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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2018

Leverage Modularity in Digital Lending

Customized user interfaces can maximize productivity

Each year, the mortgage industry comes ever closer to the fabled digital paperless mortgage. The desire for a fully digital-mortgage process is driven by the recognition that eliminating paper and reducing the time needed to move the mortgage through the pipeline are the keys to profitability and success.

The struggle has been that the technology advancements consumers have become accustomed to, including 24-hour mobile access and instant decisions, have been slow to be adopted by the mortgage industry. The primary driver of this delay is the legacy infrastructure of the loan origination system (LOS) many mortgage professionals are still using. 

LOS vendors rely on a “jack of all trades” user-interface (UI)approach that results in a complex, confusing and error-prone workflow that is adequate for all but advantageous to none. Instead, the LOS should be reimagined as a modular framework that places each type of user in a specific UI environment, allowing for efficiency to be gained through focused interaction with the LOS.

Defining modular technology

At its core, every LOS is a compromise. The technology has to serve the needs of a wide variety of users. The demands of a mortgage originator working with an applicant are different from the needs of the compliance staff, which differ from the demands of the secondary marketing staff. Traditionally, the LOS compensated for this by focusing primarily on the qualification of the loan — the underwriting and processing. This results in a process that ensures a high-quality loan product, but at the expense of usability by departments outside of underwriting and processing.

As the mortgage industry becomes more data-driven, lenders can benefit from leveraging a more modular approach to their LOS. Modularity refers to the development of role-specific modules of the LOS that provide a specific user interface and workflow environment for each type of user, such as originators, processors, underwriters, etc.  In essence, instead of a one-size-fits-all system, the LOS is customized to provide unique interfaces for a range of user groups.

All of these individual modules reside on top of a centralized database with a core set of functions. This ensures that all users maintain strict data integrity and have access to a uniform set of tools. A mortgage originator, for example, would have an originator-specific module built with only the fields and functions that are needed for working with the borrower. This would include loan applications, digital point-of-sale tools, customer-relationship tools and data-verification services.

With this level of specificity and focus, originators can increase productivity because they are only seeing and using the portions of the LOS that are most relevant to them. When you extend this concept to other mortgage professional roles, you can see how modularity as a whole can create significant and lasting increases in productivity.

Employing digital modularity

The other significant benefit to a modular LOS is the efficiencies it fosters when working in a completely digital environment. Mortgage originators and the lenders they work with rely on the LOS as the epicenter for automating, tracking, storing and processing loan data at every step of the loan process.

The difference between a document-driven and a data-driven loan environment is the ability to increase productivity by utilizing “data-aware” automation to eliminate manual processes. If the data shows that all elements required under the Real Estate Settlement Procedures Act (RESPA) are present on a loan application, for example, the LOS can automatically order a Loan Estimate document. If the data shows that the subject property is in a flood zone, the LOS can automatically order a flood report.

The mortgage process is highly fragmented and requires the collaboration of many specialized roles. 

This type of data awareness can only exist in a purely digital, data-driven environment. It allows mortgage companies and other lenders to harness automation to scale at a much lower cost.

Think about this: What if the originator, underwriter, processor and others could all manage their parts in tandem via different modules as a borrower’s data drives the entire process? Using a focused UI, each user would be able to identify and operate the functions that are most relevant to their role, with an objective to reduce errors and increase the speed of completing tasks. When coupled with data-aware automation, mortgage professionals can originate more loans in less time and at a reduced cost.

Benefiting from modularity

The mortgage process is highly fragmented and requires the collaboration of many highly specialized roles. A modular approach acknowledges this complexity and addresses it by fragmenting the LOS user interface into specialized modules.

This design not only improves usability, but also enhances the speed and accuracy of execution. Think about the efficiencies gained when the mortgage originator, the underwriter and the processor can work in a focused and streamlined environment. It’s like giving glasses to someone who didn’t realize they were near sighted. The world becomes a much clearer place to work in.

Compliance also is easier in a modular environment. Compliance can be broken down into each module and applied to the loan process incrementally. By the time the loan reaches the compliance department, its job is much easier because the loan will already have been thoroughly vetted. The likelihood of loan buy-backs because of poor compliance become negligible, to the point of being nonexistent.

•  •  •

Complete digital lending is on the cusp of becoming a reality. Lenders, however, must leave behind the legacy systems that fail to properly provide the technological environment necessary for digital lending to be relevant.

Technology must evolve to provide a true benefit to mortgage professionals, and modularity is one step on that evolutionary scale. Combined with data-aware automation and compliance, mortgage companies and lenders can eliminate manual processes, streamline the user experience and have the confidence that their loans are meeting the needs of investors.


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