ABA Banking Journal - March 2008 - (Page 46)
Tech topics New rules, new tools Of course, as many analysts have noted, greed and misuse of analytics let many lenders game the system during the previous housing market surge, working around, for example, professional appraisals by using automatic valuation models. But such misuse of the technology that led, in part, to the subprime fiasco won’t spell the end the marriage of convenience for IT and mortgage lending. Let’s just say the union will mature into something more refined. One theme of the newer, wiser mortgage-related environment is that it will be designed to help banks deal with variability. Roger Godobba, senior principal with Wolters Kluwer Financial Services, Minneapolis, notes that volumes dropped off in November only to tick up again in mid-February after some rate adjustments and ARM-related refis hit. Fluctuating application volumes and tougher credit standards can make it challenging for banks and other lenders to cope without technology and a variable workforce, he adds. Banks that took the initiative 18 months ago to rework their loan origination systems and the broader lending operation will be better prepared to handle the shift. Soon, others will need to follow suit. “The other issue, at least among bigger banks and lenders, is that back offices aren’t as integrated as they could be,” says Godobba. The quest for the paperless mortgage got its start around 2000. “There was a lot of investment in internet technologies over the last seven years. Now the industry will need to take a step back to ultimately go forward,” says Ted Landis, a Phoenix-based senior executive who heads the North American credit practice and the mortgage BPO business for Accenture. By this he means that all the gangbuster input was done to make a given lender scale as quickly and simply as possible. “Now lenders who remain after subprime will set themselves up to 46 MARCH 2008/ABA BANKING JOURNAL adjust for a variable application volume. They will want a pay-by-the-drink operating model.” Landis was not the only one to use that phrase. So did Linn Cook, who also feels that the fallout from subprime will be a vast market correction that makes both electronic and outsourced environments more key. Ultimately, he believes the correction will see mortgage business shift back into the hands of community bankers, which are known for their exacting credit quality standards and business process. Linn is president and CEO of PriceMyLoan.com, an application service will be scanned and will support automated reference checking. Linn thinks supporting such processrelated nuances will be of interest to community banks. He also believes the group will want to introduce more fraud-alert systems. “The idea will be to verify the information on the application and make sure that the application isn’t fraudulent in any sense.” Landis agrees that the secondary market will only reward participants offering auditable processes and a clean pool of quality conforming loans. “In order to be a successful lender, in my view, you will need technologies like BPM and imaging.” “There was a lot of investment in technology over the last seven years. Now the industry needs to take a step back to ultimately go forward” —Ted Landis, Accenture provider that differentiates itself from other mortgage-related ASPs by actually handling mortgage-related guidelines rather than simply providing a web-based pipeline and asking banks to fend for themselves in that regard. “We are actually scanning the application,” says Linn. “This lets us sift through volumes of loan scenarios and borrower profiles, separating the workable candidates from those who just don’t have the income-to-debt ratios to justify the loans.” Documentation will be a must Which brings us to the other key theme, using technology to support data verification. Because in tough credit markets it won’t be enough for borrowers to merely assert something on an application, they will have to provide extensive documentation of their financial health in the form of utility bills, statements of income-generating assets and so forth. In the new vision of automation, such documents One early adopter modernizes With credit tougher to come by and tighter margins making traits like assessment of loan suitability ever more important, Chief Technology Officer John Woolbright, with $33 billion assets Synovus, is more than glad his team is near completion of a 15-month project to modernize lending operations. “We had a DOS-based system,” Woolbright relates. When it came to business process, “branch personnel had to fill out applications with the customer in the branch. Application data, in various forms, from the initial credit evaluation, to the product assessment, and so on, took rekeying in multiple systems. In the case of an existing customer that wanted an additional line of credit, we always had to trace, manually, through many systems.” In the case of the mortgage itself, getting all the forms together to generate a fully compliant mortgage “required lots of manual workarounds and a highly trained and knowledgeable staff.” Working with that staff to configure workflow, Synovus IT staff made use of the bank’s service oriented platform. Gradually, a modular, multifarious lending system—one that tied to anti-money laundering and anti-fraud applications, a risk-based pricing application, a sales and service application, a CRM application and others specific to lending—created a closed-loop system. This cut back multiple key-ins and some of the difficulties of generating conforming mortgage documents as well as preparing other types of consumer loans. Synovus works with Subscribe at www.ababj.com
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