TECHNOLOGICAL innovation helped keep Banc One Mortgage Corp. afloat during the recent flood of refinancings. And now that the flood has been reduced to a mere trickle, the mortgage company continues to use technology to stay ahead of the fleet.
To this end, the Indianapolis-based affiliate of Banc One Corp. has reengineered its operation to increase productivity and reduce costs. It has installed an image-based loan administration system to improve the efficiency of servicing loans once they have been approved. It has also issued its lenders over 400 laptop computers for originating loans in the field.
"We can meet with customers at home, in the office, or wherever they want to take an application and start the process right there instead of waiting for the paper to be moved from one location to the next," said David Aldridge, executive vice president. "It gives us leverage over our competitors because we can meet customers almost anywhere and put the application process in motion."
More important, the unit has found a way to more efficiently service the loans.
"We evaluated front to back, looking at the entire production and administration process of our operation and developed a vision of what we wanted," said Mr. Aldridge. "We wanted to be able to use technology wherever possible that would enable us to work with electronic information and images instead of paper."
Although Banc One is hovering just outside the top 25 banks in new loan origination and servicing. the mortgage unit is considered a small piece of its pie. In 1993, the subsidiary made $13 million, a mere drop in the bucket to the holding company's $1 billion-plus earnings for the year.
Nevertheless, reducing paper handling was important to the 2,000-employee mortgage unit - especially during the recent refinancing boom. Between 1991 and 1993, the operation increased its new-loan origination volume from $1.6 billion to $7.1 billion.
Although refinancings were the source of much of this growth, acquisitions have also played a significant role.
In the last year, Banc One Mortgage acquired mortgage servicing portfolios from two institutions: Valley National Bank Corp. of Arizona and Key Centurion Bank Corp. of West Virginia. The combined portfolios added 90,000 loans - and approximately $4.5 billion - to Banc One Mortgage's servicing portfolio. It has seen the size of its loan servicing portfolio grow from $7.6 billion in 1991 to $18 billion in 1993.
At a Glance
Banc One Mortgage Corp.Headquarters:IndianapolisEmployees:2,000Loan servicing portfollo:1993: $18.0 billion1992: $11.5 billion1991: $ 7.6 billionNew loan originations:1993: $7.1 billion1992: $3.5 billion1991: $1.6 billion
According to Mr. Aldridge, the company is both excited and subdued by the growth.
"When interest rates moved from 9.5 to 6.5%, we were buried with refinancing volume," said Mr. Aldridge. "We were overwhelmed by the amount of loans we were having to process due to refinancing."
He said management felt that the more the operation grew, the harder it would be to keep track of all of the pieces of paper that go with loan files.
On average, Banc One Mortgage's loan files include between 200 and 300 pieces of paper at closing.
In order to refinance, the borrower has to go through the entire application process again, which creates mountains of pages of information on top of an already large volume.
Banc One Mortgage dealt with this problem by implementing an image-based document management system, supplied by FileNet Corp., Costa Mesa, Calif.
The system allows Banc One Mortgage to use imaging and workflow management to increase the productivity and efficiency once the loan has been approved. After a loan is made, the application and supporting documents are scanned into the system, which allows Banc One Mortgage to service the loan more efficiently than if the information were kept in paper form. Banc One Mortgage also stores the original paper documents in order to meet regulatory requirements.
Before the system was installed, Banc One Mortgage was servicing loans from paper documents - often a long, tedious process because it meant searching through piles and piles of paper. The affiliate still services some pre-system loans from paper, but once the loan is refinanced it is entered into the system for servicing.
It takes employees less time to locate information in an electronic file folder
David Medeiros, a consultant at The Tower Group in Wellesley, Mass., said the system is key to an operation that wants to eliminate paper from its workflow.
"File Net helps get rid of the paper and store the information electronically, which provides faster access to the data while also automating the workflow," he said. "The organization is able to do whatever it previously did with paper faster and more efficiently because the tasks can now be performed electronically."
With this new technology in place, Banc One Mortgage can better handle the loan servicing process from a single workstation. Customer service has also been improved.
PAPER CHASED: Storing information on optical disks makes iteasier to retrieve - making the loan servicing process more efficient, says Banc One Mortgage executive VP David Aldridge.
"We wanted to be able to answer every question a customer had in one sitting without having to make a call back," said Mr. Aldridge. "By putting workflow management and document imaging together, we were able to structure the process."
Because all loan information is now contained on an electronic file folder, less time is needed to get the information.
"We have compressed the amount of time it takes to work on a folder because we no longer have to wait for the information to be passed from workstation to workstation; it is now done electronically," said Mr. Aldridge. "We now have file integrity and don't have to worry about pages being lost or misplaced because once it is entered into the system, it is in there for good."
In the extremely unlikely event of imaging system failure, the organization still has the paper files for backup and regulatory compliance.
"We are also better able to respond to regulatory requirements with the system because all of the information is centrally located," said Mr. Aldridge. "Before we installed the system we went through a tedious process to gather all of the information to meet regulations; now it is all there waiting to be reviewed."
Another benefit of the system is the ability to move work from one workstation to the next. This function not only speeds up the processing of applications but also reduces staff burnout and backlogging.
"If we know that one person will be out or has too much to do, we can move the workload from one workstation to the next with ease, which ensures the operation is running smoothly, does not fall behind, and employees are not overly burdened," said Mr. Aldridge.
Now that the bank has installed the technology, it plans on building a loan origination system with the objective of putting both origination and servicing information in the same data base.
The current system allows loans to be originated electronically, but in order to be processed the information has to be moved from one data base to another. Mr. Aldridge said the ability to bring in and process the information at one location will increase efficiency even more.
"We have changed our strategy to focus on sales and customer service through the use of technology," said Mr. Aldridge. "We are now well equipped to handle both areas to meet the needs of our customers as their needs change."