The Financial Services Blog

My colleague Judson Phillips has been attending the Mortgage Bankers Association National Technology in Mortgage Banking Conference & Expoand he found that companies are looking at speeding up loan processing with the use of paperless technologies. Judson wrote “On Monday, I participated in a panel session titled ‘Saving Time and Money with Paperless Lending Initiatives’ and it was evident from our discussion that a hybrid solution, one that combines paperless processing from paper-to-image documents and computer generated e-documents, is the best way to create a streamlined process resulting in faster loan turn around times and reduced costs.  To achieve the best results, a web-based electronic loan folder, serving as a single repository would be the optimal way to securely enable mortgage participants to collaborate throughout the loan process.  One panelist discussed the challenges of attempting to develop this solution with internal IT resources.  He emphasized to the advantages of selecting a proven, software as a service (SaaS) solution to support paperless projects.   In addition Xerox Mortgage Services recently conducted a survey to check the mortgage industry’s pulse on moves towards paperless and e-mortgage processes and our results mimic what I observed at the show. More than 50%of the respondents said that a key attribute of mortgage technology solutions is one that enables collaboration.  When asked about the benefits of paperless technology respondents identified reducing costs and improving service though streamlined processes as most important. We’ll keep doing our part by listening to the mortgage industry and continue to supply it with the technology it needs to needs to succeed and grow. “ 

The one bright spot in the mortgage market is the reverse mortgage according to a recent article in the American Banker.   Annual volumes have just passed the 100,000 mark and as the first of the baby boomers reach the reverse mortgage age threshold of 62 the popularity of the reverse mortgage is expected to grow rapidly.

Bank of America bought into this market niche last year when they purchased Seattle Mortgage Company’s reverse mortgage business and both Citi and JP Morgan are also interested and have confirmed that they are studying the market.

Companies who get involved in the reverse mortgage market have the chance to design efficicent business processes from the start.  Traditional mortgage processig is very paper intensive and handling documents from multiple sources can slow down the origination process.  Xerox is a leader in the electronic document management market and Xerox Mortgage Services helps clients to speed up mortgage processing for reverse mortgages and traditional loans.  If you are creating a new business to serve this growing segment of the mortgage market it makes sense to eliminate paper and streamline your operations which will help you to provide a better service to your customers.

I was reading an article written by a colleague of mine, Judson Phillips, vice president of marketing for Xerox Mortgage Services and he describes how financial services companies, particularly mortgage companies, are increasingly looking to cut costs by buying software and other technology as a service.  He wrote

 ”As the mortgage industry remains in a state of flux, mortgage lenders are turning to on-demand or software-as-a-service applications as a way to quickly upgrade, replace or enhance current technology and support variable cost models.  These applications are flexible and scalable and provide many benefits, such as, faster Return on Investment, elimination of long implementation cycles and quick deployment which lower overhead costs.  

The ability to leverage an on-demand application across a company enables collaboration, improves loan processing times and increases efficiency.  On-demand pay-as-you-go also enables lenders to engage in new technology initiatives via a variable-cost model to control their cost structure and support highly fluctuating volumes to weather a the storm. For example, many lenders are rapidly moving to paperless processing, turning paper loan folders into electronic loan files, eliminating millions of sheets of paper, reducing storage, printing and shipping costs.“   

I completely agree with Judson that it’s a great strategy for mortgage companies to buy their technology this way as it turns a fixed cost into a variable cost and that greatly improves their ability to handle the fluctuations in mortgage application volume.  Please let us have your comments, or take a more detailed look at Xerox Mortgage Services.

What will the fed do next week when they meet to discuss interest rates?  The market is expecting a quarter point cut, or maybe even a second half point cut in the federal funds rate.  The housing market remains bleak and today another large decline in sales of existing homes was reported.  Today Merrill Lynch added to the bad news, reporting a third quarter loss due to write downs of nearly $8 billion for sub prime mortgages.

Declining sales, both for new and existing homes, and an inventory backlog of over 10 months of sales, mortgage companies are going to be closing fewer loans.  But with a decline in interest rates there may be an opportunity to increase refinancing, especially as many adjustable rate mortgages (ARMs) are about to flip over to high fixed rates.  However loan volumes are bound to be down from the heady days of 2004 and 2005 and this gives the mortgage companies an opportunity to streamline their mortgage origination process and cut costs at the same time.  Cutting out the paper from the mortgage process and switching to a digital loan file will speed things up, but allowing brokers, insurers and investors to have access to the loan file will increase savings and speed up the process even more.  With the recent creation of Xerox Mortgage Services there is now a solution to help mortgage companies to come throuh the current difficult market conditions and prepare for the eventual upswing in mortgage applications.