By Greg Council
Credit unions offering mortgage services are painfully aware of the regulatory mandates regarding mortgage documentation. When loans become a sizable part of the business, more staff are assigned for longer periods of time in manually-intensive processes. They must receive, verify, and process all mortgage-related documents.
Since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, financial service providers must ensure proper documentation is collected and shared throughout the lifetime of a mortgage—regardless of what entity owns it. This means that 20 or more documents must be present and completed for a single mortgage loan.
Credit union staff often spend a significant amount of time manually checking loan packages to verify every document is present. This is made more challenging by the fact that not every document is received at the same time or in the same order. The staff must also ensure that any documents, which require initials or signatures, are properly completed. Even after all this careful, tedious effort, mistakes are made.
As a result, the same documentation is often requested multiple times during the mortgage process, which introduces delays and negatively impacts the members’ experience. At a minimum, due to risk, credit unions spend more time at increased costs to ensure any mistakes are caught and corrected.
Beyond OCR Basics: Meeting Four Essential Needs
Lots of software options exist for capturing documents and providing the basics such as indicating the presence of a particular form. However, few solutions can automatically check and re-verify form content. As a result, this effort remains a manual process. Many credit unions would benefit from being able to:
- Classify a document as a specific type of supporting document (e.g., W-2 form).
- Automatically organize captured documents that are out of order.
- Identify documents that have pages missing or pages that are out of order and re-order them.
- Locate key data and verify against loan policies, based upon the document type.
Key Tips to Remaining Successful
The additional documentation burdens can be so overwhelming that small banks and credit unions are exiting the mortgage business altogether, but it doesn’t have to be. Some credit unions have found success through contract automation aided by classification technologies.
Automating compliance verification activities using classification technology is fundamental to contract automation. Classification technology can be trained with samples of expected documents. Classification can include special rules based upon each class that “interrogate” each document for page orders, compliance of submitted information, and even extract information to verify against core banking systems. In addition, the process is flexible because it uses machine learning that does not require creation of explicit and, therefore, “brittle” rules – the system adapts to changing needs. When rules are manually created, for example, any new or changed documents require the rules to be manually created or updated. Leveraging an automated system with machine learning means that updated or new documents can be continuously added and processed.
Three key tips on contract automation for sustainability and success in the mortgage business are:
- Discover immediately the presence or absence of critical documents and eliminate error-prone manual processes with classification software. Group this document with like documents.
- Organize documents (including re-ordering pages) and streamline key data within the documents.
- Augment workflows by adding key data into controlled review cycles to provide comprehensive coverage and compliance with software-enabled automation.
- Leverage contract conformity as a “channel agnostic” workflow that can analyze, process, and submit documents from and across any input stream, whether via an online form, captured via a smartphone, or scanned at a local branch. And also, verify data based on loan policies.
With a greater knowledge of contract automation powered by classification technology, even the smallest credit union can process loan documents in a highly accurate manner without spending precious staff time.
Greg Council is Vice President of Marketing and Product Management at Parascript, which automates data-intensive image and document processing activities. For info: www.parascript.com.