In this article, we look at the critical importance of a good document management system in the mortgage industry. The emphasis is on understanding the document-intensive nature of the mortgage industry. We also look at the specific ways in which a document management system can help, and how a good DMS produces concrete business results in the mortgage industry.

Preliminary Verifications

The mortgage lender has to ensure that both the borrower and the property are worthy of risking their money.

The lender verifies the creditworthiness of the borrower by checking the person's credit record, assets and liabilities and current income levels. All these verifications have to be done by referring to documents, copies of which the lender keeps for his record.

Then comes verifying the property. Does the borrower already have, or would be able to acquire, a good title to the property? Are there any existing liens on this property? These verifications would typically involve going through a large number of documents. Finally, the property has to be assessed for its value and condition. A competent surveyor makes the assessment and prepares a property report.

Upon pledging, the property documents pass into the custody of the lender, who has to maintain these safely for several decades.

Processing the Mortgage Loan

Processing a mortgage typically involves the following:

• Appraisal



• Credit Report



• Escrow Deposit for taxes & insurance



• Paying Title Company Closing Fee



• Buyer's Attorney Fee



• Lender's Attorney Fee



• Home Inspection



• Title Insurance



• Flood Determination/Life of Loan Coverage



• Homeowners Insurance



• Underwriting



• Survey



• Down Payment



• Loan Discount Points



• Drafting the mortgage deed and incidentals



• Payment of Transfers Taxes



• Recording at County Records



• Couriering Documents



• Prepayment of Interest

The paperwork involved in these activities and documentary evidence for fees and other payments would create a lot of documents, which the lender has to maintain.

Mortgage Documents

A typical mortgage loan creates:

• Settlement Statement listing all costs and fees



• Truth-in-Lending Statement disclosing the annual percentage rate



• Mortgage Note detailing the terms and conditions of the loan



• Mortgage Deed of Trust identifying the property offered as security and affirming the charge created, and the various undertakings agreed by the borrower relating to the property



• Monthly Payment Letter detailing the amounts and due dates of principal and interest payments under the loan

A lot of negotiations and contributions from different parties go into the mortgage documentation process. Coordinating all these is itself a big documentation task.

Legal Compulsions

All the documents created for a particular loan have to be preserved securely against loss and damage for decades. A typical mortgage is for a period of 30 years, and it could extend to 40 years or more. The recovery of the loan and interest could often depend on the timely availability of relevant documents.

Scheduling, Monitoring, Auditing

The complex process involved in mortgage transactions requires tight scheduling and monitoring.

Additionally, in the highly legal environment, even small typographical and other errors could damage the security for the loans. Some kind of systematic auditing would be required to ensure that errors are detected and corrected in time.

Storage of the Documents

By now you should begin to get an idea of the massive volume of documents created in a mortgage office. Managing such a volume is no simple task.

If you depend on physical storage facilities alone, you might have to acquire considerable space at your prime business location. Dedicated staff must also work on the classification, sorting, storing and retrieval of the documents.

On the other hand, if you have computerized your operations, not only would management of the documents become far easier, but the costs also would come down dramatically

Preliminary Information Collection and Storage

Before closing a mortgage, the lender needs to appraise the property, check title and the status of insurance, escrow/taxes, flood services and compliance with federal/state/local regulations.

The process is typically as follows. Paper documents would be scanned and the digital images would be stored under the relevant ID. The paper documents could then be physically stored safely at a convenient location. Authorized persons can work with the digital images, thus minimizing the movement of important documents, and the risk of damage and loss.

Live links to each digital record/document would make access and review a matter of seconds.

The lender could thus not only speed up the whole process but also ensure that all required formalities have been completed.

Mortgage Loan Documentation Process

The entire set of typical mortgage loan documents - Settlement Statement, Truth-in-Lending Statement, Mortgage Note, Mortgage Deed of Trust and Monthly Payment Letter could thus be generated extremely fast once the negotiations are over.

The negotiations themselves could be speeded up and made less prone to errors by providing authorized access for all parties concerned to the relevant documents. The documents would be digital at this stage, and stored at, say, a Web portal that can be accessed from distant locations over an Internet connection. Remote review and working would then be possible for authorized persons.

An audit trail of changes made by each and every person would enable management to track what exactly is going on.

Once the negotiations are over, and the agreement has been finalized, it is a simple matter to print the final documents for the signature of all parties concerned.

Business Benefits

Flagging of standard routines, capturing the details in easily accessible digital format, providing authorized (instant) access to these documents from anywhere all lead to fast turnaround times. Coordination is facilitated, omissions are avoided, errors are minimized and completeness is ensured.

The time thus freed and the distractions avoided enable the lender to focus on his main business - originating new mortgages.