How is pack quality important in first time right applications?

application pack

According to Fannie Mae, 69% of buyers would apply for mortgages online. Lenders also benefit from the lower costs offered by automation. Nearly 66% of mortgage process expenses are attributed to people.

Initially, there were concerns over increasing default rates due to the automation of the process. However, recent statistics show that Fintech mortgages have 25% lower default rates than traditional lenders.

With the digital processing of loan applications growing rapidly, it is essential to understand how to optimize this process.

One key factor in this is the mortgage application package. These packages are critical when intended for suitable first-time applications.

Traditional lenders often spend hours, days, or even weeks to go through these packages and verify them. However, AI in financial services enable loan applications to be processed 20% faster than other lenders.

So, what exactly is a mortgage application package? How are fintech lenders able to process applications quickly and reduce default rates? Is there a way to optimize this process further?

What is a Mortgage Application Package?

A mortgage loan application package, simply put, is the potential borrower’s file. Applicants are responsible for building this file with the help of the lender. It includes vital information that the lender uses to determine if the mortgage is viable for approval.

The package consists of the documents required when applying for the loan. Some of the documents needed when presenting an application are:

  • The Note: The written promise that the borrower will pay the lender as per the terms decided.
  • The Deed of Trust: A security instrument that acts as insurance for the bank. If the borrower fails to repay the loan or other home payment responsibilities, the banker will have the right to foreclose the property.

Personal Documents: This includes pay stub for the last 30 days, W-2 forms, signed federal tax return, documentation of any other sources of income, bank statements, documentation of the source of your down payment, documentation of recent name change, and proof of identity.

The Lending Instructions/Conditions: The document states the various conditions required to be met when applying for the loan. These conditions can include things from buying a homeowner’s insurance to paying off credit cards to the need for exact signatures on the loan documents. In addition, details like product type, down payment, and interest rate are discussed between the applicant and lender and then added to the file.

The Closing Disclosure: It is a government-issued form that details the entire disclosure of the costs, loan, rate, and terms within a loan transaction. This form will be presented at every step of the loan process.

Often, these packages will have multiple copies of these documents for the benefit of all parties involved in the mortgage process (such as a lender, escrow company, title company). Hence, using manual labor to go through these documents, make copies, and divide the originals and copies into piles that need to be sent to the proper parties can be a time-consuming feat.

With the introduction of AI in the mortgage industry, the process is automated and simplified for the benefit of the lender and borrower. In addition, it has made it easier to file suitable first-time applications as there is limited room for human error.

What are First Time Right Applications?

“First time right” is a concept. It states that a particular process is done correctly the first time it is attempted and every time. This means it does not require any repeats and redos to complete the process.

When it comes to mortgage loans, first-time right applications refer to when a borrower submits all the details and documents as required. As a result, the application is 100% complete, authentic, and ready to be processed at the first instance.

With fintech lenders, first-time suitable applications are possible through high-tech software. The combined use of computer vision, machine learning, and NLP technology allows software like RevEL to extract data from documents with over 95% accuracy.

The information is also validated in real-time through document and cross-document conditions. With Digilytics RevEL, one-shot learning (OSL) algorithms and models are paired with a Mortgage BERT framework to process these applications efficiently and accurately in real-time. The future of artificial intelligence is heading to improve the accuracy rate and the speed at which these applications are processed, allowing potential homeowners easy access to mortgage loans.

Why Does Pack Quality Matter in First Time Right Applications?

When we talk about pack quality, we mean the quality of the documents provided within these mortgage loan application packages. Since first time suitable applications are intended to be completed without any issues and repeats, it is vital that the information provided is accurate, authentic, and up-to-date.

Since the process uses artificial intelligence capabilities to process and validate documents for efficiency, its pack quality is vital in ensuring it is done without a hitch. This means providing documents that are clear and valid for ease of automation.

About 40%-60% of repurchase requests are due to a missing key document. Missing documents are a vast yet avoidable issue that sets back mortgage loan originations. Not only does this issue cause setbacks, but also numerous false findings.

How Do Missing Documents Cost Lenders?

A missing document doesn’t necessarily mean the document is not in the package. For example, it could be named wrong or in the incorrect folder, are among other problems. Unfortunately, lenders often won’t manually go through the documents to find them themselves when these issues occur. Hence, it results in a repeat submission.

The inefficiency caused by these missing documents can lose lenders hours that could otherwise be used to do more complex tasks. This issue also leads to mandatory write-ups to prevent regulatory problems in tandem.

How To Improve Mortgage Quality Control?

Thanks to document digitization and intelligent data management techniques, mortgage quality control has become more cost-effective. In addition, automation and optimization have resulted in a more efficient and cost-effective workflow. Fintech lenders use this workflow automation, smart reporting, and digital analytics to improve loan application quality control.

Mortgage loan originations can genuinely be a proper first-time process with AI. Machine learning and Natural Language Processing (NLP) use the contextual clues in the document and resolve queries surrounding the application. If the documents lack sufficient information to enable this, it will result in the applicant having to resubmit a viable pack.

For this, the mortgage loan package must be submitted complete and stored in the system. With a comprehensive, cohesive, and accurate loan package, borrowers can have their applications processed at the earliest. Lenders can also process more loans as the issues surrounding documents are reduced.

How RevEL Ensures Pack Quality

Digilytics RevEL uses state-of-the-art artificial intelligence to provide financial service solutions to mortgage lenders. It helps lenders process mortgage loan applications with ease and minimal intervention. The workflow is optimized without forgoing the quality of the process.

It is a SaaS solution that can piggyback on any loan origination system. RevEL performs the 3C checks for document data verification: completeness, correctness, and consistency. This ensures that applications are suitable for the first-time right process.

RevEL also uses predictive models based on the applicant’s credit history and buying pattern, providing underwriters better insight to help with loan approval decisions. In addition, the pack quality helps these predictive models improve their accuracy.

With RevEL, the room for error is minimal. Human errors are reduced significantly, resulting in a higher rate of suitable first-time applications. Mortgage origination has never been easier thanks to the AI-enabled mortgage processing product by Digilytics.

Conclusion

Digilytics RevEL reduces your overall operations costs by providing an easy automation solution for your mortgage process needs. In addition, it improves productivity and facilitates quicker application processes.

The accuracy provided by RevEL’s AI for document scanning and validation is exceptional. To learn more about Digilytics RevEL, you can visit our website.