Best Practices of Mortgage Processing for Lenders

Best Practices of Mortgage Processing for Lenders.
Best Practices of Mortgage Processing for Lenders

Mortgage lending involves multiple complexities driven by regulations, number of players, channels, and integration IT architecture. These drivers impact costs, efficiency and cycle times.

Now that regulations have become stricter, following the subprime crisis of 2008, mortgage lenders may find it even more difficult to process their mortgages. Mortgage lenders need to comply with the comprehensive guidelines issued by the Consumer Finance Protection Bureau (CFPB). If they fail to comply, they might have to face civil suits, heavy penalties as well as loss of reputation.

Add to this the fact that costs for the mortgage businesses have gone up. According to a survey by the Mortgage Bankers Association (MBA), the net cost to originate which includes all production operating expenses and commissions, minus all fee income (but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread), rose to USD 5,238 per loan from USD 5,038 in the fourth quarter of 2014. “Net cost to originate” is the cost incurred by mortgage firms to process mortgages.

Best Practices of Mortgage Processing

  1. Integration:

    Functions such as credit, collateral and fraud should be integrated. All these functions should have common priorities with unified budgets and measurement metrics. By integrating these functions under a single governance structure, you can easily manage risks while meeting revenue goals.

  2. Process Standardization:

    When processes are standardized across the firm, not only costs but time and effort also are reduced significantly. Here are some ways you could standardize the mortgage lending process:

  3. Standardizing Sales:

    Ensure that all your new and existing sales personnel go through a loan officer certification program. This way all your staff would be able to keep up with new regulations, policies, industry trends and other changes. If you leave your officers to use their own knowledge, the possibility of mistakes would be quite high. When all your sales staff is on the same page regarding regulatory knowledge, it would improve loan processing and origination cycle times. Keep your prospecting team separate from your sales team.

    • Standardizing Origination:

      It would be best for you to document, publish and circulate all loan processing and servicing procedures throughout the organization. Train your staff in the practices to be followed for the perfect origination process and ensure that all of them follow the same practice.In this regard, time spent on application data gathering should be minimized. Your staff should spend less than 20% of their time on this process. You could even hire entry level staff exclusively for this activity, saving the time for your experienced hands to deal with important functions such as new business development and cross selling.The same could be applied for underwriting incoming applications.Simpler files can be run through an automated system while the complex files are handled by experienced staff. Allowing inexperienced staff to deal with the underwriting process can result in wasted time and possible mistakes. Assigning complex tasks to experienced people would improve the underwriting cycle time and accuracy.

    • Standardizing Servicing:

      To provide the best customer service experience, you could establish a single point of contact for each of your borrowers. Allowing all your staff to field inquiries and make contact with borrowers would lead to chaos and confusion, not to mention the delay in solving service issues. Assigning a single person to handle all queries from a customer will improve overall customer service and also the effectiveness of your loan servicing. In this regard, create a standard policy across the organization for tracking customer contacts and keeping records of their interactions with the firm. This would decrease the time needed to look up customers and their loan information, and also the time needed for resolving customer issues.

    • Standardizing Default Servicing and Quality Issues:

      Create a dedicated team to handle defaults so that front line staff does not need to waste time on defaulting customer queries and issues. Also, have a standard model for assessing quality across the organization, irrespective of geography and loan types.

    • Standardizing Data:

      As a mortgage business, you would be having different stakeholders such as underwriters, appraisers, attorneys, and regulatory bodies. All these entities require different data sets. Data storage and input procedures could be standardized to the extent possible. It is also important to ensure that this data is accessible through a dashboard for better visibility for the management. One could create automated validation and verification to minimize errors.

    • Standardizing Compliance:

      To ensure that you remain compliant, you could implement complete tractability for all key regulatory compliance. This could be done across processes. Test your compliance practices regularly to identify loopholes, if any. Implement this compliance culture across the organization.

  4. Going Paperless:

    Automation can be a boon, especially for mortgage lenders who have to handle a huge amount of paperwork. Using software to upload and share documents can save costs and time while eliminating errors.

  5. Outsourcing:

Outsourcing certain tasks of mortgage loan processing such as loan form data entry and processing, appraisal title checks, underwriting disbursements and collections could be a strategic solution for increasing internal business productivity in a cost-effective manner.

Mortgage processing can become a streamlined process by adopting these measures described above. This will enable businesses in the domain to focus on their growth objectives.

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For information on how Invensis Technologies will deliver value to your business through Mortgage Process Outsourcing Services, please contact our team on US +1-302-261-9036; UK +44-203-411-0183; AUS +61-3-8820-5183; IND +91-80-4115-5233; or write to us at sales {at} invensis {dot} net. 

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