The Post-TRID World... What Next?
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With the introduction of the CFPB’s TRID now six months behind us, the mortgage industry is getting a clear look at the results of its implementation. A recent article on housingwire.com points to a 60% decrease in net gain on loans originated by independent mortgage banks and mortgage bank subsidiaries since the implementation of the TILA-RESPA Integrated Disclosures rule. According to the study, total production expenses per loan grew to $7,747—an increase of nearly 10% in a single quarter—primarily due to a rise in personnel expenses. Join special guest, Stan Pachura, former CIO of National Mortgage Insurance (NMI) for a 60-minute webinar discussing the state of the Post-TRID World and solutions for these increasing costs. Stan will specifically discuss how automating the processing of loan documents can reduce or even remove the additional costs associated with the move to TRID. The webinar will also include a demonstration and discussion of Zia’s Advanced Closing Extraction (ACE) mortgage accelerator for Ephesoft. With ACE, you can offset many issues introduced through TILA-RESPA by: Decreasing employee hours spent on processing through automated document classification, data extraction, and information validation Enhancing the customer experience with easy-to-implement exception handling and time-saving shortcuts Introducing process improvements based on detailed analytics and reporting capabilities Enabling rapid document viewing with Snowbound software, a leader in the mortgage industry Whether you are a mortgage bank, wholesale bank, or service provider, the need to automate the classification and extraction of loan documents is clear. This webinar will guide you in navigating the changes seen from TRID with expertise, examples, and customer success stories.
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The Post-TRID World... What Next?
- 1. The Post-TRID World… What Next?
- 2. ©2016 Zia Consulting, Inc The Reality of TRID "Necessity is the mother of invention” - Unknown
- 3. ©2016 Zia Consulting, Inc Costly Error- ProneSlowComple x People, Paper, Process
- 4. ©2016 Zia Consulting, Inc Who Does This Impact? Mortgage Banks National Regional Credit Unions Wholesale Banks Mortgage Insurers Service Providers
- 5. ©2016 Zia Consulting, Inc What’s In It For You? COST (Profitability) CONFIDENTIALI TY (Security) COMPLIANCE CUSTOMER SATISFACTION (Retention) 4 Cs
- 6. ©2016 Zia Consulting, Inc Profitability: By The Numbers The net gain on each loan originated by independent mortgage banks and mortgage bank subsidiaries plummeted 60% in the 4th quarter of 2015 1 Net gains only reached $493 on each loan they originated in the 4th quarter, down from a whopping $1,238 in the 3rd quarter 2 Personnel expenses averaged $5,131 per loan in the 4th quarter of 2015, up from $4,674 in the 3rd quarter 1 1. HousingWire – March 17, 2016 2. Mortgage Bankers Association Quarterly Bankers Performance Report
- 7. ©2016 Zia Consulting, Inc Security How are documents shared? Where are documents stored? Need for “Universal Content Security” Internal/external collaboration On-premise/cloud security Integrated with business processes
- 8. ©2016 Zia Consulting, Inc Customer Service STRATMOR Group’s “What Drove Borrower Satisfaction in 2015?” survey: 10% of borrowers gave their lender an individual satisfaction score of 6 or less (out of 10) These unsatisfied borrowers represent potential CFPB complaints for lenders along with negative comments on social media and to friends and relatives
- 9. ©2016 Zia Consulting, Inc Compliance
- 10. ©2016 Zia Consulting, Inc What If We Classified Automatically? Your Classification Our Classification
- 11. ©2016 Zia Consulting, Inc And If Processes Were Automated? Your Process Our Process ©2015 Zia Consulting, Inc. All Rights Reserved.
- 12. ©2016 Zia Consulting, Inc And Your Systems Were Integrated? Your Users Our Users ©2015 Zia Consulting, Inc. All Rights Reserved.
