A MetaSource Whitepaper

Guide to Gaining a Competitive Advantage Through Mortgage Document Management

010203040506070809101112

Executive Summary

Mortgage Workflow & Compliance Solutions

Mortgage Content Ingestion

Content Capture

Workflow and Decisioning

Reconciliation & Auditing

Compliance, Quality & Retention

User Experience & Support

Loan Acquisition

Loan Resolution

Next Steps

About MetaSource, LLC

Contents

Executive Summary

Mortgage originators and servicers have never before faced as much regulatory scrutiny, even as the sub-prime debacle fades into the past.

If that wasn’t challenging enough, competition is once again intensifying to pre-housing bubble levels.

Mortgage originators and servicers need new ways to ensure the accuracy, completeness and compliance of loans that are economical and help to differentiate their quality of service.

This whitepaper identifies how an array of workflow and compliance solutions streamline and ensure quality control in step with the mortgage origination process as well as servicing these loans over their life.

01

Mortgage Workflow & Compliance Solutions

Components of mortgage document solutions include the following, broken down by each of the six steps in the mortgage origination process:

Mortgage Content Ingestion: virtual mailroom and the capture of all incoming document types (paper and electronic)

Content Capture / Automated Processing: document classification, OCR and database look-up validation

Workflow and Decisioning: workflow automation and document management

Reconciliation & Auditing: workflow automation and pre-fund mortgage compliance audits

Compliance, Quality & Retention: post-close mortgage compliance audits, retention scheduling and document destruction, and CFPB compliance

User Experience & Support: call center and instant document search and retrieval

02Based on our experience, specific benefits of mortgage workflow and compliance solutions include:

Increasing productivity by 65%

Cutting quality control costs by 55%

Decreasing time to fulfill customer or CFPB servicing file audit requests by 70%

Competitive advantages in mortgage turnaround time and customer service

1234

5

6

Mortgage Content Ingestion03During this phase of the mortgage lifecycle, mortgage workflow and compliance solutions can do the heavy lifting by capturing every type of loan document, through every ingestion portal:

Paper: documents needing to be scanned are typically 15-20% of overall volume received by mail

Email: increasingly prevalent; attachments need to be extracted

Mobile: very small usage today but is a big thing coming down the road as people can take snapshots of documents and upload them just as they do with check deposits in mobile banking

Fax: declining volumes and very poor image quality but still represents about 25% of all document volume

Secure file transfer protocol (SFTP): for a high volume of documents

3rd party applications: pulling information directly from application software via API, including the top loan origination systems (LOS) and insurance binders

Mortgage originators are increasingly utilizing third-party virtual mailroom services, i.e. mailroom outsourcing. This service includes opening, prepping, scanning, and indexing incoming documents and email. The best virtual mailroom providers also sort documents by type and ensure loan application completeness, which is detailed in the next step: Processing.

Mortgage workflow and compliance solutions are created to prevent your loan processors, underwriters and other expensive knowledge workers from having to serve as $20/hr. clerks by manually processing documents and email. Management will also no longer wonder why processing is so slow when throughput increases dramatically and they have the process visibility they never had before.

Content Capture04Once all loan documentation has successfully been captured, all content is sorted

and validated in two ways: by document type and fields within each document. Data mapping for loan portfolios is also a valuable function – see the Loan Acquisition

section near the end of this whitepaper.

Document Fields

Within each document, fields are validated for completeness. One of our clients has defined 800 document types. This validation is possible through integration and database look-ups with your loan origination system via API. Exceptions are then manually processed by your team or outsourced to a third party.

Document Type

Each incoming document needs to be identified by type (document type by image or DTI-debt to income) before any routing or processing can begin – e.g. applications, appraisals, W2s, 4506-Ts. This is increasingly achieved with advanced document capture software performing auto-classification with optical character recognition (OCR). When the technology results in a low confidence match for a document, domestic labor exception handling is used for reconciliation. This technology-focused, domestic approach offers a new alternative to 100% manual, offshore methods employed in India and China.

Workflow and Decisioning05

Following both validation steps, each document is then routed with workflow automation software for processing based on rules established per document type. A document checklist can be created to help ensure all documents are collected and, if something’s missing, an alert will be automatically sent out to the responsible party.

All mortgage documentation has to reside somewhere, so mortgage originators need document management software, either on-premise or in the cloud. Some prefer the cloud because they have limited IT resources and too many on-premise systems today and would rather pay a reasonable and predictable monthly subscription instead of incurring another capital expense and annual maintenance.

Workflow automation software is a function of document management software so, to get automated routing, you need both.

Reconciliation & Auditing06Reconciling Incomplete & Missing InformationInevitably, there will be documentation issues as mortgages are processed and income and assets are validated. Out of 100 W2s received, 99 are correct but one is wrong, incomplete, illegible, or is missing in its entirety. This creates a workflow between you and the borrower or loan officer to ingest, process and validate this new information.

Considering that reconciliations need to be conducted every hour or every day to conform to a litany of requirements, it’s imperative that this process be streamlined as much as possible. A third-party mortgage compliance advisor can perform these reconciliations with experience in pre-fund and post-close mortgage auditing. Thus, if you send 500 objects through the six ingestion channels, you will know what comes in from where, with the option to have an audit performed on each transaction with a report sent out and/or posted to a dashboard.

Pre-Fund AuditingFannie Mae and Freddie Mac are increasingly pressuring originators to conduct quality audits pre-close, on every mortgage. The vast majority of mortgage originators are not equipped to conduct these pre-fund QC audits internally, so it’s best to work with an experienced external mortgage compliance advisor.

