Do These Sound Familiar?
- Making sure that you collect and retain the most critical origination and collateral documents to protect against buybacks or reps and warranty claims
- Ensuring that you have clear title for each mortgage, and therefore, all documents needed to initiate a foreclosure process
- Keeping your loan documents organized and easily accessible for regulatory and compliance audits
- Enabling an increasingly over-stretched team to more efficiently access and work with loan information (for origination, servicing, litigation, or resale)
- Ensuring secure chain-of-custody, providing access only to those with authorization
Five Steps To Better Mortgage Records Management
In today’s mortgage environment, there is no room for error. Origination volumes are down, the refinancing boom is beginning to unwind, and the ever-changing regulatory environment is your new normal. The management of your loan documents, both paper and electronic, has never been more important.
Is your mortgage business busier even though origination volumes are down? Despite forecasts that 2012 may be the worst year for originations since 1997, regulatory changes, lawsuits, and a growing number of buybacks have kept mortgage lenders and servicers busier than ever.
Document management is an area of increased focus for mortgage lenders and servicers alike. As parties work to carefully document that every “i” has been dotted and every “t” crossed, the average mortgage file size is growing. With all the lawsuits and buybacks, it’s critical for banks to make sure that they have a well-organized file with backups of their most important documents.
“You can minimize your firm’s exposure to liabilities if you consider the weak points in your records management program and address them with a hybrid approach.”
This problem continues well beyond origination, as critical collateral documents, servicing documentation and borrower documents continue to trickle in and evolve over the lifetime of a mortgage. The situation is made more complex as loans and servicing rights are sold, and loan files change hands.
Here’s one disturbing example that demonstrates the importance of having quick access to documentation for all mortgages under your care – even those you’ve purchased from another lender. In a recent case, a US bankruptcy court dismissed a Bank of America (BofA) claim to enforce a foreclosure. Why? Because the homeowners being sued claimed that BofA could not produce the original note on the property, issued by Countrywide home loans in 2006, two years prior to its acquisition by BofA.
When the lender finally produced the documents in question, it was too late. The court sided with the homeowners, citing many inconsistencies in BofA’s records handling. As a result, the homeowners were relieved of responsibility for their $211,000 mortgage, freed of their debt, and allowed to keep their home.
Putting Your House In Order
Have you digitized much of your loan files already? 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 repercussions.
You can minimize your firm’s exposure to such liabilities if you consider the weak points in your records management program and address them with a hybrid approach.
To manage loans end-to-end, first limit how many people touch, copy, mail, fax, or otherwise transmit sensitive files. Then, maintain an audit trail that logs authorized access. Scanning paper documents is a good first step toward this goal, a practice many lenders have already implemented. To make a solution even more economically feasible, banks may want to consider scanning only the more important portions of a loan’s documents, such as the collateral records, rather than scanning redundant copies of non-essential records that do not increase the loan’s security. A hybrid solution accommodates both types of documents, but you must still determine how to store records so that they remain 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 most likely to default.
Centralizing loan records will trim the time it takes your employees to search for files. Web-based access can get information to lawyers, investors, and other interested parties quickly. And concurrent, monitored access ensures that everyone is working from the same document.
When Does It Make Sense To Hire A Housekeeping Professional?
Meeting stringent records storage requirements can be expensive and unwieldy. A trusted third party can provide leading-edge storage facilities and technology.
Take the case of one lender who 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. The question: Should it store scanned abstracts of mortgage files internally or turn to a third party?
Executives turned to a third party vendor and chose to have customers send the loan files directly to Iron mountain where they were reconciled and stored at the Dallas Pinnacle 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. Today over 100 users can access those files online.
Ultimately, the institution was able to accomplish what other mortgage lenders are struggling to do — efficiently manage the growing deluge of physical and electronic documents associated with mortgage files. Consider the benefits of adopting a similar course of action yourself. By collaborating with a trusted third party, you can centralize records storage and save money by freeing up valuable real estate. In addition, you’ll standardize your business processes and even ensure a more fluid disaster recovery plan, customized to your business needs.
A Five Point Mortgage Records Management Plan
You may start to save money and increase efficiency if you:
- Digitize your files on an as-needed basis.
Consider frequency of use, importance of materials, and urgency of access to determine which documents should be converted from paper to digital format
- 2. Control authorization.
Reduce and control the number of people “touching” mortgage files
- 3. Adopt a hybrid strategy.
Devise a plan that selectively accommodates both paper and digitized files
- 4. Centralize file management.
Improve security and accountability by ensuring distributed access to appropriate users
- 5. Outsource your records management.
Turn responsibility over to a trusted partner who specializes in records management. You’ll get better service, reduce on-site document storage costs, and manage the loan file life cycle
Learn More About Document Management
Do you have more document management questions? You can read additional information on this subject in the Iron Mountain Knowledge Center. If you would like to connect with a highly knowledgeable product and services specialist who can address your information management challenges call:
800 899 IRON (4766).