- 13. ©2016 Zia Consulting, Inc Case Study: Leading Mortgage Insurer The Challenge: Change the rules of the game Technology as a competitive advantage How to build It? The Results: 250+ document types, 1.3 million pages/month Alfresco smart content hub + Ephesoft intelligent capture Activiti advanced workflow Integration with BI/reporting
- 14. ©2016 Zia Consulting, Inc Tailored For Your Business Any Input: paper, fax, upload, email (bulk or individual) Advanced classification/extraction Automated BPM/workflow Expedited Viewing & Markup Central content hub (DM/RM) LOS system integration
- 15. ©2016 Zia Consulting, Inc Smart Capture™ Today’s alternative to costly/complex legacy IDC Business selected + IT approved Your business process Mailroom automation Embedded capture Extended (mobile) capture
- 16. ©2016 Zia Consulting, Inc Intelligent Mailroom Automation Input: scanned documents, email attachments, faxes, uploaded documents Classify: identify document types in the file WITHOUT bar codes/separator pages Extract: data from structured/unstructured documents Deliver to LOS Solving the “Paper Problem”
- 17. ©2016 Zia Consulting, Inc In-Process Capture Utilizing Ephesoft Web Services Embedded into: ECM (Alfresco) SharePoint Portal/Website Delivered within workflow/business process
- 18. ©2016 Zia Consulting, Inc Mobile Capture Based on Ephesoft mobile SDK Mobile classification and extraction Mobile IDC administration Customers to field reps Save time, save money
- 19. ©2016 Zia Consulting, Inc What Is ACE? Zia solution accelerator for mortgage documents ACE = Advanced Closing Extraction From HUD-1 to TRID Tested and validated with leading mortgage company
- 20. ©2016 Zia Consulting, Inc Case Study: Interfirst Mortgage The Challenge: ~20,000 documents/month Manual classification process Regulatory requirements dictated need for strict data accuracy The Results: Zia’s In-Process Capture embedded within Interfirst customer portal Zia’s ACE™ for Extraction 700% Productivity Increase
- 21. ©2016 Zia Consulting, Inc Introducing Activiti BPM High-performance process engine http://www.jorambarrez.be/blog/2015/07/20/the- activiti-performance-showdown-2015/ Business-friendly tools Advanced analytics Integration with wide range of applications Alfresco ECM + BPM platform
- 22. ©2016 Zia Consulting, Inc Central Content Hub - Alfresco Single system for in-process content and records Automated, rules-based management of RM lifecycle Simple tools for filing, search, audit Open source, open platform, open standards Enterprise class/DoD 5015.02 certified
- 24. Who is Zia? EST. 2003 Boulder, CO Critic al Not Casual Controlling Chaos + Delivering Rapid ROI Process & Integratio n Open Platforms Content People
- 25. ©2016 Zia Consulting, Inc Zia Mortgage Services Initial Assessment Architectural Services Implementation Integration Migration
- 26. ©2016 Zia Consulting, Inc Next Steps Talk to us/talk to our customers Loan automation assessment/demo Zia Mortgage Solutions Demo, case studies, brochures, videos… ziaconsulting.com/mortgage-solutions Ephesoft/Alfresco enterprise trial
- 27. Questions?
Editor's Notes
- Welcome – thank you – as Emily mentioned – this webinar is focused on how automation solutions built w/ modern technologies can not only help you address the challenges of TRID but also save you time & money, enhance customer satisfaction & retention, and even address data security Today’s focus is on Mortgage Document Automation and the processes involved in efficiently managing those documents – not about replacing your Loan Origination, Processing or Servicing systems – you have those, you’ve likely invested significant amounts of money into them About automating the business processes you use – We’ll be Introducing a number of tools / technologies that play a key role in building a solution – but again is about finding the exact right fit for your organization Our IP as Zia – understanding how to apply modern, really next-generation technologies to your business process – in this case mortgage originations and processing– how to apply intelligent capture, email integration, central content hub for document & image/video management, servicing and claims system integration, records management, and more…
- As any mortgage lender knows, change is the norm in the industry. And not all changes are positive changes; neither from a customer service nor profitability perspective. The new Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures (TRID) rule that took effect in October of last year has been a tremendous headache for lenders. And the industry is still striving to ensure compliance under TRID. In fact, the further the industry gets past the initial implementation of TRID, the more evidence there is of TRID errors, with little direction from the Consumer Financial Protection Bureau on what to do or even think about. How you address these changes, and apply tools and automation to the process, can not only address the “necessities” of TRID but also streamline your operations, dramatically reduce costs, and enhance customer engagement and satisfaction.
