In the early days of mortgage lending, the only way to ensure that the transaction would meet all of the state, federal and investor requirements was to use the right forms. Each type of loan came with a pre-defined stack of documents that would have to be completed in order to correctly process the transaction. As government regulators worked to make the process safer and more understandable to consumers, additional disclosure forms were added to the stack. Today, a typical loan file, containing all of the required forms, could be many inches thick.
As the industry has worked to get the paper out of our systems and adopted more electronic documents, lenders initially just created digital versions of the original paper documents and created electronic stacks that mirror in all respects the original loan documents from which they sprang. This was a good first step, offering both the industry and consumers many advantages, including lower costs to originate and store the loan documents and the convenience of electronic signatures for consumers. But in the end, we’re still dealing with static forms and that’s a problem.
For many years now, Docutech has been working to help lenders separate the loan data from the forms that carry it. In the process, we have moved away from forms and now deliver data driven documents. Forms are documents with spaces to hold data. Data driven documents are created dynamically and specifically to hold the required data for each individual loan. The distinction is significant.
The adoption of data driven documents has made it possible to speed up the underwriting process, mitigate the risks of fraud and human error and allow the lender to easily send the data to a different set of documents if the requirements of the transaction change. Our ability to generate custom loan document sets us apart in the industry.
The days of a loan file being made up of a collection of forms has given way to each transaction being recognized as a unique data record that contains all of the information required to transact the loan. While it’s still likely that this data will find its way to a paper document today, that may not be true in the future.
We’re already seeing the federal government move in this direction with appraisal data. Changes to the appraisal report form and a special centralized data portal now allow the government to gather all of the collateral valuation information it requires electronically. In effect, the “form” professional appraisers use has become little more than a data collection aid. Steps by the nation’s largest investors will take the rest of our loan application data in the same direction.
For lenders, this is great news. Once they begin to think in terms of data, which can be instantly updated and controlled in every step of the loan, instead of the completion of forms made up of various blank spaces, they can begin to react to data driven events. Our clients are already doing this and it’s streamlining their loan processes and driving costs out of the transaction. In addition, it’s improving the consumer experience, which has never been more important.