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Paperless Mortgage Origination is a Game Changer Article (Commercial Record/October 2013)

Lenders Moving Ahead With Measured Steps


Paper’s days are numbered. Sure, you may be reading these very words on a piece of paper, but sooner or later you’ll be flipping pages on an e-reader. One day soon, even your mortgage origination process may be entirely paperless, if it isn’t already.

But what does “paperless” really mean in this context? What type of equipment do you need to implement paperless loan processing? And what regulatory concerns, if any, should lenders consider before they swap papers for PDFs?

Marc Riccio, president of the East Havenheadquartered Specialized Data Systems, said he’s seen banks implementing some paperless component or another into their loan processing for at least a decade now.

“The big thing that has changed now in the last year or two, is that instead of imaging or scanning the file after it’s closed, lenders now are starting to image the file at point of sale, which includes capturing the electronic signatures at point of sale,” he said. “And that’s been a game-changer.”

Riccio, whose company produces mortgage origination software, said some lenders have been cautious to dip their toes into electronic signature territory, but many have integrated document imaging into the process, and it’s not hard to see why. Going paperless saves time, money, trees and space.

Phasing In Digital
At Torrington Savings Bank, all loans start out as paper, said Senior Vice President Jeff Geddes, but the processing and underwriting is done in a digital environment. The community bank’s space constraints made paperless processing a necessity, he said.

“Since November, in just the loan department, as of July 17, we had 54,077 documents scanned and indexed,” Geddes added. “That’s documents, not pages. A tax return can be 25 pages long.”

And Diane E. Miller, assistant vice president mortgage of lending administration at United Bank in West Springfield, Mass., sums up paperless processing in three words: “faster, cheaper, better.”

Presently, she said, United Bank does not use a bank-wide imaging system, though it’s considering that in its long-term plans. In the meantime, a regular copier with built-in scanner does the job well when coupled with RemoteLender, the bank’s loan origination system of choice.

“You can always recreate [documents] in the event of a disaster. You don’t have to worry about files being destroyed because all that information is stored on a server, where it’s protected and secure,” she said. “Not only that, but I don’t have to keep a plethora of documents at hand to recreate something. If I needed to create documents, they’re all there.”

“It does speed up the process for sure,” Geddes said. “In the past, somebody would need a file and nobody knew where it was. Maybe someone else had it and they had gone to lunch. Now you just pull it up on your desktop.”

“This should not be a surprise to anybody. This has been coming. If the lenders have not started looking at this technology, they’ll fall behind very quickly.”

Marc Riccio, president, Specialized Data Systems

Easing In
The biggest challenge, proponents say, to implementing a paperless system is not regulatory, but cultural. More to the point, the banking industry is a business mired in reams of paper and bankers are notoriously reticent to change.

“I think bankers find comfort in mounds of paper for some reason, especially lenders. Nice thick files make you feel like you’ve done a good job and done your due diligence,” Geddes said.

Torrington Savings Bank started small when it went paperless, he said. The human resources and accounting departments started imaging documents before lenders did, so that helped ease the entire institution into the process.

Miller recommended something similar: identify those employees who may need a little extra help and spend the
time working with them.

Lenders looking to implement e-signatures also need to do their homework, starting with the Electronic Signature Act and any applicable state regulations.

“If a lender wants to enter the paperless mortgage world, you really need to become familiar with your state regulations,” Riccio said. “Every state has its own idiosyncrasies, especially concerning the use of e-signatures.”

And rules aside, there are infrastructure considerations.

“All of our clients are now purchasing dual monitors and putting them on the underwriters’ desks, so the underwriter can open the application and look at the loan level data and also open up an image of all the documents on the other screen,” Riccio said. “They can look at the data in the actual file with the signature side-by-side.”

Of course, if you aren’t ready yet to go whole hog and spring for a bank-wide imaging system, a good office copy machine will probably do just fine for weaning your company off the sheaves of paper.

“This should not be a surprise to anybody. This has been coming,” Riccio said. “If the lenders have not started looking at this technology, they’ll fall behind very quickly. It’s happening.”

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