- Costly – Costs are on the rise everywhere. Lenders are allocating significant resources to performing reviews, quality control measures and fill gaps in current processes and procedures. In addition to the increased costs related to personnel, lock periods are being extended due to delays in the process which also increases costs. And, according to HousingWire, a new note from Standard & Poor's Rating Service stated, “Uncertainty around the liability that such exceptions place on mortgage assignees has stifled secondary market trading, increasing costs to lenders as the loans stay on warehouse lines longer.” In fact, just last week, the CFPB sent a letter to the MBA and other industry trade groups, acknowledging implementation issues regarding the TRID rule and outlining an expedited path to clarifying those issues. In the letter, CFPB Director Richard Cordray acknowledged that implementation of Know Before You Owe "poses many operational challenges," in part because of the diversity of industry participants, "whose perspectives may vary as to what compliance under this rule requires." Cordray also agreed that "there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity." Complex – The TRID mandates are well stated. However, the implementation requirements to attain compliance are not clear. Investors, whether it is Fannie or Freddie or any other correspondent investors, require the lender to rep & warrant that the loan is compliant. As a lender, you are stating that that the loan complies with all guidelines, including TILA-RESPA. If it is not, you could be required to repurchase the loan. Slow – TRID can be confusing for lenders and consumers and closings are being delayed. Error Prone – An article in the March 2016 edition of Mortgage Banking Magazine cited a December 2015 report from New York-based Moody’s Investor Service titled U.S. Mortgage Lenders Face Difficulties Complying with New Rules, a Credit Negative for RMBS, several third-party review firms analyzed approximately 300 loans form several lenders and found the 90 percent of the loans that had closed since Oct. 3 contained compliance violations. As a result, from a customer service perspective, dissatisfied borrowers are receiving multiple disclosures and re-disclosures.
- We’ve mostly referenced “mortgage lenders” as a term to this point, but want to be clear who is being impacted by the TRID rules and therefore who can benefit from an automation solution like we’ll be discussing today. Not just large national banks – your Wells Fargo’s, BofA’s, etc.. But also hundreds or even thousands of regional mortgage lenders including banks and credit unions. And it’s also the secondary market – your wholesale banks – as you’ll see directly in one of our case studies today And also a wide range of others in the mortgage industry – from service providers to mortgage insurers, which again you’ll seen in a case today.
- Profitability – Your ability to contain costs and improving efficiency and accuracy is critical. According to Marina Walsh, MBAS’s vice president of industry analysis, “Production profits dropped by over 60% in the fourth quarter of 2015 compared to the third quarter. Total Loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – surged to $7,747 per loan in the fourth quarter of 2015, jumping from $7,080 in the third quarter. Confidentiality (Security) – Virtually every document you touch in the mortgage industry contains personally identifiable information (or PII) – and that’s why the need for confidentiality, our 2nd C, or data security is always top of mind for CIO’s and others involved in risk management for mortgage organizations And as we’ll briefly discuss today, it’s not simply a matter of database security, it’s really about protecting content from the moment it enters your organization, through every phase of both internal and external collaboration, including interactions with the applicant and also third parties Customer Satisfaction / Retention – about better service: Focus on customer service as a differentiator – customer retention is really a huge issue – don’t discount the value of simply being able to answer a question about a loan – where in the process, what’s received / missing, etc… Setting an meeting borrower expectations is critical. According to the Stratmor Group’s Mortgage Satisfaction Survey. “Failing to provide mortgage applicants with an upfront checklist of required documents has a dramatically adverse impact on Satisfaction”. It sounds simple but the the survey further noted that, “Customers are much more satisfied when they are NOT asked for additional information that was notp art of the original checklist”. Compliance – It’s largely what we’re here to talk about. Under TRID, a lender has significantly greater liability for the timing, completeness, and accuracy of the Loan Estimate (LE) and Closing Disclosure (CD). Investors and mortgage insurance companies are even more thorough in their compliance reviews, and are refusing to purchase or insure loans with even minor TRID defects. Non-compliant loans that are missed during the initial screenings will likely be put back to lenders if errors are later discovered.
- As discussed a couple slides earlier, often the #1 concern for CIO’s in 2016 is how to ensure they aren’t the next company on the front page of the wall street journal for a data breach. And so obviously lots of time spent on firewalls and database security But we would suggest an even broader look at security or confidentiality needs to be taken – by looking at the entire lifecycle of documents from when they enter your organization until they are stored as records. How are documents shared with you? Paper? Fax? Email? Upload? How do you share them with others – either back to that applicant or to 3rd party providers – again, email? Dropbox or Box.net? Others And then how do you store them while “in process” and then as records Our view – you need a process for applying security automatically at inception – a concept we call “universal content security” That applies across internal AND external sharing of content – whatever the technology involved And applies whether documents are stored on-premises or in the cloud And is done without ANY user intervention – it’s just part of the business process
- The Association of Mortgage Investors wrote a letter to the Consumer Financial Protection Bureau Director Richard Cordray to express the mortgage investor community’s concerns over the bureau’s “Know Before You Owe” mortgage disclosure rule, including specific examples of issues that are cropping up. The errors mentioned in the letter are broken up into three categories and I would like to cite an example or two from each one. Frequent loan estimate defects Numerical computation errors on the Loan Estimate (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Loan Estimate, Loan Costs and Other Costs do not total Estimated Closing Costs in the Costs at Closing table on page one of the Loan Estimate). The Estimated Closing Costs are not calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Loan Estimate. Frequent closing disclosure defects Calculating Cash to Close table does not reflect “Yes” when amount changed from Loan Estimate to Final. When the answer to the question is “Yes”, there is no indication where the consumer can find the amounts that have changed on the Loan Estimate. Numerical computation errors (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Closing Disclosure, Loan Costs and Other Costs do not total Closing Costs in the Costs at Closing table on page one of the Closing Disclosure). Examples of technical and minor errors frequently cited as TRID violations TRID: LE Loan Costs/Other Costs Deficiency - The "Title - CPL" Fee is not labeled correctly on the Loan estimates. CPL is not an Acceptable abbreviation and should reflect "Closing Protection Letter".
