Even though the mortgage industry is moving toward the goal of removing paper from the mortgage process, closing a loan still comes down to executing a collection of documents. Whether these docs remain in digital form or are printed on paper, these documents and the data that populates these documents determines the difference between a quality, profitable loan and a costly problem for the lender.
Effective document validation allows lenders to avoid problems at the closing table and afterward. Is the right information on the form and is it on the form correctly? If those two questions can be answered affirmatively, the lender has mitigated many of the risks they would otherwise face in the secondary market.
Unfortunately, validating documents in the complex mortgage business, especially when the lender operates in more than one legal jurisdiction, is very difficult. That’s why lenders rely on their document preparation service to make sure that the correct form prints under the correct circumstances and includes the right information. There are three ways an excellent doc prep service will make sure this happens.
1. Data Validation
Data validation algorithms are core elements of document preparation software. These powerful systems are designed to check every data field before it is placed in the document. This is important because the loan documents can only be as good as the data the lender provides. The very best way to do this, and the first way a great doc service can protect lenders, is by creating direct integrations to the lender’s loan origination system (LOS). The integration with the lender’s LOS should be seamless and allow users to easily generate accurate forms without any gaps in the data or data integrity problems. If the data doesn’t make sense for the document in question, the system should not allow the documents to be printed.
2. Delivery and Fulfillment of eDisclosures
Doc prep services can help lenders mitigate risk by providing functionality that allows for the delivery and fulfillment of eDisclosures. Delivering these upfront disclosures electronically is great for borrowers, who love the convenience of viewing and signing them online. But it’s even better for lenders.
When disclosures are sent electronically, it shortens the cycle by decreasing the statutory lead times required by RESPA/TILA, allowing the lender to close faster. But the best benefit for the lender is the audit trail. When consumers accept disclosures electronically, the lender receives a computer-generated timeline that can be used to tell regulators when the disclosures went out, when the borrower provided consent to receive them electronically, when they viewed them and for how long, when they signed them, from what location, and much more.
Secondary market investors prefer eDisclosures because they want that data stream coming back from the process. All of this information can be used to defend the lender or investor should a challenge ever arise suggesting the disclosures were not delivered properly.
3. Clear integrations with settlement services vendors
TRID requires the lender to know in advance what the loan will cost to close and to disclose this to the borrower. That cannot be a manual process because the chances of error are too high. By integrating with the settlement agent partners and creating functionality that will allow them to collaborate with lenders on fees, the disclosures will be accurate.
Errors aren’t just costly in today’s highly regulated mortgage market. They can be devastating. That’s why lenders are partnering with excellent doc prep service providers who know what it takes to protect them from these errors.