Loan quality and document intelligence: a vital link.

Author:Gagliano, Richard

With the mortgage industry strongly focused on restoring confidence in loan quality, data management is top of mind for most lenders. High-performing lenders improve the quality of information that moves through the mortgage loan process via effective data management. However, it is important to realize that the focus is not just about the data--it is also about the documents.

Doument/data evolution

Documents offer a view into the package of data that is contained within a loan file. For decades, the industry has relied solely on paper documents across the mortgage continuum.

As technology evolved, new processes have been developed that require electronic data to be extracted from the documents and sent through the mortgage supply chain, along with the imaged documents.

While access to both the data and the documents separately has added benefits, it also may introduce issues such as document/data inconsistencies.

Intelligent documents such as the MIS MO[R] SMART Docs[R] (an acronym for securable, manageable, archivable, retrievable, and transferable documents) are a credible solution to these issues. They were designed to help the mortgage industry overcome this problematic data/document quandary that largely arises from rekeying errors, inconsistent version control and time lags between changes on a document and changes to the database of record.

The intelligent document format literally embeds the data into the document in a way that keeps the two locked together. Yet, despite the fact that this advancement has been around for a decade, adoption of intelligent documents in the mortgage industry has been limited.

Part of the reason for this sluggish adoption is simply resistance to change.

Money, resources and a paradigm shift are required for a successful migration from paper-based processing to a paperless environment. In addition, the industry has lacked a true champion for loan files that are completely comprised of intelligent documents.

Government-sponsored enterprises (GSEs), like Fannie Mae, played a major role in driving initial intelligent document adoption with an electronic note (eNote). However, GSEs have not advocated for an intelligent document revamp of the entire loan package.

Another factor slowing adoption of intelligent documents is the sheer number of documents within a loan package and the existing paper processes already in place.

In order to transition to a fully electronic, intelligent document environment, the lending operation will have to undergo dramatic change. This would require some resources to update the way data/documents are managed. Given the risks associated with delivering data and documents separately--especially in today's regulated environment--it is well worth taking a second look at intelligent documents.

Separate document/data risks

Loan data that are extracted from paper documents can also introduce quality issues. Optical character recognition (OCR) is currently utilized, but is not 100 percent accurate.

Smears or smudges from printers, fax machines and general handling of the document can easily decrease the accuracy of OCR. In addition, many documents in a loan file are not static templates, and OCR...

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