- While it is possible to manage this process manually, realistically, technology is needed to automate and “back-stop” compliance. The right technology helps lenders gather the data that goes into the LE from various vendors; compute the LE accurately; deliver it in a timely (and trackable) fashion to the borrower and compare the initial LE against the final CD to make sure that variances are within tolerance. The ability to obtain and transmit accurate data in a timely fashion, is extremely important because TRID requires many detailed, individual figures to be imported into the disclosure forms.Ω Everything – whether paper, fax, email, upload, mobile, etc… Classified, data extracted & validated With full page OCR – and without bar codes or seperator pages With accuracy
- Lenders have spent many months preparing and processing under TRID. However, they must now ask themselves if their approach is sustainable. The additional resources added and process changes made by many lenders have significantly increased costs and/or lengthened the time to close. Key considerations include: Data exchanged among industry participants during the application, underwriting and closing processes must be accurate and delivered within rigid deadlines Compliance with the new requirements requires a focus on capturing data from the new TRID documents swiftly and accurately Many lenders are relying on manual data entry for extracting the data contained within the new documents. Manual data capture is expensive, slow, and prone to error. Lenders must even ensure that rounding rules are appropriately applied Extracted data must be available to downstream systems for further processing Significant penalties are imposed for inaccurate data capture and missed delivery dates And kicked off business process Flexible Tasks / roles, integrated with tools like Outlook, a content / ECM hub – and of course your Claims Systems Automation of tasks like Records Management
- And what if the classification and business process automation took place “behind the scenes” – so users could keep working with the tools they know and work with every day – from outlook to your loan origination and processing systems – because your automation solution was fully integrated with those business applications No longer would you have a “two screen” problem – where users literally have two monitors and have to switch back and forth Or a “print & rescan” problem – where the organization is forced to print out documents from one system, so they can re-scan into their LOS for example, which is a real use case from one of the leading mortgage providers on the west coast You get enhanced productivity and adoption of systems and processes And a Single system of record, with access for all
- Add my thanks for joining everyone – as Emily mentioned at outset, run Business Development here at Zia – going to spend the next few slides outlining what makes up our automation solutions and really why this makes a difference for you Starts with an understanding that every mortgage banking environment is different – across the various parts of the industry and individual differences in levels of digitization and automation As an overview to start with – here’s the typical components of the solution in one slide, although again noting that everyone is unique in some way Process via any input – however content enters the organization And we’ll discuss – both individual documents from applicants as well as bulk processing in a mailroom Key is the ability to Initiate a business process automatically Apply full page OCR based advanced classification & extraction (which we’ll discuss in depth today) Store in a single system of record for both Documents & Records Management Integrated with all business systems – including LOS
- Now deep dive into a few of these areas First – obvious to most of your – value of capture – advanced classification and extraction – What is advanced capture (Lexmark) – “accurately classifies document types and extracts critical information from hard copy or electronic documents without having to rely on barcodes, separator pages or keywords. The solution validates the extracted data and shares LOS or other applications” we’ve partnered with a software vendor named Ephesoft to use in our mortgage solutions – so wanted to share a bit of background on the organization and why we chose them As noted – alternative to legacy vendors like Kofax & Captiva What’s Different – Business Selected Subscription or Purchase pricing Eliminate click or page charges Lower overall solution price IT Approved Thin client architecture Use of open standards Simple to Install, Train System, Train Users Match / exceed capabilities of legacy systems Look at 3 ways we utilize Ephesoft in our mortgage solutions to directly impact your business processes Intelligent Mailroom Automation Zia’s “In-Process Capture” (IPC) Accelerate Mobile Capture
- Traditional capture – often bulk scanning & classification/extraction of data – or at least centralized Now it’s jut smarter Intelligent Mailroom Automation Again – any Input: scanned documents, email attachments, faxes, uploaded documents As noted - identify document types in the file WITHOUT bar codes/separator pages Because Extract: data from structured/unstructured documents Deliver to LOS Solving the Paper Problem – with intelligent capture vs. just digitization, greatly reduce number of people, amount of time, volume of errors