Once all documentation and information for a loan is processed, your mortgage compliance advisor can do the audit before it closes and determine any findings that can be corrected prior to close. This minimizes the risk of fines and/or repurchases from Fannie Mae and Freddie Mac.

Mortgage document solutions are designed to automate the ingestion, processing and routing of mortgage documentation so that your team can do what they do best: originate zero defect mortgages.

Compliance, Quality & Retention07

While pre-fund audits help to eliminate unnecessary defects, Fannie Mae and Freddie Mac require that you perform a post-close audit on 10% of all mortgages you originate. Federal and state government agencies additionally require that you retain loan documents for up to seven years.

Post-Close AuditMortgage originators have two choices to conduct post-close audits: conduct them internally or use an external mortgage compliance advisor.

For those conducting post-close audits internally, third-party software exists to help ensure these audits are conducted as thoroughly as possible. The challenge is that Fannie Mae, Freddie Mac and the FHA continuously change their requirements, so make sure you’re using current software.

Those using third party mortgage compliance advisors are in a much better position to stay on top of changing requirements and they take advantage of deep auditing experience that they may lack internally. The challenge is that most mortgage compliance advisors do not invite discussion of findings, so we recommend you find one that is open to discussions and makes it easy to provide additional information and comments to address findings.

Document RetentionDocument retention is a function of document management software that automatically applies a retention schedule to each document so that it can be stored for only as long as it needs to be and is destroyed when the retention period expires.

ComplianceThe Consumer Financal Protection Bureau (CFPB) has grabbed headlines with huge fines levied against GE Capital ($225 million), JP Morgan Chase ($36 million) and Wells Fargo ($26 million). In addition to going after the big guys, the CFPB are increasingly targeting smaller mortgage lenders and servicers.

In this day and age of the mortgage industry, you cannot afford to think that the CFPB is not watching you as they are. The best defense against the CFPB is to be proactive about being compliant and evaluating your business practices with a compliance consultant.

User Experience & Support08

Having all loan documentation electronically and in a single document management repository is the first step. Search capability within document management software is the second. Combined with the information and indexing information captured in the ingestion process, search functionality makes documents instantly available and sharable.

Document management allows customer service reps on staff, those outsourced to a call center, or for those who purchase and service mortgages to answer mortgagee questions faster, and on the first call. This also allows those conducting a future internal or external audit to search and retrieve whatever documentation they need without any additional assistance.

Loan Acquisition09Loan Portfolio QualityIt’s not uncommon for up to 15% of mortgages to have missing information, discrepancies and errors. Auditing loan portfolio quality ensures that you know the precise degree of quality for that you wish to purchase.

For example, if you intend to purchase a loan portfolio of 1,000 mortgages, hundreds of fields from a sample of these loans can be audited during the 30-60 day review period by an external mortgage compliance advisor. This will determine what information is missing and identify the overall mortgage quality level and degree of fine/repurchase risk from Fannie Mae and Freddie Mac.

Data MappingEstablishing accurate data mapping is crucial when transferring loans from one mortgage servicer to another. Ingesting and verifying data fields from loan documents originated elsewhere can be tedious and risky usually because different organizations use different terminologies. Data mapping can assist you by automatically renaming mismatched data fields so they correctly map to yours.

For example, if you purchase 1,000 loans but need to rename any document type, like “appraisal,” data mapping can do this translation automatically for every loan in the portfolio.

For loan portfolios and servicers purchasing mortgages, there are two services you should be aware of: evaluation of loan portfolio quality (and gaps) and automatic mapping of data between their loan management system and yours.

Loan Resolution10

Default/Loss MitigationConsidering that 5% of all mortgages on average go through default or loss mitigation, loan servicers need document capture workflow automation to ingest new information related to this event as well as utilize document management to store this category of loan documentation separately from active loans.

PayoffAnother 5% of loans get paid off, so workflow automation streamlines the process that servicers go through when sending out tax info, escrow updates, recorded notes, and all other documentation needed to close out the payoff, within the time required by law.

Document capture, workflow automation and document management software can also streamline two additional mortgage processes: default/loss mitigation and payoff.

Next Steps11Mortgage workflow and compliance technology and services are increasingly available today to eliminate manual and error-prone processing, to ensure compliance and perhaps even to create a new competitive advantage for mortgage originators and servicers.

Contact us to learn how some combination of the following will streamline loan origination and servicing:

Virtual mailroom outsourcing Document scanning Document capture software Workflow automation software Document management software/cloud Pre-fund mortgage audits Post-close mortgage audits Call center outsourcing

Instead of tying up your knowledge workers with repetitive, low-value tasks, mortgage companies can focus more on their core business by using some combination of MetaSource business process management services and software to streamline the loan origination process. We do the heavy lifting and process massive amounts with a level of agility that only a specialist can offer. There is no limit to the amount of information that can be absorbed and indexed with exceptional accuracy.

MetaSource is not a loan origination outsourcing service but we instead serve as a deeply experienced, third party resource to ensure mortgages are done with zero defects, in as streamlined a manner as possible.

Learn More Today!marketing@metasource.com(888) 634-7684www.MetaSource.com

About MetaSource, LLC12From automation to outsourcing, our mortgage workflow and compliance solutions enable you to focus on your core business – we’ll do the rest. MetaSource is a technology driven provider of Business Process Outsourcing (BPO) / Business Process Management (BPM) services integrated with Enterprise Content Management (ECM), workflow solutions and customer experience processes to meet our clients’ goals and objectives. We service a variety of industries for a national clientele through our global network of PCI Level 1 / Version 3 certified, SOC / AT 101 Type II (formerly known as SAS70) and HIPAA compliant processing centers, employing over 1,000 employees worldwide.

1900 Frost Rd, Suite 100Bristol, PA 19007marketing@metasource.com(888) 634-7684