The future adoption of straight-through processing, as outlined in my previous article, could be seen by some industry players as heralding the end of the packaging function as we know it. However, the sub-prime/non-conforming mortgage sector has developed and thrived with lenders and packagers in partnership, and it is not likely that these strong business relationships will vanish overnight. Instead, successful packagers are more likely to find ways in which technological solutions can strengthen their role as offering a valuable service to brokers and lenders.
Many lenders, including Southern Pacific Mortgage Ltd, already have strong technology links with some of their major packagers by way of branded and remote processing arrangements. Here, underwriters employed by the lenders work in the packagers’ offices using direct links into the lenders’ own operating systems. These arrangements are highly sought after by packagers and are viewed as a very attractive service edge to offer brokers. Clearly, many brokers feel they will get a more personal service when submitting cases through a packager than if they submit individual cases direct to lenders. Irrespective of great technological advances, people like to do business with other people – especially in a service industry such as mortgage distribution, where so much depends on the end customer feeling they have been looked after well. Brokers with strong and mutually beneficial business relationships with packagers are likely to still want that supportive relationship – even when we have reached the point where a completely paperless application is possible.
Attitudes
Currently, there is a wide range of packager attitudes to the adoption of more automated processes, with some still wedded to wholly paper-based systems, and others that are leading the way and pushing lenders to catch up. Ultimately, the successful packagers will be the ones who align themselves with the technological revolution at an early stage, enabling themselves to keep pace with lender developments and still offer brokers the traditional support, knowledge and ‘clearing house’ function for applications that are difficult to place.
The core problem that lender technology is seeking to eradicate is the re-keying of information, and the holy grail is to achieve a single input of relevant data and the automatic capture and addition of data from other sources. This advanced scenario can be achieved using technology such as the rapidly-developing XML formats that defines the information contained in file in such a way that it can be read by any system or application. Once a set of data (such as the information needed to search a mortgage sourcing system) has universal legibility, the same information can go forward to produce a KFI, application form and decision confirmation letter. It can also provide the data for the rest of the mortgage process, including instructing online valuations, customer identification, contact with solicitors and much more.
Case-tracking
Of significant benefit to packagers working with lenders investing in electronic processing is case-tracking. Much time and resource can be soaked up in manually tracking the progress of mortgage applications through to completion. Case-tracking allows packagers and brokers to simply look up the progress of a case and pass on reports to the end customer immediately without the delays inherent in what may often be a series of telephone calls to and from the lender.
One key challenge to packagers is the need to integrate their own systems with the different operating systems of their panel lenders. In the past it has been necessary to key and store data in identical formats, field lengths and file layouts to be able to pass data between systems. Once set up though an XML file format informs the receiving system of format and data content, which can be full or partial, without causing errors. The transfer of data between systems and for the population of data into formatted documents becomes far simpler.
The IT revolution in mortgage processing looks likely to cause a fundamental change in the mortgage distribution chain. Packagers taking full advantage of technology will be able to return true added value to their service to both brokers and customers from sourcing the mortgage all the way through to application and completion.
All lenders are developing their technology rapidly, and most will be happy to discuss collaborative projects with their packagers, as we certainly are at SPML.
Stuart Aitken is director of credit at SPML
