June 24, 2022

Process Loans 3X Faster with Mortgage Document Automation

Mortgage industry has to deal with massive piles of documents for making verification checks and clearing loan approval. On the flip side, the age old document solutions (manual keying, OCRs…) aren’t enough to comprehend existing needs. The blog focuses on the process of mortgage, the documents used, documentation challenges, and intelligent document processing as a solution for mortgage document automation.

As stated in a report by FreddieMac, the U.S. mortgage market is expected to close at $2.1 trillion in the year 2022. Adding to it, the demands will be rising despite geopolitical turmoil and post Covid-19 economic slowdown.

On the contrary, the banks providing mortgage loans to the applicant will stay under constant stress due to the huge volume of document processing manually. With massive documentation requirements, the industry is constantly trying to optimize the processes for verification checks for approvals and to make them faster.

The hindering issue are the traditional ways of document processing which are incompetent as per today’s requirement keeping customer service/experience into mind. To bridge this, the mortgage industry is focusing on finding a mortgage document automation solution. A solution that can optimize their document process and help them with faster mortgage approvals.

To further explain, let’s start by learning how mortgage works and further lead to the challenges, and the proposed solution.

Types of Mortgage Loan and Documents Involved

Primarily there are 5 different types of mortgage loans an applicant can choose from. These are:

  • Standard Loan: Standard loans are provided in two ways i.e. conformational and non-conformational. Conforming loans have a set standard fixed by FHFA (Federal Housing Finance Agency) which includes credit, debt, and loan amount. A conformational loan can’t exceed the set limit and is ideal for purchasing small properties. On the other hand, non-conformational loans are ideal for purchasing huge properties simply because they are not regulated by FHFA. Standard loans are ideal for people with subpar credit scores or who have faced any financial setback in the past. The loaning time for a standard loan can be up to 30 years.
  • Jumbo Loan: These loans are provided for areas that are on the expensive side such as Los Angeles, New York, San Francisco, etc. These are ideal for huge loans.
  • Loan Insured by Government: Divided into three categories i.e. FHA (Federal Housing Agency), USDA (the U.S Department of Agriculture), and VA (the U.S. Department of Veteran Affairs) are loans provided to people with poor credit scores. These loans require less down payment and are ideal for someone who doesn’t clear for a standard loan.
  • Fixed-rate Mortgage: These offer fixed interest rates throughout the entire mortgage time period.
  • Floating-rate Mortgage: These offer floating rates depending upon the market. The interest rates in this type of mortgage loan can go both up and down.

Each of these mortgage types can have varied documentation requirements. With so much diversity, the process of documentation also becomes tricky considering the data processed is unstructured in nature. However with a mortgage document automation solution, each of these mortgage types can be catered to easily.

Documentation Required for above mentioned Mortgage Loans…

Tons of paperwork are required before a mortgage loan is finally authorized. Below are the documents required for applying for a mortgage loan in the USA:

  • Bank statements and other assets
  • Tax returns
  • Credit history
  • Proof of income
  • Renting history
  • Gift letters
  • Photo ID

Each of the documents mentioned above are reminiscent of the types of mortgages mentioned above. To handle these requires the mortgage to employ intensive document processing that in today’s time can only be achieved via mortgage document automation.

Which Mortgage Automations Are Popular Among Lenders? 

The pandemic impacted many typical loan processes, such as the traditional walkthrough home appraisal. This gave rise to the adoption of appraisal automation and appraisals being completed from a desktop with appraisers never actually stepping foot on a homeowner’s property.   

All of the core data that appraisers needed was online, such as comparable home prices, MLS information, and tax records. The digital appraisal process takes a fraction of the time compared to the traditional approach.

Mortgage Automation then took its shape in many forms. A few of the most common ways were: 

  • Automating repetitive human clicks within a respective Loan Origination System (LOS) 
  • Reconciling data from different sources (e.g. automated cross-checking info between a 1003 Form or tax documents and data in the LOS)  
  • Transferring data between distinct interfaces (e.g.  seamlessly transferring data from government websites into an LOS via automation) 
  • Using automation in mortgage lending to automatically order services within an LOS (e.g. ordering credit, flood, fraud, title reports, etc.)

Mortgage Loan Processing Steps

Multiple steps go in before approving a mortgage application. To get a better understanding of the same, below are the steps mentioned for mortgage loan processing:

Getting Pre-Approvals

It is a quick step that requires a pre-approval document. This document is based on a three-bureau credit report also known as tri-merge.