- Zia’s “In-Process Capture” (IPC) Utilizing Ephesoft Web Services Embedded into: ECM (Alfresco) SharePoint Portal / Website – as will see in one of our examples today Critical piece – why we call it “In-process” – it’s delivered within workflow / business process – don’t change the way people work, just automate the classification & extraction So as documents are dropped into ECM repository, via email integration or fax directly in, they are classified into correct document types and then required data is automatically extracted
- Finally – for those looking to extend the capture process all the way out to field offices or even applicants directly What we call our Accelerate Mobile Capture Based on Ephesoft Mobile SDK Mobile Classification & Extraction Mobile IDC Administration Applicants to Field Reps Save Time, Save Money by performing the classification & extraction even before the documents come into the organization
- So what did we do with all of these tools – put them together for mortgage providers – again from leading national mortgage banks to the secondary market – we’ve created ACE – which stands for Advanced Closing Extraction This is our “productized” offiering – a pre-trained, tested & validated version of Ephesoft which is available for license within our mortgage solutions Initially developed for HUD-1 and other documents like the Good Faith Estimate and Truth-in-Lending, now ACE has been extended to cover TRID documents – specifically the Loan Estimate (LE) and Closing Disclosure (CD) – as we’ll show you in the demo today ACE has been proven against literally millions of mortgage documents, working hand-in-hand with a leading mortgage provider
- The Challenge: Received about ~20,000 documents/month Previously had a completely manual classification process – costly, slow, error-prone Regulatory requirements dictated need for strict data accuracy on HUD-1 docs The Results: Zia’s In-Process Capture embedded within Interfirst Customer Portal Zia’s ACE™ for Extraction 700% Productivity Increase, Data Accuracy Rates over 90%, Reduced Processing Times by 67%, Significant Reduction in Error Rates “We anticipate being able to triple closing capacity without adding additional headcount”- Alex Ulyanov, Interbank CIO
- Couple more slides quickly before we get to the demo – first is the business process engine that we use underneath the solution Most advanced modern BPM Activiti is a lightweight enterprise BPM solution that’s built for both developers and business people. It’s a modern alternative to complex, IT-dependent legacy BPM systems. Don’t believe us – ask Google – okay not really, but kind of At the core of Alfresco Activiti is a high performance process engine that you can use to automate and modernize a wide range of critical business processes. blog about The Activiti Benchmark Project Business-friendly Tools – choice of process modeler, forms editor & library Process Analytics which are critical for internal metrics / goals or SLA’s The open platform integrates seamlessly with a wide range of third-party and custom-built applications. Alfresco Activiti works hand in hand with Alfresco One, our ECM solution, so you can manage content, process, and people with one powerful, seamlessly integrated platform.
- Finally – the content hub – for receiving documents, collaborating, and storing as records – again not as an LOS replacement but as a supplenet With Alfresco, you can manage all your business content and corporate records in one integrated platform. Alfresco supports automated, rules-based management of the entire record lifecycle, from record capture through retention to final destruction. Flexible disposition schedules let you control everything that happens to a record—from capture through retention to final destruction. You can review, hold, transfer, archive, and destroy records based on File Plan or record properties. The system has a variety of easy-to-use tools to file, search and audit records. These tools make life easier for everyone: end users, records managers, and compliance officers. For Zia – the fact that it’s Open Source but also an Open Platform and complies with Open Standards like CMIS allow us to deliver business solutions that work Alfresco offers the only open source RM solution that is DoD 5015.2 certified and was built from the ground up to be enterprise class & scale
- Now going to hand the mike over to Pat who is going to show us what Zia’s loan automation solutions look like – and specifically the ACE solution accelerator
- Our History / Our Focus We do content – not just any content, but critical. With a focus on process-intensive content Take our skills and build repeatable solutions on open platforms To again help you control your chaos and automate your manual/paper-centric processes
- So what services do we specifically deliver for the mortgage industry – we talked about ACE for processing TRID documents But looking at actual services - range from initial assessment to architecture & design services – deliver to you for implementation Or provide delivery of technologies, with experience and IP from dozens of engagements with companies just like yours To integration solutions – obviously for leading LOS technologies but also with outlook, office or other business tools And finally migration – not just content migration but business process Next month webinar where we talk about migration from legacy Capture vendor – Kofax to Ephesoft
- Where go from here – First – if this might be a fit – let’s talk – talk to us / happy to have you talk to customers Look at your mortgage process, show you more depth the solution Visit our web page, few other demos Let us help you try it!
- Value of analytics – related to SLA