Yesterday I moderated a panel at the Mortgage Bankers Association
mortgage operations conference, in Grapevine, Texas, on both the challenges and necessity of automating mortgage loan quality.
Kelly Kraus, the product development manager at Fannie Mae,
made an interesting point in that while most technological products remain optional, some still come as higher recommended. For instance, the Fannie Mae Early Check helps clear up "fatal eligibility checks" for preparing loans for the secondary market.
It's basically an automated check list for use under the Loan Quality Initiative to look for problems, and it will tell you, for example, to be sure that any Social Security number being provided is "not associated with a deceased person," for example, Kraus said. This automatically helps clean up the underwriting and prevent rejection from a GSE.
Ed Gerding, a fraud consultant at CoreLogic,
noted also that technological implementation gives the impression of forward thinking, and that "the appearance of innovation drives down buy-back risk."
At a panel such as this, these speakers no doubt see paper as disease in the system: rotted flesh that needs cutting away. And there is logic in that, but the process needs to go ever further. The act of electronically bundling loans for the secondary market is great from a process and compliance standpoint. It's a great way to provide loan level transparency to investors. But it's still a mid-tier data entry process.
Investors want accessible loan level data. Why does all the information sent to investors go via electronic delivery, but the documents provided to borrowers at closing is a 250-page book?
The mortgage process still has too many paper-steps. This slide provided by Abdias Lira, a software architect from Wolters Kluwer
, tracks the creation of a mortgage to show just that. (Click to expand.)
At some point, that data will need to be entered into an electronic platform and systems can only be as strong as the personnel entering that information.
Cynthia Wortham, a compliance director at Prime Lending
, asked if anyone in the audience still manually populates the date of the good faith estimates and argued for the automation of the process.
The face-to-face appeal of mortgage origination will never be replaced. But any data gathered at the time need only be entered once, and automated for the length of the loan. Investors can then cherry-pick the information in pools in ways that suit their individual needs.
And this would also solve the argument investors had years ago, that when they asked for loan-level data, they become inundated with info … most of it unnecessary to their goals. Today, the situation is different in the era of Dodd-Frank. My point from last week's column
and this week remains intertwined, and summed up nicely by Wortham: "We are expected and required to comply," she said. "Missing or inaccurate data is unacceptable in the eyes of many investors and state and federal examiners."
Jacob Gaffney is the editor of HousingWire.
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