The document shows the credit record and the credit history reported by a third party. It is important because it allows the bank to foresee the permissible amount of loan it can lend. Also, it helps the bank to decide the interest within a range.

Mortgage Application

This stage focuses on the sources of income, the amount of income, income source, child support, current properties, address, bankruptcies, foreclosures, etc. The process of verification requires multiple documents. It is a time-intensive step and requires thorough background checks. Also, the credit history of the applicant is considered the most important factor before releasing a loan.

Processing of Loan

During this step if the bank provides approval for the loan, the borrower will receive a loan estimate valid for 10 days. On the contrary, one can expect a rejection within 3 business days of the loan application.

Upon accepting the loan estimate, the bank will start to go through the information provided by the applicant if not done previously. These can include:

  • Demanding a credit report if not done previously during pre-approval.
  • Inspection of the property and appraisal.
  • Verification of employment and deposits made in the bank.
  • Verification of title.

Underwriting Process

This is the process that essentially decides whether the applicant will receive a loan or not. In this step, underwriters would thoroughly review the application and demand for appraisal. Appraisals are simply the valuation of the property. The purpose of the step is to identify if the provided loan would be enough to purchase the property. Once everything is checked, the interest rates would be locked over for which the loan would be approved for the applicant.

Closing the Deal

This is the final step of the entire ordeal. At this stage, the applicant will be called to sign huge piles of paperwork related to the mortgage. The most important document during this process is the closing disclosure form. It displays the original cost of the property and the final cost of the property after complete loan repayment.

Challenges in Document Processing for Mortgage Loan

Considering the surge in mortgage loan applications, there are certain challenges the mortgage industry faces quite often while processing loans. These are:

Faster Processing Demands by Customers

Mortgage has been relying on primarily three methods for processing documents i.e. manual keying, OCRs, and outsourcing. The initial two don’t qualify for today’s requirements considering the TAT (turnaround time) in manual keying, and the limitations of an OCR with unstructured data. Adding to it, outsourcing seems like a reasonable solution but can be quite expensive and doesn’t provide any direct control. New-age solutions like intelligent document processing are highly efficient in processing unstructured documents for data extraction and verification. Also, they are capable of running without any manual intervention and are quite cost-intensive in comparison to outsourcing.

Qualifying the Applicants

The process of qualifying the application happens at the stage of underwriting. It requires thorough verification of a resource which is ideally a time-intensive process. Although with the help of an IDP, it is possible to cross-verify documents in batches to make the work faster.

Scalability for Work

Mortgage industry has been continuously progressing giving out more paperwork to process. To deal with the problem, the industry requires a scalable document processing solution that can fit the requirements of changing demands. An IDP is a scalable solution capable of processing hundreds, thousands, and millions of documents in a single go with zero manual intervention.

Incapability to Focus on Core Operations

Amidst the process of manually processing documents and staying within bounds with the existing compliance, a collateral time of banks is lost. This time can be utilized for dealing with core operations and not manually processing the documents.

Some Potential Uses of Automation Solutions in Lending

Ordering Third-Party Services

Traditional mortgage lending processes require employees to obtain, verify, and order information from third parties that is relevant to a borrower’s loan application. These include things like employment and asset verifications, credit reports, appraisals, and tax returns. Employees typically submit manual order forms to each vendor. They are often required to follow up to check on the status. Once received, the information must be manually reviewed and manually entered in their systems.

And then there is the issue of payment and reconciliation. Many lenders manually pay each vendor invoice. Following payment, they are forced to manually reconcile accounts. Not only are these processes time-consuming but there is the very real possibility of human error.

With mortgage lending automation solutions like intelligent document processing, banks can streamline the process of ordering third-party services. Lenders can set predefined business rules that automatically orders the relevant services. The mortgage lending automation solution also receives, reads, and enters the information from the third-party’s report into the designated software system. These solutions also automate the payment and reconciliation process, as well as perform compliance functions like ensuring that invoices satisfy RESPA disclosure requirements.

Post-Closing Quality Control Reviews

The post-closing process is performed after all documents have been signed and a loan has been funded. Strict lending regulations and guidelines require lenders to audit closing documentation to ensure that they comply with underwriting processing rules. Post-closing manual loan review processes take a significant amount of time and expose mortgage lenders to unnecessary compliance risks.

