Lenders of today face myriad challenges, not least of which is managing the risks associated with the post-closing phase of the digital mortgage process.
The advent of generative AI and automation technologies has also put the industry on the cusp of a transformation that promises to streamline operations and significantly reduce these risks. But the question arises, how does automation revolutionize the post-closing process, and what are the tangible benefits for lenders?
A recent study by Freddie Mac found that the top two causes of loan quality defects that most commonly arise include missing documentation and miscalculation of income due to missing documents. In the case of a loan defect, the lender is usually responsible for fixing the problem. Such a situation could be disastrous if the solution requires repurchasing the loan.
Subsequently, changes due to the forced isolation imposed by COVID-19 have enabled automation to be implied in new ways. For instance, the number of title and settlement companies that now offer digital closings has increased rapidly between 2019 and 2021 and jumped to a staggering 46%. Additionally, the adoption of remote online notarization increased by over 50% in 2020, which indicates that it is an opportune time for lenders to explore the use of automated solutions for all stages of loan processing, including the mortgage post-closing stage.
Join us in exploring the power of post-closing automation and how it streamlines operations, elevates compliance, and facilitates intelligent, data-driven decisions, reshaping the lending future and redefining operational excellence in the mortgage industry.
The Shift to Post-Closing Automation
- Trailing Document Management: Managing trailing documents becomes effortless with automation. Intelligent platforms design adaptive workflows, enabling meticulous tracking, assessment, and organization of documents from multiple sources. They establish systematic processes for gathering, monitoring, repackaging, sorting, and actively pursuing missing documents, ensuring comprehensive oversight.
- Compliance and Document Handling: Automation tools are not just about efficiency; they are about precision. Embedding industry best practices into these platforms equip post-closing agents to meet varied investor and agency requirements. With automation, immediate document reviews, timely updates to stakeholders, adherence to CFPB guidelines, and customization of loan packages to specific needs are all achievable, contributing to a smoother, error-free closing process.
- Data-Driven Enhancements: Beyond day-to-day tasks, automation offers strategic advantages. Automated dashboards provide critical data, empowering C-suite executives to drive process enhancements. Valuable insights enable tracking of agent performance, assessment of loan marketability, and analysis of interactions between settlement agents and lenders, paving the way for smarter, data-informed lending decisions.
In essence, automation is more than a mere tool, it is a game-changer in the post-closing landscape, redefining efficiency and accuracy for agents and executives alike.
The Strategic Benefits of Adopting Post-Closing Automation
In the past, digital systems could only handle a limited number of tasks, which made it necessary for many processes to involve manual intervention. However, with the latest advancements in artificial intelligence (AI) and machine learning (ML), it has become possible to automate a much larger percentage of these tasks, with human intervention being required only for exceptional cases.
The deployment of automated and customizable solutions to meet the unique requirements of each post-closing enterprise can result in the following primary benefits to mortgage providers:
1. Cost Containment
Digital automation has emerged as a game-changer, notably enhancing cost efficiency per loan. Here’s how automation is reshaping financial management in three impactful ways:
- Optimizing Workforce Dynamics: Automation eliminates the need for frequent hiring or layoffs due to fluctuating mortgage volumes. The stability boosts team morale and slashes expenses linked to recruitment, hiring, and severance. Moreover, it enables current employees to handle a greater number of loan originations than can be managed manually. Consequently, this allows them to concentrate their expertise on addressing any exceptions, while minimizing routine post-closing tasks, resulting in improved job satisfaction and retention, and ultimately reducing costs.
- Reforming Space Utilization: With the current work environment, many companies want to reduce their expenses by minimizing the physical office space they use. However, this can be difficult when they have to store a lot of paper documents. One solution to this problem is to use digital storage through automation, which takes up much less space than traditional filing systems, providing a practical way to lower real estate costs or use the space for more important activities.
