Efficiency Key to Profitability in Reverse Lending

Wednesday, 07 October 2009 10:37

Automation Delivers Streamlined Process to Adapt to Rapidly Changing Market

Many of the 80 + million baby boomers have reached the 62-year-old minimum age eligibility for HUD reverse mortgages. This demographic group is expanding exponentially with more than 6,500 seniors turning 62 each day. On top of this, life expectancy continues to rise at a time when government entitlement programs including Social Security and Medicare are already dangerously overextended. It is only going to get worse in the years ahead as more baby boomers retire and tap into these programs.

The aging population currently holds billions of dollars worth of equity in their homes. These individuals are faced with mounting medical bills and have a strong desire to stay in their homes longer. Adding fuel to this momentum, the federal economic stimulus package, which was passed earlier this year, increased eligible home values for a reverse mortgage from $417,000 to $625,500, thus opening up more properties and equity that would qualify for reverse mortgages.

As mentioned above, all of this is happening at a time when lenders are being inundated with new rules and regulations with which they must comply. Reverse mortgage lenders are feeling the pressure to adopt mandatory live pricing introduced by Fannie Mae. There have been regulatory changes for RESPA, the HUD-1 and the GFE, which include form changes and updates, different classifications of fees and the introduction of tolerances depending on the fee type and selection of provider to name just a few.

As a result of these changes, reverse lenders are quickly realizing that success in the reverse mortgage market cannot be achieved on volume alone; efficiency is absolutely critical. It is within these market conditions that technology can be a great enabler. In order to more effectively and proactively adapt, reverse lenders need to embrace automation solutions (robust technology platforms) that enhance their ability to deliver operational efficiency.

Often times, reverse lenders view technology as a cost rather than an investment in their organization. This mindset has resulted in reverse lenders spending money on niche technology products. Historically, these products included reverse mortgage calculators, point-of-sale tools, web portals, investor technology tools and document preparation. These systems have typically been purchased from individual technology providers claiming best of breed, ease of use and low cost of entry. With margins shrinking, reverse lenders should explore the benefits of a robust, fully integrated technology platform that includes the likes of workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation.

Each reverse lender must become more efficient instead of engaging in more rhetoric between niche products and fully integrated technology platforms. A fully integrated technology platform can deliver true efficiency, which is vital to profitability for today’s reverse lenders. This article will define what the elements of a fully integrated technology platform include and provide specific reverse lending examples of this technology in action.

Workflow Automation

Workflow automation consists of business procedures automation or "workflows" during which documents, information and/or tasks are passed from one participant to another in a way that is governed by rules or procedures. In turn, this will eliminate or significantly streamline manual or disparate processes.

The Key Benefits of Integrated Workflow Automation

Improved efficiency - automation of many business processes results in the elimination of many unnecessary steps, which reduces the overall cost per loan exponentially.
Better process control - improved management of business processes achieved through the standardization of working methods and the availability of audit trails significantly improves compliance.
Improved customer service – consistency in the processes leads to greater predictability in levels of response to customers.
Flexibility – software control over processes enables ease of configuration that is in line with changing business needs and constantly changing rules and regulations.
Business process improvement - focus on business processes leads to streamlining and simplification thereby reducing errors.

Electronic Document Management and Imaging

The inundation of paper documents resulting in thousands of folders, lost and misplaced documents, cluttered offices, off-site storage, poor data security and compliance issues can break the rhythm of even the most efficient enterprise. A fully integrated electronic document management solution enables lenders to capture, store and manage documents for everyday business operations more efficiently; helping to accelerate the lending process by applying exception based processing.

Electronic document management and imaging systems provide advanced capture and Optical Character Recognition (OCR) technology to enhance data accuracy and loan quality while increasing operational efficiencies and decreasing costs. Lenders have the ability to capture any document from any data source, view and annotate the document, and then print, fax, email or package for delivery. Documents are stored securely and all activities in the imaging system are audited. Lenders can control access to specific documents and specify who can view them and what actions can be performed on them.