While post-closing review procedures vary by lender, at a minimum the process requires that lenders review: 

  •    Underwriting documents for completion and accuracy;
  •    Loan application for completion and accuracy;
  •    Borrower eligibility and support for the underwriting decision;
  •    The appraisal;
  •    Other output from third-party tools;
  •    Compliance with mortgage insurer requirements;
  •    Documentation showing sufficient mortgage insurance coverage;
  •    Legal documentation like the sales contract; and
  •    Compliance with local, state, and federal regulations.

Loan quality reviews are generally completed within 60 days of file selection. Quality control reports have traditionally been completed following review of all files selected within a specific month. With mortgage lending automation software, lenders do not have to wait until all reviews are completed. They can report findings in real-time following the completion of each review. Automated solutions review and extract data from relevant documentation, and flag potential issues. Employees can then perform root-cause analyses to identify and correct the defect.  

Mortgage automation solutions significantly reduce lenders’ post-closing review and compliance costs.

Mortgage Lending Processes that are Ideal for Automation

Yet there are some core characteristics of lending processes that stakeholders should look for when identifying candidates. These include: 

  • Highly repeatable processes with low levels of complexity. These are processes that are easy to perform, occur frequently, and utilize a significant portion of employees’ time.
  • Swivel chair processes. Swivel chair issues arise when stakeholders must manually enter the same data in a variety of systems due to a lack of integration among applications.
  • High quality required. Mortgage lending institutions face extensive regulations and compliance issues. For these reasons, many processes require organizations to achieve quality and scalability.
  • Rules-based processes. Automation is a great fit for processes that adhere to a set of predefined and structured rules.

Thus we see that automating the mortgage process can help businesses of any size expedite tasks. An IDP platform can:

  • Process documents and data, read and compile data pulled from multiple sources and in various formats, 
  • Perform data verification of documents or source files, including reconciliations 
  • Order services or case numbers, or verify statuses from third parties.
  • Process transactions that follow structured rules but are not automated in the core system.
  • Perform workflow management, allowing organizations to sequence the order of operations.
  • Process audit trails that demonstrate adherence to rules and regulations.

The automation of manual processes commonly associated with mortgage processing can reduce operational risks through higher quality and consistency in processing transactions. Performing the process correctly the first time can reduce or eliminate the need to perform extensive secondary reviews and the remediation that is often necessary. Additionally, building full auditability and control checkpoints can make the secondary review and testing much quicker and more streamlined.

The Crucial Role of IDP for Mortgage 

To close a loan can typically take almost two months because of the many tasks and players involved. According to a Canon study, document management is the biggest bottleneck in loan processing.

Mortgage data and document processing that uses OCR technology alone is limited and often requires a great deal of human intervention. Automating document processing using intelligent document processing (IDP), is the key to enhancing the whole process.

AI-based document processing can handle more document types, both structured and unstructured, and document variations, delivering greater accuracy for mortgage document processing and reducing errors. It can classify, extract, and validate critical data from the loan packets so that users can approve or deny loan applications with as little time and effort as possible.

All those actions help move loans faster through the approval cycle, delivering a reduction in cycle times. Even a 20% increase in throughput due to modern automation can mean tens of millions of dollars in more loans.

Benefits of Using Intelligent Document Processing in Mortgage

Considering the kind of propositions an IDP platform brings on board, there are multiple added benefits to using an IDP in mortgage processing:

Faster Processing: An IDP is exponentially faster than all the conventional methods of document processing. It also gives better control over the process considering the platform is deployed in-house.

Unstructured Data: For mortgages, banks have to go through a variety of documents with different templates, sources, formats, structures, fonts, and data. An IDP can process unstructured documents and provide processed verified data on the other hand. It also allows for custom data extraction from ‘n’ number of fields from a batch of documents.

Higher Transparency: An IDP seamlessly integrates with the existing DMS. It can be EDGE-based or Cloud, there is no issue with the integration. Also, the data generated by an IDP is sorted, segregated, and in the form of digital files i.e. excel sheets, CSV sheets, etc.

Centralized Data and Data Digitization: With an IDP, all the processed data can be easily stored in the central database. As mentioned above, an IDP supports cloud integration giving the employees access to data anywhere in the world.

Customization: Depending upon the vendor, IDPs offer customization of workflows and selection of documents for the verification process. Also, the customization is completely DIY and can be molded as per the requirements of the banks.

