Automation: An Underwriter’s New Best Friend



It is generally acknowledged that underwriting is the most crucial function of the mortgage loan production process. And, in most cases, underwriters’ compensation reflects how important they are to a lender’s business.


Yet, too often, underwriters’ skills aren’t leveraged effectively, and they face multiple obstacles to their productivity. They spend far too much time looking for missing documents, manually comparing different versions of documents and performing simple routine calculations. And, given the increase in regulatory scrutiny over the past several years, a misstep on the part of an underwriter can be very costly for her employer – so experienced, thorough underwriters are invaluable to a lender.


Especially in today’s regulation-heavy environment, lenders need to adopt technology to automate routine tasks, freeing underwriters to apply their knowledge to activities that require their expertise. With automation, underwriters are able to devote more time to highly leveraged activities, such as carefully evaluating loans that need more thorough review, and less time to repetitive, routine tasks. This speeds the loan production process, reduces labor costs and ensures better compliance. And, as underwriters’ productivity increases, so does their job satisfaction.


Automation delivers benefits even before a loan file reaches an underwriter. It’s all too common for underwriters to receive loan files that don’t have documents arranged in an order that expedites the underwriters’ tasks, files that contain documents that are misidentified, or worse yet, files that are missing important documents. So, the underwriter must devote valuable time to renaming, reordering and hunting down missing documents – time that would be better spent on the central task of evaluating loans.


Automating the onboarding and setup of loan files can dramatically reduce the time it takes to assemble a complete loan file, often by up to 90%. Automated document recognition (ADR) technology can dramatically speed the onboarding of loans by automatically identifying, naming and indexing more than 250 common loan documents to create an electronic loan folder. This drastically reduces the time and labor required to name, sort and compile loan folders. This technology also provides notification of missing documents, so lenders have the information they need to rectify the problem and ensure that they are onboarding complete, compliant loan files.


Fast onboarding and setup of complete, accurate loan packages reduces labor and saves time throughout the entire loan production process. This is especially true in the underwriting step. When underwriters are assured that the loan folders they receive are complete and accurate, they can immediately begin evaluating the borrower loan file to speed the loan production process rather than chasing down missing documents or manually reordering documents to facilitate the underwriting workflow.


Once an underwriter begins the critical task of evaluating the file to determine if the loan meets the lender’s underwriting standards, automation speeds the evaluation and ensures loan quality with a standardized, repeatable process. Underwriters can leverage automated data extraction (ADE) technology that extracts critical data from loan documents, compares values in a fraction of a second, runs the data through a pre-defined rules engine and provides alerts on any values that don’t fall within established parameters or tolerances. Because the process is automated, underwriters review only the cases that fall outside of the rules parameters, meaning that the majority is evaluated without any human intervention.


This exception-based model eliminates the multiple touches that underwriters routinely require to ensure data integrity and makes the costly and time-consuming “stare and compare” approach to verifying data across multiple documents obsolete. This allows the underwriter to focus on loans that require more careful scrutiny, such as loans with non-occupant co-borrowers, loans on second homes and investment properties, loans with borrower self-reported income, and other loans with unique characteristics. Using automation technology, data integrity is increased and labor costs are decreased at the important underwriting step.


Without technology, underwriters face the arduous and error-prone task of manually entering data into a spreadsheet, a calculator or loan origination systems to calculate the numerous financial ratios (e.g., debt-to-income, etc.) used in the loan evaluation process. And any mistakes made while keying data into evaluation tools could lead to faulty underwriting decisions, which can be very costly to lenders. Even simple errors might negatively affect a lender’s ability to sell loans to investors or, even worse, can lead to loan buy-backs. With ADE technology, underwriters save time and eliminate errors with technology that provides a standardized, repeatable process – something auditors require.


And job satisfaction gets a boost, too. Now that automation frees underwriters to focus on higher-level tasks that leverage their skills and experience rather than tedious, repetitive tasks, job satisfaction increases, along with productivity. Not only do lenders reap the benefits of more productive underwriters, but they also benefit because employees who feel that their jobs give them the opportunity to apply their knowledge in meaningful ways are less likely to leave for greener pastures, taking their experience and institutional knowledge with them.


To optimize productivity, underwriters need to be able to focus on assessing risks and making loan underwriting decisions and not waste valuable time chasing down information to complete a loan file or performing a series of manual steps to accomplish the most basic tasks. Using the right technology, underwriters are able to evaluate loan files quickly and accurately to reach underwriting decisions rather than relying on manual, error-prone processes. Lenders that implement automation technology are able to better leverage their underwriters’ knowledge and experience, underwriters are able to underwrite more quality loans in less time, and job satisfaction is improved for some of lenders’ most valuable employees. And as underwriting productivity increases, total loan production costs decrease, giving lenders that implement automation technology an undeniable competitive advantage.


This article was originally published on MortgageOrb on 9/19/2016.

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