In Part I of this series, I discussed why some lenders are hoping that manual processes can support the transition to integrated disclosures and why this assumption is fraught with cost, slow processing time and high risk of error. The August 2015 cutover to the new integrated disclosures is a significant transition – the kind that requires a redesign of current processes.
To meet both compliance and quality control objectives, lenders need a way to collect more data than they have before, and coordinate document preparation and delivery within more rigid guidelines. But what options do lenders have to collect this data?
Creating the new integrated disclosures requires a fundamental change in the flow of information. Today, lenders send HUD data to settlement agents, and those settlement agents prepare the final HUD-1 form, ensuring that fees and line items are correct and properly formatted. With integrated disclosures, that information flow is reversed.
Lenders now need to be able to receive closing data from settlement agents in an efficient and accurate manner. They also need to compare the Loan Estimate, Closing Disclosure and, later, the final signed closing documents to ensure that fees remained within acceptable variance and that the forms met quality measures.
Developing interfaces with various systems to collect loan, fee, and closing data directly is time consuming and difficult for LOSs. At the same time, requiring settlement partners to enter data manually isn’t scalable or cost efficient. The most promising approach is to employ a technology that can extract necessary data from the documents the industry is so used to managing.
A document delivery system with built-in capabilities to extract data from documents and enable two-party collaboration on the input of data is the ideal means to achieve all objectives. LOS systems do a good job of managing your origination process.
Doc Prep systems do a good job of generating compliant forms. Neither is as well-positioned to securely, cost-effectively and efficiently pull in data from other workflow participants as needed for integrated disclosures, and then compare document versions from different points in the mortgage workflow
This requirement doesn’t just apply to the Closing Disclosure. Lenders with wholesale or broker channels face almost the exact same challenge with the Loan Estimate form. Whereas the sending of the Good Faith Estimate (GFE) is handled directly by the broker today, the lender will soon be responsible for the data on the new Loan Estimate.
Again, the lender is faced with the challenge of receiving data from the broker to review and approve the Loan Estimate document. Being able to automate the uploading and extraction of that data via the documents submitted by the broker will help lenders cost-effectively meet compliance requirements in their broker channel.
In the long-run, systems will be able to facilitate a more direct exchange of data, especially using the MISMO 3.3 standard for data exchange. While this may reduce the need to extract data from documents, it doesn’t lessen the collaboration and coordination required to jointly create new integrated disclosures forms. Delivery systems with collaboration features are best suited to facilitate this kind of data exchange.
Ultimately, relying on data extracted from draft documents created by other parties, using it to compare various baselines of fee data, and transitioning it to the final documents delivered to the consumer may be the best approach for lenders looking to evolve their business processes. Lenders who can move from a document to a data driven workflow will find themselves well positioned meet the new CFPB compliance objectives in a cost efficient and scalable manner.
