Technology: Improving Mortgage Lending Efficiency One Day at a Time

The average time to close a mortgage from application is between 42 and 49 days according to data from Fannie Mae. Why should it matter? According to Arizent’s Future of Mortgage Lending survey, nearly three-fourths of consumers said they think the process should take no more than 21 days from initiation of the application to closing. 

While that expectation diverges with the current reality, lenders should rely on technology that speeds the time to close as much as possible. Despite options in the marketplace that can speed the time to close, there is still a lot of manual processes and inefficiencies stalling the time to close. 

To help lenders meet customer expectations, VirPack strives to have all borrowers’ loans closed in 30 to 45 days or less. This is a demanding goal fit for “a perfect world,” but lenders cannot rely on manual processes and expect to drop their average time to close. 

Understanding Where the Friction Is

Even if a borrower is pre-qualified, the first hurdle for lenders is to assess if a potential mortgage borrower qualifies. Lenders must gather all the required documentation directly from the borrower, their realtor, accountant or other parties. This process results in a high volume of customer data being placed into one folder.

Without automation, loan processors and underwriters “stare and compare” the pooled information for many hours. They must then manually input the data into the underwriting program and ensure all borrower data has been collected and saved accurately in the lender’s loan origination system (LOS). In a traditional lending operation, data gathering can last as long as 120 days. Even if all the required information recorded is correct, the data still may need various updates over time.

Loan processors spend most of their working hours ensuring loan documents have the required signatures, are legally compliant and accurately represent the borrower’s financial profile. These tasks, including loan risk calculations, must be completed before data transfers to the loan origination system (LOS).

Unfortunately, relying on manual processes introduces the risk of more mistakes. Even small mistakes can turn into expensive losses. For example, if a disclosure is sent out after the deadline or the file contains outdated credit scores or non-compliant appraisals, the loan will be delayed at best or flagged for non-compliance at worst. 

Automation Saves Time AND Reduces Errors

Lenders can rely on proven technology to avoid costly errors while also reducing the time from application to close. The key to making the most of automation, however, is to not assume one-size-fits-all when it comes to technology.

Instead of just relying on an “out of the box” solution, VirPack’s team monitors the lender’s underwriting process to see the specific tasks loan processors complete manually to estimate the average underwriting time. They can determine how many hours each day the team spends reviewing the documentation. Using that information, VirPack provides an accurate estimate of the time that can be saved by underwriting loans using their platform. This also provides a benchmark for measuring the lender’s return on investment (ROI) after adopting the technology.

As a rule, VirPack’s technology improves ROI by helping lenders shorten the loan cycle by at least five hours per day. By saving many hours across the loan file for underwriters, loan processors and shippers, the loan can close faster, providing a stronger borrower experience and increasing revenue.  

Building Trust for Lenders

Implementing new technology and workflow into the loan process requires a level of trust in the lender’s partner. If operation managers, underwriters, loan processors or others who must use the new technology do not buy into the changes, LOS updates or replacements are not a priority. 

And there are risks involved in any change. Loan processors may hesitate to fully trust the technology to take over the mortgage processing quality control, reducing its effectiveness. Managers may also be reluctant to invest the time needed to adopt and train staff for a new system. 

A common concern that lenders often express, especially during economic uncertainty, is the ability to close loans without losing traction in the middle of the process to other lenders. Even though the borrower is locked in with a lender, they are regularly contacted by other lenders, whether that be through targeted advertising or personally. In some cases, borrowers who believe they can get a better deal with another lender will leave, opening the lender to rate risk and wasted resources. 

By implementing VirPack’s workflow and automation tools, lenders are empowered to move quickly through loans while ensuring that nothing falls through the cracks. By reducing the time to close, they are in turn reducing the borrower’s “shopping time.” 

Another area lenders need to be careful of is data security. The question lenders should always ask their technology providers is, “How are you protecting my customers’ data?” The vendor should also be able to outline what they can do to minimize lenders’ damages if a customer data breach happens.  VirPack’s built-in security system was designed to automatically protect users from data breaches and hacking risks when they extract data. 

While many lenders have delayed implementing automation technology, the amount of time it can save the organization greatly outweighs the common objections. By adopting a trusted technology like VirPack into your lending process, lenders can close the gaps within the process and reduce the time to close.