No Errors and Zero Manual Intervention: An IDP requires zero manual intervention while processing documents and offers processed data without any errors. For anything that raises an exception, an IDP would demand a human reconciliation and later on learns & evolves with the solution.

Reduced Time and Cost in Operations: Considering its capability to process documents in bulk and the speed of an IDP to process documents, there is a tremendous decrease in the TAT. Also, it directly affects the cost incurred on document processing because every business hour spent on manual processing is the hourly wage of an employee performing a subpar task.

According to a McKinsey report, customer satisfaction is a real differentiator in the mortgage industry. Considering that the mortgage industry is highly competitive, it is obvious that companies who invest in automation will stand out among competitors.

Another clear benefit of automating mortgage document processing is reducing operational costs up to 80%. Becoming more productive and profitable is possible via automation.

Regulatory compliance is another critical issue for mortgage lenders. Companies have to meet strict guidelines, otherwise they may face legal penalties or even revocation of authorization. Mortgage automation helps lenders to track each step easily and get ready for audits.

Additionally, banks believe that personal customer service will continue to play an important role in the future. In order to be able to focus on excellent customer service, processes must be automated. One of these is the mortgage processes. To gain a decisive competitive advantage, banks depend on efficient processing of mortgage applications.

To prevent efficiency gaps from widening, banks need intelligent automation for mortgage application processing.

Intelligent Document Processing (IDP) helps banks automate the mortgage process, reduce turnaround times and thus scale applications. At the same time, this also creates enormous value for the applicant, as automation with IDP means real-time processing and thus massively faster loan approvals

Who can Benefit from Mortgage Process Automation?

Mortgage process automation provides a wealth of benefits to all employees and staff throughout the company. The effects of implementing mortgage process automation can be felt in departments throughout the organization. Some common beneficiaries include-

Management and Leadership

Mortgage process automation ensures compliance. Leadership will also be empowered by the information and data trails this technology creates. They'll be able to make better decisions with more confidence and take steps that they would never have been able to before.

Accounting and Finance Departments

Mortgage process automation creates information trails that easily demonstrate compliance and adherence to the many changing rules and regulations. And if these regulations change, it is quick and easy to adjust and request any missing information or documentation.

What to look for in Mortgage Processing Automation Platforms?

Selecting a state of the art IDP platform  provides mortgage companies with maximum scalability. They're highly flexible and can grow with you. It's also essential to consider an IDP platform that can help you digitize, automate, and optimize  your paper intensive mortgage processes at the click of a button.  

It should also be easy to use  and should be made accessible to everyone from enterprise companies to brokers.

Intelligent Document Processing for Mortgage Document Automation

VisionERA is the latest intelligent document processing currently available in the market. It offers document processing from structured to unstructured documents. The platform can perform data extraction and verification of documents in huge volumes with higher accuracy and automation figures with zero manual intervention.

Built using smart technologies such as Artificial intelligence (AI), Machine learning (ML), Natural language processing (NLP), and Computer Vision, it comes loaded with high cognitive abilities, intuitiveness, and OCR capabilities.

It also offers a host of industry leading features such as an automated table detection system, autocorrect data, QR scanning, etc. The platform is capable of extracting data from a variety of file types such as Text, Images, PDFs, sheets, XLS, signatures, etc. It provides custom DIY workflows, plug-n-play integration, and a smart insights board with useful KPIs.

VisionERA is an industry and use case agnostic solution that follows a three pronged approach of decode, decipher and decide.


Mortgage industry is constantly under pressure with tons of paperwork to process. Also, the pressure from the applicants to clear the loans as fast as possible is a constant requirement. Choosing a mortgage automation solution such as an IDP would tremendously aid the industry in wisely treating their customers. It will help them sort the due work related to document processing and help employees with timely completion. This will make the processes much more sustainable and optimal with added reduction of TAT and cost.

Note: Want to deploy mortgage document automation for your organization at just $0? Yes, you heard it right, right now, we are offering VisionERA to our customers at $0. Want to learn more about the terms and conditions of the offer, simply click on the link here.

To try out your mortgage documents for processing, use our free trial button.

To get a proper understanding of VisionERA and how it can help with mortgage document automation? Schedule a demo with our automation experts.

Get Started with your Document Automation Journey

$0 Implementation cost | $0 monthly payments -> No Risk, No Headaches

Pay only for Satisfactory Results!

Sign up for Free Trial