest rates are at historic lows. Technology is reshaping customer expectations. And a global pandemic is stretching remote workforces thin and causing increased demand as more consumers seek to refinance and consolidate debt in these unprecedented times.

Even in a healthy economy, a robust resale market and increased housing starts force financial institutions to juggle managing higher demand from consumers with fast, simple and seamless customer experiences to compete effectively. Many institutions lack the ability to scale and respond quickly to changes in this fast-evolving industry, which is essential if they’re to improve their position and create a modern lending experience for customers.

One of the prime candidates for process improvement is mortgage loan origination. Mortgages remain important contributors to a bank’s revenue. But today’s predominantly paper-based mortgage loan origination process is plagued by costly delays and inefficiencies. Copying, faxing, scanning, printing and manual keying of data occur at every point in the mortgage loan process. Completing the process can take over a month and a typical mortgage origination package averages about 400 to 500 pages. In 2020, mortgage processing from origination to closing was taking on average 49 days.

With customer expectations rapidly evolving, manual and paper-based loan approval procedures contribute to delays in the loan decision-making process. These processes are outdated in today’s complex society as time-consuming, paper-based underwriting lacks consistency, auditability and accuracy. According to a report by McKinsey, two-thirds of Asian banks face the ultimatum of shifting to new models to stay relevant in today’s rapidly developing economy. To thrive in a post-COVID-19 world, consumers and regulators are putting pressure on lenders to reduce the amount of contact time with potential customers to close qualified mortgage loans.

Meanwhile, smart information technologies—such as multifunction devices (MFDs), mobile phones and tablets—through which banks hope to realise process improvements introduce vulnerabilities that could find them out of compliance with regulatory requirements. Customers’ non-public information (NPI) or personally identifiable information (PII) is at risk every time a mortgage-related paper document or electronic information is created, scanned, copied, printed, faxed or emailed. To make matters worse, the increase in remote workers due to the pandemic means many of these processes could be happening outside of an institution’s secure network.

Prior to the pandemic, organisations had already begun to automate to reduce paper and manual work. A recent study by Forrester Consulting found virtually all companies have implemented some degree of automation across front and back office functions, and banks are no exception. For instance, most lenders have implemented digital mortgage applications, but many haven’t automated their back-office processes yet.

While lenders have provided borrowers with online access to bank statements and other loan documents, they are in the infancy stage as they transition away from paper. This leaves many reliant on documents and manual tasks.

To become more competitive, compliant and efficient in mortgage processing, banks need to:

• capture documents and information electronically to eliminate as much paper as possible
• automate manual steps and workflows and reduce costs
• add security and control wherever paper is required or information is transmitted
• simplify the sharing of information between business units and deliver a positive and engaging customer experience

When the mortgage origination process is automated end-to-end, banks minimise the chance of human error, reduce the risk of compliance violations and promote customer cross-selling and retention—all while significantly lowering operating costs. 

Five Steps to a Simple, Streamlined Process

Even in uncertain times lenders should work to improve the mortgage loan origination process. In March 2020, The U.S. Federal Reserve (Fed) slashed the Fed fund rate to 0 per cent to 0.25 per cent which has implications as the Singapore Interbank Offered Rate (SIBOR) and the U.S. Fed rates have been historically correlated. Refinance activity may increase in the midst of the COVID-19 pandemic as investment sales in Singapore have jumped 78 per cent in Q3 of 2020 while the rest of the Asia Pacific property markets have seen sustained recovery, according to Colliers International. It’s more important than ever banks have an advanced, efficient, compliant and customer-friendly approach to mortgage origination now and for the aftermath of this crisis.

Here are five steps lenders can take to achieve speed, efficiency and security in automating the mortgage loan process:

1. Digitise documents at the point of origin. Don’t just scan images of related documents and manually enter the customer’s information into the system. With automation, you can use an MFD or mobile device to capture and distribute all the customer’s documents and information, transmitting it securely and automatically at the time of collection into the bank’s mortgage loan system.
2. Automate error-prone manual tasks. Speed the handling and processing of loan documents, increase accuracy and eliminate costly delays of manual rekeying with content-aware print and capture technology, automated data extraction, document type identification, image correction and cleanup, blank page removal and double-sided scanning.
3. Accept documents from any input source. Missing documents shouldn’t be a cause for delay. Allow the customer to send the needed document any time from any input source: scanner, email, fax, web forms, mobile, etc.
4. Improve the customer experience. Features such as auto-filling of loan application fields, automated data capture from scanned images, instant document transfer from branches to central offices and continual visibility into loan status increase accuracy and offer customers the digital experience they desire.
5. Simplify compliance. Leveraging content-aware print and capture technology will also ensure documents containing NPI and PII can’t be scanned, copied, printed, emailed or faxed without authorisation. And extend this same level of security to mobile devices and remote workforces.

Now and in the post-COVID world, those continuing to rely on antiquated paper-based, manual processes and partial automation will find it difficult to compete against those that have successfully completed a digital transformation of their operations. Leverage automation and transform the mortgage loan origination process and begin working like the digitally enabled bank of tomorrow, today.

Zakir Ahmed is the Senior Vice President & GM - Asia Pacific & Japan at Kofax