Mobile Banking and the Qualified Mortgage

Last month I purchased a new home in Southern California. Before any of you post a congratulatory message, understand that said new house is accompanied by a 30-year financial commitment known as a fixed rate mortgage.  I didn’t have a problem making this financial commitment despite our shaky presidential selection process, not to mention the shaky geologic situation in Southern California. But like many borrowers, I was left wondering “why is this process so painful?”

Mobile Banking and the qualified mortgage

I write precious few paper checks these days — and I suspect I’m not alone.  Almost all my banking is done via an app on my iPhone.  I’m not a millennial by any means, but it still seems strange to me when a vendor asks for a check, or I’m expected to tender currency.

When it comes to banking, it seems we’ve all embraced on-line transactions.  For me, the hunt for the new mortgage this year began much the same way.  After some extensive on-line rate shopping and a few email exchanges, I was provided with a new, TILA RESPA approved, three page loan estimate (as a pdf attachment!)  Even more impressive, I was given a user name and password for a loan portal, where I could upload required documents and track the progress toward my closing date.

While I went about using my SnapDoc mobile app to capture documents and upload to the portal, my college daughters (yes millennials) wondered why I had to send them so much information.  Keep in mind, these girls have set foot in an actual bank once in their life—to set up their high school savings accounts—and they were left wondering why they had to make an in-person appearance for that event.

Why Your Lender Needs All That Paperwork

While I was thinking of the best way to explain to them why banks need all these documents, I came across a blog post by Mark Greene on Forbes.comWhy Your Mortgage Lender Needs All That Paper Work.” Mark does a great job explaining that the Qualified Mortgage (QM) that came about as part of the CFPB (Consumer Financial Protection Bureau – the same folks who produced the Truth In Lending Act.) It seems the CFPB not only protects consumers, but it affords lenders protection from potential buy backs if they produce well-documented, audit worthy loan packets.  Hence the paper trail of pay stubs, tax returns, W-2s, bank statements and so on.

With the kids informed—if not convinced—I uploaded dozens of requested documents to the bank’s portal.  In the ensuing days I would login each morning to track the progress of my loan. Occasionally a status for a required document would go from yellow—meaning they were reviewing it—to green, meaning we were good with that one. But as we approached the closing date, many of these basic documents stayed in the dreaded yellow zone.

Being in the document automation business, I know that even with an arcane, manual data entry system, three weeks should be enough time to recognize my w-2 form and type in the 15 fields of data.  A call to my loan officer (I should say several telephone tag calls to him) ended with him acknowledging that he really didn’t get the loan portal, and (I quote) “why don’t you just fax them to me?”

SIGH. Again, not a millennial, and I’ve done my share of faxing—years ago, but there seemed to be something wrong with the system. It was as if the two groups within the bank didn’t talk to one another: the marketers and customer service people who know I want to transact on-line, and the regulators, who know that the mortgage crisis of the last decade was the result of poor documentation, not poor customer service.

Eating Our Own Dog Food

The thing is, all of the technology is there to accommodate both groups.  This can be made so much easier and there are benefits to the consumer, the bank employees, and even the strategic decision makers at the bank.

Next week I will be presenting Ephesoft’s latest mobile technology at Finovate Spring in San Jose (Full disclosure, I will be the speaker, the actual cool demo will be shown by Ephesoft’s CTO, Ike Kavas.) This is personally exciting for me, because many times you hear of vendors using their own application (“eating their own dog food” in the industry parlance,) but here is my company Ephesoft actually developing a solution that was tailor made for me.

Ephesoft has a rich history in the Mortgage industry.  Every month our Ephesoft Transact software is used to classify millions of mortgage documents and extract the information. For some Fintech customers the goal is to accelerate the mortgage process. For others, particularly those in the private mortgage sector, they employ Transact to normalize incoming mortgage packets from lenders and reproduce them in a logical, audit friendly, tabbed PDF.

At Finovate, we will be showing how our Engineering team took the processing power to classify these documents and capture the data, and ported it onto a mobile device.  Doesn’t matter if you have connectivity to the internet or not.  All the processing can take place on the phone.   The net-net for consumers like me applying for a loan, you’ll see a lot of immediate green icons when you go to the lender’s portal.  Happy end user, and the loan officer and his fax machine are free to take care of other customers.

We’ll also be showing how this mobile technology works with Ephesoft Insight, so the smart people at the bank can pull data from multiple repositories of millions of unstructured documents and perform eDiscovery, data visualization and predictive analytics. We like to think of it as a building a bridge between the mobile millennials who want fast & easy mobile transactions, and the document-based unstructured content required by auditors to meet business and regulatory requirements.

And yes, we love the house.