There has been so much talk over the years about delivering a true, automated, systematic process that ensures data and document integrity, quality and compliance throughout the origination and closing process. While there have been major investments in systems to extract data for verifying compliance before the loan gets boarded and funded these efforts are a tail wagging the dog approach in taking “dumb” pdf’s and scanning them to make them digital after the fact.
Basic challenges with above approach:
- Missing trailing documents; when did you ever get a consistent, complete & current package first pass with all the documents 100% of the time? Ever?
- Was the system able to effectively read all of the docs and data the first time?
- Was the system intelligent to identify if you were missing pages or signatures?
- Did you have ability to auto stack and index them back into the system?
- Did you receive any audit history to verify TRID and all other compliance regulations?
Some companies are looking at the next shining object – Blockchain to overcome this but Blockchain is not going to solve the above issues as it’s only dealing with the data and not the actual document.
Finally, there is an answer! MISMO v3 Verifiable SMARTDocuments® is the one true “Source of Truth” solution. SMART stands for Secure, Manageble, Archivable, Retrievable, Transferable and now with the recent release and approval of the Verifiable SMARTDocument format virtually all data and documents can be auto verified and certified to ensure compliance.
Start “e” and stay “e” to Deliver a True “Source of Truth”
It’s time to look at innovative technology and introduce you to a totally “new” approach – go digital and stay digital — but to get there we need a quick discussion on what it means to deliver a “true Source of Truth” via a full automated digital process and service.
- 1st generation data: This data is as pure as it can be because it is generated from the system of record database that creates the documents which includes any changes to the data which is continuously tracked and updated systematically.
- 2nd, 3rd and 4th generation data: Every time the data and documents are scanned, keyed in and/or manipulated. This means with each instance you get farther away from the source of truth. We refer to this as dirty data because with every party who touches, contributes to and changes the data nobody wants to rep and warrant compliance of this data. Because you can no longer trust the integrity and veracity of the data and documents, this is why investors and rating agencies require a 10/20% re-underwrite/audit of the data and documents post closing to verify compliance prior to funding. [It is estimated on average that data and documents are updated (both internally and externally) at least 20 different times by 10 different people[LP1] and five different systems over the origination and closing process of the loan]
- What about Compliance? The other topic to address is compliance. What kind of documentation do you receive around “when” data and documents are delivered to the borrower to ensure proof of TRID compliance?
MISMO Version 3 SMARTDocuments®
Introducing you to the concept of self-verifiable documents. With SMARTDocuments® SMART = Secure, Manageable, Archivable, Retrievable, Transferrable; and now Verifiable. What that means, is the native source XML data is securely embedded “inside” the documents throughout the mortgage loan origination and closing process. So now, for the very first time in the mortgage industry’s history, 100% of the data can be auto verified for completeness and compliance every time a document is generated!
In this new world when the loan is “cleared to close” from underwriting a final compliance audit is performed on the data and that “blessed” data is auto populated and embedded “inside” the documents and immediately wrapped with tamper evident seal to ensure the security, sanctity and integrity of “all” the data and documents. A date and time stamp audit trail travels with the document(s) to show evidence of compliance not only on who, but what data was changed (version control) and when the documents were delivered and eSigned as well. From a compliance tracking and accountability perspective – this is virtually nirvana!
Close with Confidence and Fund Next Day with Certainty
Think of the pickup this means to secondary marketing execution. With SMARTDocuments, you can now ensure the investor that all the data and documents meet their investor requirements “prior” to the loan closing and eClose the loan to lock it down. For the first time investors can actually trust 100% of the data in and on 100% of the documents without having to OCR dumb documents to extract to perform yet another post closing compliance check on them prior to funding.
The CFPB introduced the idea of maintaining a Compliance Management System, (CMS) years ago and now you actually have one
Finally, executing compliance management in a totally digital fashion for every instance and version of the data and documents is retained in an eVault along with a date and time stamp audit trail. If anyone contests the legality of the loan down the road, all that history is maintained in the eVault to show electronic proof/evidence of compliance as long as the loan is active.
And you don’t have to wait for Blockchain – The Ultimate Solution Exists Today
So much buzz, energy and investment has been focused on blockchain as the next big thing but there are basic issues that SMARTDocs solves today that blockchain may never address. Benefits including immutability, data security, general ledger, transparency, reducing compliance risk and costs are available today with embedded SMARTDocs and the eVault. So, what are you waiting for? Do you think that Steve Jobs waited for consumers to ask for the iPhone, no, he saw a market need, and opportunity to fulfill it and virtually changed the world on how we communicate. SMARTDocs has the same potential if only investors would embrace them.
Tim Anderson is President of the eMortgage Division at Evolve Mortgage Services. Evolve Mortgage Services, LLC based in Frisco, TX., is a top provider of tech-enabled outsourced mortgage solutions and eMortgage technology. Evolve enables companies to eliminate roadblocks and focus their valuable resources on growth. The company’s services empower mortgage lenders, servicers, and investors to reduce inefficiencies in their mortgage loan process and dramatically improve profitability. Founded and run by a team of industry veterans, Evolve provides seamless component or end-to-end loan services and creates custom strategies for each client. The firm has extensive experience in origination and post-closing services; institutional, whole loan, and servicing acquisition due diligence; MSR, and compliance loan reviews including HMDA, forensic, whole loan sales, agency deliveries and TPR securitization reviews and asset transfers.