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From Paper Trail to Super Highway

How the Mortgage Insurance Industry Traded Its Unwieldy Paper System for Sleek Digital Processing

By Jerry Murphy

The mortgage insurance (MI) industry has been through quite a transition over the past several years. Those in the business in the early 2000s remember offices with file cabinet-lined walls, rooms jam-packed with boxes, and stacks of paper with brightly colored tabs and folders. Paper files were shuffled from desktop to file box and shipped to company headquarters, investors, and third-party vendors.

During the boom years, the mortgage industry was a loyal friend to office supply stores with a seemingly never-ending need for paper, folders, staples, toner, and storage boxes. Mortgage professionals relied on strict organization systems, but it could be difficult to know exactly where each loan was in the process. Automated workflow systems existed, but they were not yet tied to the loan files because the actual loan files were sitting in folders.

Fast forward a few years, and a mortgage office looks quite different. File cabinets are few and far between; stacks of paper have dissipated, making room for sleek 20-inch monitors, and colorful file folders and tabs have faded to a distant memory. Today’s industry is characterized by digital processes that transformed mortgage documents from a tangible object to an easily accessible, secure, mobile, intangible entity.

The Paper Trail

It was the refi boom of 2003, and underwriting offices were crammed full of paper loan files that had been faxed, mailed, or hand-delivered. At MGIC, for example there were so many files to process the company had 20 underwriting offices across the country to manage the intense workload. In comparison, MGIC has just five underwriting offices today. The refi boom also corresponded with a boom in contract underwriting service offerings, which was a very paper-intensive process.

Many mortgage insurers hired interns to help their underwriting teams handle all the paperwork. In fact, it was common to see entire rooms devoted to handling incoming files. It was quite a process when the morning mail deliveries arrived and the team of interns proceeded to convert incoming envelopes into workable loan files.

If one underwriting office had a lighter workload than another, that office would often box and ship files to another company office to more evenly manage the pipeline. After the underwriting was complete, it was time to ship the loan files back to headquarters’ distribution center for permanent archival.

Permanent file archival was an entire department at many MIs. They had all the tricks of the day—microfiche, microfilm, and sophisticated file catalog systems. A request to retrieve a file was a multiday process. The complexity of it puts the Dewey Decimal system to shame.

Road to the Digital Age

MGIC was one of the first companies in the MI industry to move away from paper loan files and turn to digital file processing and storage. Doing so ultimately gave the company a huge advantage in terms of cost savings, improved customer service, and simplified operations.

Initially, companies like ours simply began scanning paper files and digitally archiving them, eliminating the need for paper storage and shipping. This was an excellent first step in that it gave MI companies experience with the high-speed scanning and the technology required to digitally store loan files. Moving paper files to the shredding bins was a scary step as the MIs slowly began to trust electronic image storing. Cost savings were immediate at MGIC—there was no longer a need to ship loan files from as far away as Puerto Rico to Milwaukee. The next step was to scan the paper loan files upon receipt and create a paperless workflow and underwriting process. This, too, was a culture shock for people who had spent their entire careers working through paper files, scribbling notations as they went along. What on earth happened to those rubber thumbs the underwriters used to rifle through the paper?

The final step was when customers became paperless themselves. Now MIs were able to receive loan files digitally, skipping the paper delivery step entirely. Suddenly the benefits MIs saw from a paperless environment had spread to their lender customers who were able to securely upload loan files. Now their RUSH files really could be rushed.

Changing Lanes

At many industry offices, remnants of days gone by still linger—high-speed scanners in every office that rarely get used, reception areas that are no longer occupied because couriers and package delivery folks don’t stop in much anymore, supply rooms full of folders and two-hole punch machines looking for a good home. In their place, you now see high-tech workstations complete with 22-inch monitors or side-by-side monitors. The benefits of this decade-long transition are many. For example, today it only takes a few moments for MGIC to deliver a loan file for MI underwriting or contract underwriting via the company’s secure loan origination website, the MGIC Loan Center. In contrast, in the era of paper loan applications, each loan delivery might cost up to $50 and take a day or two to arrive at one of the offices. Cost savings are seen throughout the entire operation, from office and storage space savings to the human cost savings brought about through automation.

Processing and underwriting capacity have increased with the flexibility this new technology provides. It is no longer necessary to keep underwriters where paper loan files reside. As long as the underwriters have a high-speed internet connection and a secure work environment, they don’t need to work where the lender is located. MIs no longer live in fear of the next business boom, because they can rapidly right-size their organizations to suit the changing business environment. This would not have been possible without the paperless solutions put in place over the last decade. Another byproduct of today’s technology-based workflow is improved security as a result of going paperless.

High-speed Information Super-highway

In today’s ultra-competitive environment, it’s critical to be as efficient as possible.

Companies need to make it as easy as possible for your customers to do business with you. For MIs, this means it’s extremely important to establish secure interfaces in their customers’ technology platforms in order to best serve them. Customers should be able to log into their organizations’ systems, place an MI order that gets routed to their insurer at the same time they are processing their loan file, and get an instant decision—without having to log into a completely separate system. Improving the automation of all the transactions during the loan origination process is crucial to remaining competitive in this market. With automation comes efficiency, accuracy, and security, which leads to significant cost savings. This savings can then be passed on to borrowers.

The future of the mortgage industry lies in the ability to securely share digital information between organizations in order to be as efficient and cost-effective as possible. That means there will be increasingly more third-party vendor integrations with loan origination systems (LOSs), product and pricing engines (PPEs), and document delivery and management systems. After all, why duplicate efforts? Whenever possible, companies should leverage the data and documentation that already exists in their own systems.

That’s why MGIC has already integrated with the leading LOS, PPE, and document management providers to ensure their customers have the capability to get accurate rate quotes, order MI, and send documents securely and directly through their systems. It is also important to actively participate in the Mortgage Industry Standards Maintenance Organization (MISMO). This allows companies like MGIC to stay up-to-speed with the always-evolving data-sharing standards.

For the industry to continue to evolve, it is critical all parties in the mortgage process—from originators to lenders to investors to service providers—stay current on technology standards and secure, efficient methods of data and document sharing.

Editor's note: This select print feature appeared in the April 2015 edition of MReport magazine.

About Author: Jerry Murphy

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Jerry Murphy is VP of Field Operations at MGIC, a private mortgage insurer committed to providing quality products and services while protecting investors from credit losses. Murphy has more than 24 years’ experience in the mortgage industry, all of them with MGIC. Previous to his 14 years in field operations, he was an applications development manager for MGIC’s information technology team.
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