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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2007

7 Trends for the Tech-Savvy

Keep an eye on these technologies on the path to e-mortgages

To be competitive in today’s market, cost-effective automation of business practices through information technology is critical. Mortgage-industry players that can capture and process loans faster while reducing the costs of doing so will have significant competitive advantages.

Mortgage professionals must have the latest information on technology practices and to understand how the industry is moving further down the path to complete paperless processing.

Here are seven rapidly evolving trends to watch.

1. Online security

Each year, standards and practices are fine-tuned and improved based on industry needs for managing security risks. In 2001, the Federal Financial Institutions Examination Council (FFIEC), a formal interagency that prescribes uniform standards for the federal examination of financial institutions, provided guidance for the enhanced security of technology applications in the banking industry. This effectively mandated that traditional username-password security was inadequate for high-risk online-banking activities. These activities include those that allow monetary transactions or access to sensitive customer data. This guidance was updated in 2005.

Although not every financial institution has implemented these requirements, regulators may soon compel many to do so. These regulations will protect sensitive customer information, improve authentication, reduce identity-theft attacks and impose stricter guidelines for password protection.

Even if your company isn’t specifically regulated by the FFIEC, these guidelines are an important reminder that the mortgage industry must take similar steps to enhance and improve security standards. Every organization analyzing a technology solution should pay close attention to available security enhancements to ensure that its data is protected and not vulnerable to security exploits.

2. Electronic loan delivery

Electronic delivery of mortgage-loan documents to the secondary market has become essential to remain competitive. Electronic loan delivery can bring the industry to its optimal state of paperless processing while gaining the greatest benefits for users. Leading industry participants are already using this model with success, including increased workflow efficiency, faster stipulation resolution, faster turnaround times, reduced warehouse-funding costs and increased return on investment (ROI).

Electronic loan delivery provides many advantages over paper-based delivery — the most obvious being reduction of the paper glut associated with day-to-day loan processing and delivery. Most important, it can shorten delivery and settlement periods, allowing secondary-marketing managers to sell and trade loans more quickly, while returning funds to the seller to fund new loans.

Electronic delivery and transmission of loan documents can occur via physical transmission, e-mail transmission, point-to-point Web-based delivery or through a collaborative-document network. Each uses a number of media and transmission methods. The common denominator is that electronic loan delivery is impossible without image-based loan documentation or intelligent documents.

3. Imaging beyond archiving

Using document images instead of paper for underwriting and loan delivery is a critical component of going paperless. Many organizations use image-based solutions to archive the mountains of paper-loan folders. Companies, however, are using image-based technology for more than just document-archiving.

For instance, image-based loan files are now used in electronic loan processing, underwriting, post-closing, due diligence and investor delivery. And when used, image-based efforts are found to reduce loan-processing costs and turnaround times and to increase workflow efficiency significantly.

As imaging continues to increase in importance, the idea of using images beyond archiving also will increase. Image-based loan documentation will be a core technological piece to further the new trend of electronic collaboration.

4. Intelligent documents

Leading brokers and lenders are rapidly moving toward intelligent documents, which further streamline and simplify mortgage processes.

File formats, such as Adobe’s portable document format (PDF) and the Mortgage Industry Standard Maintenance Organization’s SMARTDocs, will become more mainstream as mortgage vendors continue to adopt these solutions.

Although many mortgage professionals believe that a true e-mortgage system is years away, organizations not yet adopting intelligent documents should begin exploring available technology. Consider a smart, hybrid approach. Every organization should ensure its technology investments today can evolve, seamlessly and cost-effectively, to remain a long-term competitor.

5. Software on demand

Software-as-a-service (SAAS), also known as software “on demand,” is an application model where a third-party vendor develops, maintains, hosts and supports an external software application for clients. Analysts predict that within five years, 25 percent of new business software will be delivered in a SAAS model. In addition, with major software companies investing in SAAS, this software-delivery method has become more robust. Software providers are developing more-customizable, Web-based applications that can be integrated with other technology.

The on-demand model is providing a new level of sophistication not only for complex back-office demands but also for desktop applications. As mortgage-technology providers offer better, faster and cheaper solutions than in-house alternatives, SAAS will be one way the mortgage industry can tap into collaborative networks more easily.

6. Collaborative networks

Collaborative networks — particularly collaborative document networks — are poised to emerge as a powerhouse. For the mortgage industry to reach a completely paperless state, the use of a collaborative network will be critical.

A collaborative-document-network model significantly enhances the Web-based approach to loan processing and delivery. Using an online collaborative-electronic-document network, mortgage-industry participants can have immediate access to loan documents and related information.

Managed online, communication and transmission is simple. It can improve workflow and further streamline the loan process for everyone on the network.

Leading industry participants already using this model are finding success with increased efficiencies, improved workflow, faster turnaround times and increased ROI. As more industry members begin using collaborative document networks, the benefits will also increase.

7. Integration and service-oriented architecture

To help organizations move along the technology continuum, one of the hottest trends will be the integration of existing applications. More organizations likely will increase their competitiveness by integrating their current technology and legacy systems with new products from external vendors.

A service-oriented-architecture (SOA) approach is seeing more use. Although SOA has been available for several years, it’s now making its way into mortgage-industry applications. SOA standards provide faster assimilation of technology and can lower costs, allowing applications to be more economical.

Subsequently, organizations using SOA-based technology will gain greater competitive advantage, speed and visibility with their applications. As legacy systems increase their need to communicate with other applications, SOA will provide greater flexibility, automation and ease of integration.

•  •  •

The mortgage industry is at the vanguard of a major shift in the way business is conducted. Smart investment in the right technology is critical to remaining competitive, improving ROI, processing loans faster with fewer errors and improving workflow efficiencies.

Having a better understanding of far-reaching technology trends will also open the doors to understanding the widespread benefits. The bottom line: As the technology evolves, so will the industry.


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