REQUIRED READING: In 1970, when Charles Reich wrote ‘The Greening of America,’ the term went way beyond the obvious and into the shifting of society toward a greater collective consciousness focused on improvements beyond the ecological. But one of the obstacles to going green is cost. The idea of retrofitting entire enterprises that have been long dependent on paper is daunting and can certainly involve significant costs.Â
In fact, as recently as five years ago, a number of lenders made huge investments in imaging-system hardware and software for handling great numbers of loans that arrived into their wholesale operations. Millions of dollars were spent, and with so many of those companies now gone, it is difficult to know if they reaped the rewards of the new method of operations. For many of these lenders, the imaging process came after the loans had been originated, and in those cases, a great deal of the cost-savings opportunities had already been lost.Â
The loan origination system (LOS) already has a head start on the paperless process. Virtually every LOS starts the loan origination sequence in paperless mode, accepting the application information and storing it so that when duplicate information is needed for other forms, it does not require the need to re-enter data.
It's a good start, but if the LOS includes electronic document management (EDM), paper is eliminated altogether.
EDM creates a virtual, electronic loan folder that replaces the paper folders that get passed around the typical loan office. The documents are viewed by permitted users and are labeled with process-completion tags as they go through the process workflows. In this operation, files do not get physically moved about and are never lost or misplaced. They can also be viewed simultaneously by more than one user – a process that requires copies to be made.
Think about that for a moment – how many completely unnecessary copies of loan files have been made over the last year in your organization? Multiply that figure times thousands of lenders and middlemen, and you get a feeling of the scale of waste that can be ameliorated by using EDM: 10 million to 12 million loans, each representing a ream or so of paper, with all the resources it takes to produce and distribute them. It is a cycle of waste that costs $100 to $300 per loan, by some estimates.Â
The paperless chase
The traditional concept of the paperless office has included the need for imaging machines and other hardware. What happens in this process, and how do documents become electronic in the first place?Â
For starters, you don't need to have the big imaging machine in the first place if you never have a paper file. For retail organizations, the LOS does all the work by keeping everything in the EDM loan folder. When you have exhibits from the outside – whether appraisals, credit reports, fraud checks or inspections – most of them are coming to you in electronic formats that are uploaded to the EDM file.Â
When you have paper documents arriving, you either fax them to the system or use a desktop scanner about the size of a toaster to get the job done. There's an excellent chance that your current copy machines are also digital, with scanning capabilities you might never have explored. In a paperless environment, there isn't much need for photocopies.
In wholesale and correspondent operations, it's a little different. You will want the seller to deliver you an electronic file from its LOS, especially if it is using one with EDM. Electronic file delivery is another feature many of the systems have, and it is an additional money-saving enhancement.Â
Your investors are more likely than ever to request electronic delivery, because it saves them effort and time in handling paper. With this functionality, you can forget courier bills or outside vendor e-delivery charges, too.Â
Furthermore, most of these systems are available in software-as-a-service (SaaS) models that require very little up-front investment and even less in-house technology support. SaaS means that you can use the software via the Internet, with all the technology-hosting coming from the provider. Whenever there is an upgrade or a change in functionality, it happens centrally, with little to do at your locations.Â
At the same time, SaaS LOS are pay-by-the-loan systems, so you can manage costs right down to the loan level with relative ease. If you are a bigger shop and prefer to pay a flat fee per user each month, that is a Web-based variation called Application Service Provider.
When using EDM, about the only time you will need to ‘paper out’ the loan is at the time of signing, and as true e-mortgages come closer to widespread adoption, that need will disappear, too. At that point, the industry will have truly evolved from having a carbon footprint of elephantine proportions to one appropriately small.
Keven Smith is president and CEO of Mortgage Builder Software, based in Southfield, Mich. He can be reached at (800) 460-5040.