- Transforming Capital Expenditure: Automation, when integrated through a partnership with a managed services provider, offers a strategic shift from substantial initial capital expenditures to more predictable operational expenses. Instead of hefty upfront infrastructure investments and subsequent depreciation, enterprises can benefit from predictable monthly operational expenses aligned with loan volume fluctuations.
In essence, digital automation in post-closing processes is not just a technological upgrade—it’s a strategic move toward financial prudence and operational excellence.
2. Increased Operational Efficiency
Manual post-closing processes are notoriously slow and expensive. Transitioning to automation can drastically cut the time needed for loans to receive full approval and be ready for sale.
Efficiency gains are not confined to loan processing times alone. Automation converts unstructured data into structured, searchable formats with valuable metadata tags, dramatically reducing time spent hunting for information. Such streamlining ensures quick access to essential details for secondary market loan sales.
Speeding up the loan sales process through automation cuts carrying costs and opens up opportunities for competitive pricing strategies. The loan processing system, akin to a factory assembly line, benefits immensely from the rapid movement of loan documents through the approval sequence, enabling quicker market readiness. In a competitive landscape, such agility is a definitive edge.
Quality automation also plays a pivotal role in reducing defect rates. Missing documents and income calculation errors, identified by Freddie Mac as primary loan quality detractors, are often rooted in human error. Automation’s error rate is a mere 0.1%, contrasting the 1% to 5% or higher associated with manual processes.
By adopting automation, operational efficiency gets a significant boost, mitigating the need for rework or, in worst-case scenarios, loan repurchase due to defects.
3. Effortless Scalability
Successfully navigating the mortgage market can be challenging, as it is heavily influenced by external factors such as interest rates, stock market fluctuations, inflation, consumer confidence, unemployment rates, regulations, etc. These elements are critical in determining the dynamics of home purchasing and refinancing activities. Therefore, being agile and adaptable to changes in the market is essential for anyone looking to buy or refinance a home.
Mortgage originators used to rely on inflexible manual processes, leading to cyclical workforce scaling issues. Digitized processes have introduced scalability through cloud-based solutions, eliminating the need for direct staff intervention.
Moreover, digitization brings predictability to cost scalability. It allows for precise forecasting of expenses about loan origination volumes, offering a clearer financial picture as business scales.
4. Capitalize on diverse revenue channels
Exploring new revenue channels is critical, particularly as loan originators grapple with substantial losses on each mortgage transaction. While reducing expenses is vital, it represents only part of the equation. Financial services need to boost operational efficiency and pioneer inventive strategies to drive revenue growth.
Automating post-closing processes liberates teams to concentrate on strategic initiatives. Instead of dedicating efforts solely to processing mortgage documents, there’s an opportunity to innovate and create new revenue streams.
Several strategies can lead to growth, such as venturing into new markets, addressing customer needs more effectively, enhancing marketing strategies, fostering trust, reconfiguring mortgage products to appeal to borrowers or secondary markets, or even developing new offerings.
A deep dive into historical data is vital to uncover hidden opportunities for these strategies to succeed. Intelligent document processing, empowered by machine learning, streamlines this task. It transforms unstructured data into structured, actionable insights, enriching it with intelligent metadata that provides context. Such enhanced analysis enables analysts to discover and leverage information that would remain obscured otherwise, offering a treasure trove of opportunities to explore.
Conclusion
Exploring the world of post-closing automation reveals the extent to which it is transforming the lending process. The transformation goes beyond keeping up with technological advancements; it’s about seizing an opportunity to establish new benchmarks and streamline operations. Adopting automation represents a wise decision for financial leaders, providing a chance to stand out in a highly volatile market.
To succeed, enterprises of all sizes and industries must adopt the right approach to data management. By doing so, they can unlock their full potential and drive innovation, efficiency, and competitive advantage.
Don’t just observe the automation revolution – lead it! Discover how you can pioneer a smarter, more efficient digital mortgage process. Connect with our experts today and start your journey to the forefront of change.