The Key Benefits of Integrated Electronic Document Management and Imaging

Intelligently recognizes standard lending documents without the use of separator sheets or bar codes in order to drive down costs and improve operational efficiencies.
By leveraging advanced capture and OCR technology, the system validates pre-existing loan information within the integrated loan origination system and populates/modifies data fields as necessary.
Takes document capture, storage and retrieval to a new level by learning document types, automatically comparing and analyzing data within integrated loan origination systems and on the related forms, and populating loan origination data fields from the captured forms.
Additionally, documents can be viewed or exported in configurable stacking orders, focusing the presentation of material on the audience that will be receiving it - expediting review times and streamlining your business.

Business Rules Engine

With the current tempo of business, reverse lenders must be able to institute policy and process changes quickly to gain and maintain a competitive advantage. A Business Rules Engine allows the continual molding of technology to provide dynamic data flow to best leverage internal strategies and real world benefits in the form of time and cost savings along with increased scalability and profitability.

An integrated Business Rules Engine is typically based on a "publish and subscribe" design concept where business functions (actions) are triggered based on events. The solution should include a number of out of box events and actions to fully accomplish your goals; however, you also should have the added ability to take control, extend the system and configure your own policies and processes. The rules engine is normally native to the core technology and manages the rules library to provide an easy, robust and graphical way for rule authoring, management, simplification and use of information. These tools should utilize user-friendly wizards that enable you to design and execute rules from a business user's perspective without the need for complex programming.

Key Benefits of an Integrated Business Rules Engine

Thorough understanding of the mortgage process and built from the ground up to automate the lending process by concentrating solely on streamlining mortgage operations.
An integrated business rules engine will extend to areas such as product and pricing, decisioning, fees, workflow, document management/distribution, messaging, security and more to streamline operational efficiency.
Allows non-technical mortgage professionals to easily and effectively modify and customize their technology to better solve back office challenges and enhance customer service.
Auto-resolution capabilities greatly improve efficiency, mitigate the need for additional training and deliver a significant increase in employee efficiency and customer satisfaction.
Provides for intelligent data edits and validations reducing both data entry and process errors.

Intelligent Forms Creation

Intelligent forms creation enables lenders to dynamically create initial disclosures and closing packages and deliver them securely to the borrower or settlement agent. Accurate and quick document preparation and delivery through a comprehensive platform accelerates the lending process and ultimately increases customer satisfaction while maintaining compliance and reducing costs.

This intelligent forms generation technology should work in concert with your fully integrated technology platform to provide 100% data transfer into the required documents while leveraging import/export functionality to push and pull data to dynamically generate document packages thus nearly eliminating the need to manually complete missing files. By reducing manual entry efforts, you are not only gaining efficiencies, but also decreasing costly data entry errors. In addition, all of the necessary calculations take place natively within your system of record removing the need to maintain an interface to a third-party doc prep provider and preventing disparate data on multiple platforms.

By handling both initial disclosures and closing packages, the solution should include an extensive forms library along with the ability to create custom forms. The library should be continually updated to accommodate changes in agency guidelines (federal or state) and compliance rules and regulations

Initial disclosures are automatically generated and placed on a secure website. The borrower is immediately notified via email of the disclosure availability and is provided instructions for downloading and electronically accepting their disclosures via an e-Sign compliant process. Additionally, the three-day window for those disclosures to be delivered to the applicant is upheld via a reminder notice. Finally, the solution will automatically store the completed document package securely in PDF format within the system of record for easy retrieval and future tracking.

