Top 5 Best Practices of Mortgage Processing

Mortgages contribute to the success of a range of industries and its stake holders. Mortgage lending also sees its ups and downs based on the business environment, regulations and the economic viability factors. The complexities involved include compliance and regulations, the number of players offering the services, channels, integration of the IT structure and more. These factors have a direct influence on the costs to acquire, efficiency in processes and the length of the processing cycles. Civil suits, heavy penalties and loss of brand reputation are realistic adverse effects and risks if the lenders are found falling short of compliances.

The global economic recession of 2008 saw a major shift in regulations and the mortgage lending industry has never been the same.The Global demographic Transition might be a good read here.

Over the last decade, the cost of the mortgage processing services has increased appreciably hitting sentiments, balance sheets and a decline in consumer beliefs. The lenders find it harder to process successful mortgages and the acquisition costs have increased appreciably. The net cost to originate of a mortgage is defined as the cost undertaken includes the expenses of operating costs, commissions excluding the fee revenue, although it does not account for secondary marketing gains, servicing of premiums released and spread of warehouse interest). Considering the various factors, mortgage process outsourcing has seen an up rise as a trend globally. A Mortgage Processing Company could definitely help bring down costs of Mortgage Processing Services while still focusing on providing excellence in service and would help achieve a target based model, thus letting you get rid of many irrelevant costs.

It would be a fair insight to have a look at the best practices of mortgage processing while we consider the scenario of mortgage lending in the present day, 5 of which are listed as below:

1.   Integration of functions

2.   Standardisation of processes

3.   Optimising sales flow

4.   Automation and paperless transactions

5.   Outsourcing Mortgage processing services

Let us look at each one of them to understand and take a step closer to the best practices of mortgage processing.

Integrating the functions

Varied functions including collaterals, credits and fraud management need to be integrated, with common priorities, consolidated budgets and analytical best practices to measure the varied metrics. This allows for easy management of risks and helps you meet goals quicker and more cost effectively. Having a bigger picture of things under one roof also allows for better management of resources, quicker and more effective communications and minimise risks of fraud and malpractices.

Standardisation of processes

Having standard operating procedure that include standardisations allow for time and cost management with significant improvements.

Sales standardisations

It is imperative that proper inductions and training helps new and existing staff through a certified program, helping them keep pace with regulations, government and company policies, the trends of the day, and the best practices to work with. It would be dangerous to leave loan officers carry out work with their own know-how. This way they are more likely to increase errors. Having your sales team on one page for regulations and know-how of processes, this ensures a higher productivity and a better reporting process, allowing for analytical approach to enhance revenue growth. Your prospecting and lead generation team should be separated from your core sales team.

The sales process standardisations would need the following to be included

ü  Standardisation of Origination

ü  Standardisation of Servicing

ü  Standardisation of Quality Issues

ü  Standardisation of Data

ü  Standardisation of Compliance

Let us have a quick look at the above standardisation suggestions and how this could be achieved.

ü  Standardisation of Origination

Loan processing and servicing SOPs needs to be documented, published and circulated at regular intervals throughout the firm, including training the staff on best practices and regulations at regular intervals. Application data gathering, as an activity should not take more than 20% of the time of your staff. In fact, you could consider keeping lower levels of staff for this activity as the skill levels required here may not be high. You rather experienced hands should be involved in core activities and those that directly impact revenue positively including new business development. Run simpler files through an automated process. The complex files need experience including underwriting, for example. This would help improve efficiency in resource management.

ü  Standardisation of Servicing

A quick single contact point for borrowers helps avoid chaos, delays and loss of reputation with customer dis-satisfaction. The delays in addressing issues would directly result in delays in mortgage processing. Having a single point allows a quick reference check, quicker response, happier customers, and faster mortgage processing.

ü  Standardisation of Quality Issues

You need to have a dedicated team that helps look after defaults. A standardised model for quality assessment would do wonders here irrespective of processes, loan types, and geographies involved.

ü  Standardisation of Data

Different teams including underwriters, appraisers, legal team, and regulation authorities, all work together in a mortgage business and do require a range of data validations. Having set procedures and processes for data via a common dashboard would make data more accessible and allow better automation and verification processes to activate internally, thus allowing quick turnaround times.

ü  Standardisation of Compliance

It is imperative to test compliance processes regularly and keep a track of the happenings around you. Loopholes need identification and then processes to help minimise the leaks. Implementation is key here.

Going Paperless

Incorporate automation in as much as possible and avoid bundles of paper being in circulation. Use standardised software for any activities of uploading and sharing documents and this in turn helps minimise costs and errors.

Outsourcing

One important aspect would be to consider outsourcing mortgage processes. The experience and expertise to handle various processes with ease will help you take advantage of skilled workers working at a lower cost, allowing for a target based model and increasing efficiency. 

Streamlining and standardising mortgage processing services, including using outsourcing would definitely help you gain a better revenue cycle and stay on course with your larger business goals. After all, that’s what you are in business for.

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