Thanks to myriad of automation processes today, efficiency has surged in the banking sector. However, the same cannot be said about the mortgage sector – it’s growing at a lethargic pace, courtesy of some archaic practices.
The entire mortgage-loan process is extremely slow as many lenders even today rely on manual and paper-based procedures, adding heaps of unstructured and unverified data in this process. And with an increasing number of loan applications getting processed every day, things will only get more and more arduous unless the lenders automate these processes.
And this post is all about automating the right processes, as we bring you 5 mortgage processes that should have been automated years ago.
#1 Data Collection
Every loan decision commences with data collection about the prospects. This involves a lot of interactions and follow-ups with the prospects that are usually labor-intensive. Once the interactions are over, the collected data is entered manually into the lender’s system.
This can lead to a lot of inaccuracies, inconsistencies, and delays in the credit origination process. To the uninitiated, a credit origination is a process through which a lender approves a new credit product and performs initial processing based on the prospect’s data.
How to automate: The solution is to adopt an automated credit origination platform. This platform enables the prospect to enter the data, while the lender-defined rules differentiate between the ready and incomplete applications and carry the former to the next step.
#2 Credit Analysis
The credit analysis process starts with financial spreading – another manual, time-consuming and repetitive task. Financial spreading is how a lender transfers information from a borrower’s financial statements to the bank’s financial analysis program.
It is essential to automate this process as it allows the mortgage analyst to analyze the borrower’s financial strength and perform the analysis in a very short time. The time saved can be invested in other important tasks such as risk assessment.
How to automate: Adopting an automated loan origination platform again allows the analyst to provide in-principle credit decisions instantaneously. i.e., the analyst can suggest a general idea on how much loan can be granted.
#3 Credit Presentation
The credit presentation step combines all the essential data collected in the credit analysis step and presents it clearly to make the credit decision. Unfortunately, the credit presentation stage represents another round of manual exercise, thus adding more mortgage processing time.
If automated, it reduces repetitive tasks such as verifying data offered, risk assessment, collateral management, etc. It facilitates easy access to every data for credit presentation.
How to automate: Integrating an automated credit application solution into the existing application can greatly reduce the number of manual tasks.
#4 Credit Decisioning
The risk department decides on whether to approve or decline the loan. This decision is made from the credit presentation and all the data collected from the prospect. The team understands that the two mortgage loans are not the same, thus putting forward different risks to the lender, irrespective of the available data. This leads to verifying the data all over again to calculate the risk.
How to automate: Human judgment plays a significant role in the process of making credit decisions. Decision-based automation will assist the risk department in pre-screening, assessing, and weighing the collateral risks, thus leading to faster processing. The automation can be done based on the policies and business rules set by the lender.
#5 Monitoring of Covenants/Tickler
Loan covenants protect both the lender and the borrower and ensure transparency of what each party can do. The ticker, on the other hand, is a book at the bank which records all the debts and the payment dates.
Collecting financial data in a standardized process is often a challenge faced during the loan origination process. The lender needs to collect financial data to meet the requirements of covenants and ticklers. But it can be ineffective, inefficient, and risky when done manually.
Automation allows recording the covenants and ticklers during the loan application process quickly to avoid unnecessary repetition. Even if the recordings are not carried out in the correct intervals, adding an in-built alert to the system can facilitate data collection promptly.
How to automate: An automated covenant solution to the loan origination system can greatly help reduce repitition.
Conclusion
Mortgage loan lenders have started realizing the importance of minimum turnaround time and are taking long strides towards automating most of the process. With the help of automation, the entire system can provide quick, reliable, uninterrupted, and uniform decisions at any stage of the mortgage process. It saves operational costs as the workforce skips repetitive tasks. Instead, lenders can control the collected data and gain accurate business insights for planning ahead.