Key Benefits of Integrated Intelligent Forms Creation

Eliminates manual entry of data to streamline document management while improving data quality.
Provides the ability to accelerate delivery of the latest compliance and regulatory solutions.
The combination of workflow automation, electronic document management, a business rules engine and intelligent forms creation ensures that the right document packages and content are created each and every time.
The key to efficient and profitable reverse mortgage fulfillment lies in the implementation of a robust technology platform that includes integrated workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation. An integrated technology platform is responsible for managing events that direct strategic, automated actions across your loan origination product solutions. There are an endless number of actions that can be created; however, a few highlights include:
Auto-distribution and notification
Automated status and task management
Auto resolution
Continuous product validation
Pricing refresh functionality
Risk mitigation actions (including high cost tests)
Service requests and data import to and from external systems
While the reverse lending process consists of a multitude of steps, processes and exceptions, a few specific reverse examples of workflow automation in action include: with a fully integrated technology platform, reverse lenders can apply business rules that set the LTV Factor within the system, set the MCAW Section 10-Mulitply Mortgage Basis field (LTV FACTOR*Mortgage Basis), the solution can then validate that the Base Loan Amount is greater than “multiply mortgage basis” and “multiply the value by FHA calc.” Due to the business intelligence within the solution, the system will provide the end user with an immediate warning that the loan amount exceeds the FHA allowed LTV limits.
Another example of automation in action is the lender’s ability to set the anticipated advance date three days from the closing date and have it include Saturday. The system can also set the commitment expiration date to 180 days once the commitment date has been issued, or it can set the completion of escrow amount by totaling all repairs that need to be made, significantly streamlining the lending process while eliminating the potential for manual errors
Other examples of how a fully integrated technology platform can streamline the reverse lending process and eliminate manual processes include:
The ability to store and assign originator, broker and underwriter licenses for new regulation changes.
A robust technology platform can automate email to the broker regarding incomplete file submission. These systems can default repetitive items on loan input (account type, lien position etc.).
Lenders have the ability to lock down certain loan fields post-conditional approval to make sure that it is closed in the same way as it was disclosed. They can also implement validation for birth date, SSN, etc. If information is missing, the user is warned prior to the file being received in investor delivery.
Reverse lenders can automate pooling for delivery based on pool and commitment rules and flows. They can capture the following data points for each of the trailing docs: received date, shipped date, shipped to whom and tracking information for the doc. In addition, they can set reminders, auto emails and verifications.

The list of actions that can be automated with a robust technology platform to improve efficiency in the reverse lending process is endless. It takes the manual steps and guess work out of the employee’s hands and puts full control over the process back to the organization in order to ensure that compliance, new rules and regulations, investor guidelines and specific timing requirements are met every time. This can include index values, interest rates and how long an offer stays in front of a potential borrower. The timing of these activities has a direct impact on your bottom line.

A robust technology platform improves the speed at which reverse lenders can change and adapt to constantly changing market conditions while improving data integrity. Since the reverse lending world is driven by government programs that include very specific timing and process requirements, it is critical for reverse lenders to embrace fully integrated technology platforms that can control the process. These systems are ones that can ensure that the right information is delivered at the right time to the right person.

Success in reverse lending can no longer be achieved based on volume alone, so more reverse lenders will invest in integrated technology platforms that can deliver on the promise of greater efficiency. This can be accomplished through integrated platforms that provide workflow automation, electronic document management and imaging, business rule engines and intelligent forms creation to streamline operational efficiencies. These efficiencies will drive profitability and ensure long-term success.

Trevor Gauthier is the vice president of sales and marketing at Mortgage Cadence. He is a seasoned business-to-business sales and marketing professional with experience overseeing marketing, public relations and sales operations. His responsibilities include the development and execution of marketing and communication strategies, branding, content creation, market identification and segmentation and recommending strategic approaches and executable plans to maximize sales activity and returns on investment.

Mortgage Cadence, Inc. is the leading provider of Enterprise Lending Solutions (ELS). Mortgage Cadence provides data driven workflow automation and seamless integration across the enterprise to help lenders achieve harmonious operational rhythm for both forward and reverse lending.

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