Imagine Solutions Blog

Doing More Than Humanly Possible: How automation is fundamentally changing mortgage loan servicing

Oct 31, 2018 by Greg Thomas

loan servicing blog - automation


I was talking to a customer the other day; a mortgage originator who had just sold a large portfolio of loans to a servicer that seemingly had superpowers.

“We have one servicer that boggles our minds because, within our contractual window of four days, they are coming back to us and saying, ‘Five percent of the loans you gave us are missing required documentation. Either provide it or they’re going to come back to you’,” he said. “We’re looking at the volume of information we sent them and we can’t understand how they possibly could have reviewed it all, much less identified all of the stuff that was missing.”

I loved the comment for two reasons. One, it illustrates the power of automation in loan onboarding. Second, the mind-boggling servicer is one of our customers.

So, let’s talk about how magic happens, and how automation and cloud are impacting servicers right now.

Transforming the Mortgage Onboarding Dilemma

In the past, when a servicer brought on a portfolio of loans, it had to manually confirm that all of the required documentation was there. If you’re talking about four or five loans, that may be feasible. But, if the acquisition is a million loans, it is physically impossible for a team of human beings to separate and index all of the required documentation, much less validate conditions. The only option was to put a higher risk weighting on the purchased portfolio and hope for the best.

Automation changes that paradigm.

By migrating the millions of pages of those acquired loans into a PDF text-searchable indexed structure, and applying advanced intelligent capture technologies, lenders can automate document classification and data extraction. Servicers can onboard massive portfolios more efficiently, and mitigate risk by quickly identifying loans with missing documents or those that fall outside of the agreed-upon thresholds.

Although we spend a lot of time talking about how automation can take manual processes and make them more efficient, this application has a different outcome. By applying automation, companies can take processes that were humanly impossible to do manually, and make them possible.

When you consider the fact that very few 30-year, fixed rate mortgages will spend their entire lifecycles being serviced by the originating lender, the industry impact of automated validation and onboarding could be monumental.

We’re also seeing more mortgage companies embrace cloud to gain capacity without having to make a long-term commitment. For one large lender, we’ve actually defined a cloud configuration of unit processing capability, made up of virtual servers, software, data storage and network capacity. When the company purchases a large loan portfolio, we can replicate and spin the environment up for onboarding, then, spin it back down when the onboarding is done.

The company can more easily adapt to volume fluctuations more cost effectively, because it’s not paying for capacity it doesn’t use.

Streamlining the Servicing Process

Another area where automation can give servicers an efficiency boost is in the area of payment processing.

For example, using IBM Datacap, we were able to transform a client’s very manual-based lockbox operation into a straight-through, image-enabled process.

The solution scans through the check images, auto recognizes the handwritten account numbers in the memo field and validates those account numbers. Then, it reads the amount of the check, applies the amount as payment, and posts the transaction to the company’s general ledger.

All of this happens in seconds.

This client is also using a similar set up to auto-recognize the content within its customer correspondence, so it can automatically separate the address changes from the complaints, and route these to the appropriate departments for follow up. If a complaint falls under regulatory guidelines and requires response within a specified time, it is flagged, date stamped and sent through a different workflow. If sentiment analysis indicates that the letter or email is from a dissatisfied customer, it’s escalated to white glove customer care for remediation.

It’s a more efficient way to triage communications, ensure compliance and improve customer satisfaction—all while freeing staff to work on higher-level, high-value tasks.

Automation. Innovation. Insulation from Market Volatility.

In addition to all of the operational benefits, there’s another significant advantage that automation brings to the mortgage industry. And that’s staying power.

The higher levels of automation you can apply to your operation, the more you insulate your institution or company from market volatility. The more you can use automation and cloud-based services to spin capacity up or down as the market demands, the more of a competitive advantage you have.

That’s all the more reason for every mortgage lender to start looking at the available technologies and transforming its operation today.

Stop by our booth (#426) at the MBA Annual Convention and Expo 2019 to get hands-on access to the latest products and services that will take your business to the next level.

If you would like to learn more about how automation, RPA, AI and cloud are transforming the mortgage industry, check out our recent eBook



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