Brother, Can You Spare a File?

You might consider qualifying applicants to be your biggest hurdle as a mortgage lender—particularly in this volatile economy. But maintaining records—both paper and electronic—poses a possibly even greater challenge.

The Five Most Common Mortgage Records Challenges
Do these sound familiar?

• Managing loans your firm has bought or sold, including their integration into current processes
• Controlling document access authorizations
• Maintaining and accessing information within regulatory constraints
• Ensuring secure chains of custody
• Reducing costs, while maintaining (and increasing) efficiency

The Strategy:
Is your mortgage business experiencing increased volume? Despite fallout from the 2008 financial crisis, the mortgage business remains strong. In 2009 (the last year for which comprehensive data was available), the largest lenders combined to service approximately $378 billion in subprime first mortgage loans.*

Each of those notes will generate a trail of records in its wake—from the initial loan application to follow-up documents. Trailing documents must accompany a mortgage throughout its lifetime and even beyond. When you sell or acquire mortgages, all of these related files must follow them to their new homes.

Have you digitized much of this process online? That’s great news. But you’re not off the hook just yet: The most effective and efficient mortgage records system must reduce costs and control chain of custody for digital and paper based records. Anything less may leave you open to a host of customer service, financial and legal ramifications.

Here’s one disturbing example that shows the importance of fast access to documentation for all mortgage notes under your care—even the ones you’ve purchased from another lender: In a recent case, a U.S. Bankruptcy court dismissed a Bank of America claim to enforce a mortgage. Why? Because the homeowners being sued claimed that B of A couldn’t produce the original note on the property, which Countrywide Home Loans issued in 2006, two years before B of A purchased the firm.

When the lender finally submitted the documents, it was too late: The court sided with the homeowners, citing many inconsistencies in B of A’s records handling. As a result, the homeowners were no longer responsible for their $211,000 mortgage.

Putting Your House in Order
You can minimize your firm’s exposure to such liabilities—if you consider the weak spots in your records management program and address them with a hybrid approach.

A common conundrum of mortgage records management is the multi-site management of paper and electronic files. Lenders often generate and store files in different physical locations and in different formats, without a thought about their organization and continued access. The inconvenience and poor access inherent in multi-location firms encourages bad employee habits, such as making unauthorized copies of paper or digital docs.

To manage contracts end to end, you need to first limit how many people touch, copy, mail, fax or otherwise transmits sensitive files. Then, maintain an audit trail that logs authorized accesses. Scanning paper documents is a good first step toward this goal, and that’s where the lenders are heading. But it is not economically feasible to scan every scrap of paper in every mortgage record. A hybrid solution accommodates both types of documents, but you still must determine how to store records so that they are protected and accessible.

When determining which documents must be digitized, consider frequency of use, access needs and each file’s overall importance. And don’t forget files related to delinquent loans or those likely to default.

Centralizing loan records will trim the time it takes your employees to search for files. Web-based access can get information quickly to lawyers, investors and others in need of it. And concurrent, monitored access ensures that everyone is working from the same document.

When Does Hiring a Housekeeping Professional Make Sense?
Meeting the stringent requirements for storing records can be an expensive and unwieldy process. A trusted third party can provide state-of-the art storage facilities and technology.

Take the case of one lender that was anticipating the purchase of more than 100,000 subordinate lien mortgages from various sources. The company needed to store, retrieve and use critical information contained in each mortgage customer’s hard copy file. The question: Should it store scanned abstracts of mortgage files internally or turn to a third party?

Executives chose to have customers send the loan files directly to Iron Mountain where they were reconciled and stored at the Dallas Point Record Center. Iron Mountain provided an Image on Demand™ service, fulfilling more than 100 requests each week by identifying and scanning a 50-page abstract of each loan file. The files were sorted into 15 types of documents and uploaded into the Digital Record Center® for Images. Now more than 100 users can access those files online.

Ultimately, the institution was able to accomplish what others mortgage lenders are struggling to do—efficiently manage the growing deluge of physical and electronic documents associated with mortgage records. By collaborating with a trusted third party, you can centralize records storage and save money by freeing up real estate. In addition, you’ll standardize your business processes and even ensure a more fluid disaster recovery plan, customized to your business needs.

Iron Mountain Suggests:
Approved! A Five-Point Mortgage Records Management Plan

Iron Mountain recommends:

• Digitize files on an as-need basis. Consider frequency of use, importance of material and urgency of access to determine which documents should be converted from paper to digital format.
• Control authorization. Reduce and control the number of people “touching” mortgage files
• Adopt a hybrid records strategy. Devise a plan that selectively accommodates both paper and digitized files. Create image copies as required.
• Centralize file management. Improve security and accountability, by ensuring distributed access to appropriate users.
• Consider outsourcing. Turn responsibility over to a trusted partner who specializes in records management. By doing so, you’ll get better service, reduce onsite document storage costs and manage the loan file life cycle.

Do you have more document management questions? Read additional Knowledge Center stories on this subject, or Contact Iron Mountain’s consulting services team. You’ll be connected with a knowledgeable product and services specialist who can address your information management challenges.

* from 2010 testimony by John C. Dugan, Comptroller of the Currency in the Treasury Department, to the Financial Crisis Inquiry Commission.