BNC National Bank's Doug Brendel is shoulder deep in all of the challenges facing mortgage lenders in the new post-crisis market — expansive compliance requirements, new disclosures, compressed loan processing times, a growing mountain of documentation, and the need for staff buy-in to necessary changes in familiar work processes.
But mostly, he's shoulder deep in paper.
"A typical loan file is now about 400 pages of paper," says Brendel, executive vice president of the $700 million-asset Scottsdale, Ariz.-based bank's mortgage division, which is located in Overland Park, Kans. "We don't have an analysis of how much that costs and what we can save by eliminating that paper, but it's pretty substantial."
Brendel, whose mortgage division is on pace to fund about $700 million in residential mortgages in 2011, discussed the unit's new tech strategy to meet all of these challenges in an interview with BTN. The institution is embracing electronic signatures to speed loan processing and disclosures and is tapping imaging to remove paper documentation, which saves additional time and labor. The bank is planning to gradually draw down its use of paper documents for mortgage lending over time. It's a necessary move for BNC, since similar technology is already being used by larger mortgage banks, and the industry's
To enable the upgrades, BNC is finalizing an agreement with Ellie Mae to use Encompass 360, the tech firm's loan origination system, which will be hosted by FocusIT. Encompass 360 automates marketing, closing and post closing loan processing, while Focus IT charges BNC a fee to host Encompass 360 based on volume of usage. Data for the loan origination system will be stored on FocusIT's servers. "FocusIT creates a secure connection that we can access anywhere, and we can use it on a cost effective basis. We're paying them for tech support, hosting the software and for the amount of data storage that we use," he says.
BNC plans to use the new Ellie Mae/Focus IT model to automate much of the documentation tied to mortgage lending. Borrowers who log into the lender's site go through an electronic signature process by authenticating themselves and creating an identity that can be subsequently "clicked" by the users to acknowledge receipt and transfer of loan documentation. "This is useful for a couple who may be at work at different locations. The husband and wife can call up documents, confirm them, and send the documents back and forth and back to [the lender] without having to print or fax the documents," Brendel says.
There's also a time savings in online completion of compliance requirements, which have expanded with new regulations. The Mortgage Disclosure Improvement Act, for example, was amended earlier this year to require lenders' cost disclosures to include
The imaging of the documents reduces the time involved in verifying income and in executing mandatory cost disclosures, which can be accessed and executed by clicking on the lender's website, rather than by mail or fax.
"The compliance issue is less about the amount of disclosure than the time sensitive nature of the disclosure," Brendel says, adding that the more efficient the lending process for individual loans is, the better positioned the institution is to expand its overall loan funding. "There are [disclosures] that are part of the lending process that have to happen before other components of the lending process can happen. Our process can't start until we get those disclosures. And we've gone from several days with that to a few minutes."
However, there are still challenges. Brendel says that while the new disclosures and processing requirements would likely not be possible in a manual environment, there's change management issues for staff. BNC's mortgage team of about 130 will have to be trained to use the new system and adjust to a new environment.
"It will not be easy. We will have to get people who are used to using paper files to use electronic files," Brendel says, adding there's a three month training process.
Ellie Mae, which faces
