Residential Magazine

Minimize Manual Tasks and Maximize Efficiency

Tech-driven solutions can help mortgage companies reduce the burden for underwriters

By Rich Gagliano

Of all the challenges that mortgage lenders and originators face, underwriting is definitely one of the most complex. It’s only one step in the origination process, but it’s a big one. Strong underwriting equates to more closed loans and repeat business. If it’s not done right, however, it could result in a major problem. 

Underwriting is expensive and fraught with risk. Although experienced underwriters are essential, they also can be some of the priciest employees and those most prone to burnout. To complicate matters further, today’s borrowers — more than ever — expect speedy processing times.

Given these pain points, it’s no wonder that mortgage companies are questioning whether tech-driven solutions are available to ease the tedium of underwriting and effectively speed up originations without adding more risk. Before diving into what’s available to improve this critical process, let’s look at the current state of mortgage lending and the many complexities that led to this point. 

Mounting challenges

Changes are occurring quickly in the mortgage industry, which can be understandably daunting for even the most experienced lenders and originators. Historically low interest rates have driven both purchase and refinance lending to record volumes. 

On top of this, transaction costs are climbing as borrowers expect more speed and the convenience of digital capabilities. There is an abundance of data that can result in missed opportunities without the right analytics and insights.

Long story short: The industry needs solutions today that it couldn’t have predicted even a short time ago. With the cost of originating a loan double what it was a decade ago, innovative solutions to combat inefficiencies, reduce administrative burdens and create a better experience for both industry professionals and consumers have shifted from being nice-to-have options to competitive imperatives.

Underwriting plight

As lenders continue their battle against underwriting inefficiencies, their underwriters struggle with linear, worksheet-intensive and checklist-based activities in their quest to minimize risk. Throw in complex analyses, document inventories and data comparisons, and you can see how underwriters face a mismatched and rapidly intensifying combat zone that leaves them dissatisfied and exhausted.

Underwriters, however, bring essential expertise to the origination process that lenders cannot do without, and they do so at an understandably hefty price. While they’re often among the highest-paid employees in the industry, the tedious and manual workflow of the current environment allows them to underwrite an average of only two or three loans per day. 

This reality, paired with rising underwriter burnout and turnover, should be enough to motivate any lender to find solutions that combat inefficiencies and administrative burdens. This also would help to improve the experience for these critical employees who truly are the backbone of the origination process. 

Enhanced workflow

When it comes to underwriting automation, lenders time and again express the same hesitations: “We can’t possibly automate something so risky and complex,” or “Technology can’t replace the skills of an experienced underwriter.” The truth is, they’re right on both accounts. 

First, let’s emphasize one critical point: Underwriters cannot and should not be replaced by technology — period. There is simply no substitute for the value that experienced underwriters bring to the transaction. As essential contributors to your organization, your skilled underwriters deserve a seat at the table. But automation tools, when leveraged appropriately, can complement and (more importantly) enhance the work of underwriters. These professionals welcome these solutions more than anyone. 

Underwriting automation and digitization address the quality and productivity challenges that lenders and originators face today, thus facilitating an environment in which experienced underwriters can optimize performance. Technologies can help underwriters knock out manual, analog processes more quickly and efficiently through such things as the digitizing of data and automated documentation. By allowing tech tools to bear the drudgery and time-draining steps in the loan production process, underwriters can focus on the most critical parts of their jobs: complex analyses and decisionmaking. 

Mortgage industry tech leaders are already addressing these challenges through significant investments in digitization and automation for underwriting. There are already many tools available to help underwriters maximize their job performance and enhance their user experience. These tools use capabilities such as artificial intelligence (AI), deterministic logic, predictive analytics and workflow capabilities to boost productivity while helping to reduce risk. 

Borrower review

AI can be used, for example, to review documents within a borrower’s loan package and then extract the required data. Some AI solutions can recognize W-2 forms and various pay-stub formats, pull income data points, and then categorize the data so year-to-date comparisons can be made and monthly estimated income can be verified with a W-2. 

There also are advanced AI tools that can verify whether documentation requirements for each part of the lending decision have been met. By understanding the rules for documenting self-employment, these sophisticated AI solutions can determine if additional information is needed based on the evaluation of tax returns. Additionally, there are solutions capable of extracting data through advanced decisionmaking rules engines. These rules engines apply standard and lender-defined underwriting metrics to determine the borrower’s ability to repay the mortgage. 

Based on this rules-engine analysis — which also considers factors such as assets, credit and property appraisal — a decision that can be compared with multiple lender products at various price points can be produced. The underwriter is then presented with a complete analysis to facilitate a review and make a well-supported underwriting decision.

Right now, the key is to take a step back and look at which analog processes within your company operations can shift to digital.

Hybrid infrastructure

Additional automation can be achieved through data delivered directly to a lender’s closing and document-preparation systems. In addition, third-party services — such as automated underwriting systems, pricing, compliance tests, fee services, fraud services and credit reports — can easily be rerun and results updated in real time.

Leveraging these tools with a sophisticated rules engine can deliver robust automation and a dynamic underwriting workflow for improved efficiency. For the foreseeable future, lenders and originators should plan on using a mix of manual and automated solutions. Right now, the key is to take a step back and look at which manual processes within your company operations can shift to digital. 

Aim to create a hybrid infrastructure that leverages technological manifestation to boost efficiency while improving the experiences of underwriters and consumers. This requires the right set of tools for allowing underwriters to thrive while using both digital and analog processes. 

There is no one-size-fits-all solution and mortgage companies need to carefully implement scalable, unique systems that fit their business goals. Solutions must be configurable at a deep level, and be able to grow or condense as borrower demand and individual business needs dictate. 

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The mortgage industry is changing quickly. Automation and digital capabilities are essential, and without the right solutions, lenders will fall behind the competition, miss sales opportunities and further expose themselves to risk. There is a place for automation in every company’s mortgage underwriting processes; it’s simply a matter of comparing existing solutions with the needs of your organization. 

More lenders and originators are understanding that gaining a higher level of underwriting automation is the most viable and available tool for addressing their underwriting quality and productivity challenges. In turn, this will free up an underwriter’s valuable time for more complex work. ●


  • Rich Gagliano

    Rich Gagliano is president of Origination Technologies for Black Knight Inc. (New York Stock Exchange: BKI), a premier provider of integrated software, data and analytics to the mortgage industry. As divisional leader, Gagliano is primarily responsible for the direction of Black Knight’s integrated suite of origination-focused solutions.

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