Magazine article Mortgage Banking

Cutting Cost per Loan through Electronic Content Management

Magazine article Mortgage Banking

Cutting Cost per Loan through Electronic Content Management

Article excerpt

Times are tight. Origination volumes are down. Defaults and foreclosures continue to soar, and lenders are finding it harder and harder to stay afloat. However, there is hope in sight. As history has shown, the housing market is extremely cyclical. To survive the downturns, lenders must learn to do more with less without sacrificing customer service.

According to Needham, Massachusetts-based TowerGroup, the top 10 lenders in 2006 averaged $86 million in document management costs, or $202 per loan. In a 2008 report, Top Business Drivers, Strategic Responses and Technology Initiatives in Consumer Lending, TowerGroup analysts cited data management and enterprise content management (ECM) as key technology initiatives lenders should undertake as part of a larger strategic response to top business drivers, including market volatility, cost containment and paper/manual-based processes.

According to the report, "Lenders of all varieties feel continuing pressure to operate their processes more efficiently and squeeze every possible day from the cycle time and every possible dollar from operating costs. Time and cost are driven by a number of factors. The remaining opportunities for consumer lending organizations to become completely paperless and automated provide ample motivation for lenders to act. ... Enterprise content management tools are essential to move processes to the next plateau of efficiency."

Managing content to promote efficiency will be more important than ever as mergers and acquisitions continue to pervade the industry. To maximize the benefits while minimizing the investment, lenders must tackle implementation strategically. By taking a phased approach and tightly integrating with existing line-of-business applications, lenders will be able to better manage their content and data from origination through investor delivery, while decreasing their cost per loan and enhancing overall productivity.

When automating the mortgage process, the most logical implementation progression moves from the beginning of the process to the end. Most lenders start with a loan origination system and progress through the origination cycle, adding automated underwriting and fraud-detection systems, with the end goal of, eventually, adding eSignatures, eClosings, eFilings and eStorage.

When implementing an ECM system, however, the process of moving to automation tends to work best when starting at the "end" of the process--in the file room. By starting with files that are, for the most part, relatively inactive, lenders can take the first step in going paperless by eliminating the largest store of documents within the institution. It also allows them the time and flexibility to establish important components of their ECM system without disrupting day-to-day business activities.

Though the industry touts the benefits of going paperless to advance the eMortgage, much of the front end of the origination process now heavily relies on paper. Once lenders get their file rooms electronic and under control, the next phase of ECM implementation should focus on eliminating paper at the beginning of the process and creating tight integrations with existing line-of-business systems.

All of this is possible because current ECM systems can ingest documents in a range of file formats--extensible markup language (XML), SMART[TM] Docs, Microsoft[R] Word[R] and Excel[R]--from a range of channels, such as e-mail, fax and hard copy. Because of this capability, lenders can experience the operational and cost benefits of ECM by eliminating paper from the entire process. This includes all documents associated with a loan file, as well as individual documents relating to day-to-day activities and not a particular loan.

Organizations' reliance on e-mail makes it quite simple to input most communications into an ECM system, but lenders must also create procedures for scanning and indexing individual documents as soon as they arrive. …

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