SMART Doc® form: The MISMO standard for electronic document creation.  SMART is an acronym for Securable, Manageable, Archivable, Retrievable, and Transferable.

"The industry is definitely moving forward to the true paperless mortgage-from providing disclosures and opening package documents all the way to a secondary market. Absolutely, the adoption of electronic signatures is there…It's happening-it's just a matter of volume." --Margo Tank, partner at the Washington, D.C.-based law firm of Buckley & Koler LLP.

Mortgage E-SIGN Adoption Still Low After Five Years
Murray, Michael
More than five years after the Electronic Signatures In Global and National Commerce Act (E-SIGN Act) went into effect, counties are adopting e-recordings and pieces of the e-mortgage puzzle are starting to come together, but e-signatures are far from a household word at the mortgage closing tables.

"The industry is definitely moving forward to the true paperless mortgage-from providing disclosures and opening package documents all the way to a secondary market," said Margo Tank, partner at the Washington, D.C.-law firm of Buckley & Koler LLP. "Absolutely, the adoption of electronic signatures is there…It's happening-it's just a matter of volume."

The e-signature can range from a click online with a digital signature seal over it, which would be less secure and less costly, to a physical e-signature pad at the closing table, similar to pads used in Home Depot or Best Buy stores, and a digital certificate key or token, more secure and more costly.

No specific timetable exists for industrywide adoption of e-signatures, but industry experts estimate two-to-five years until most origination and closing documents will use e-signatures, although some participants see it happening sooner.

Phil Huff, president and CEO of eLynx, a Cincinnati, Ohio-based firm that specializes in e-signatures and electronic delivery, said five years would be the most likely time frame to find digital signatures at origination and closing. The first phase of e-signature adoption in the mortgage industry, or the 'low-hanging fruit,' according to Huff, is e-origination that eLynx provides in its U-Sign product.

"The second piece of e-signature adoption will be parties implementing hybrid e-mortgages," Huff said. "That will be the second big wave you will see a lot of traction with over the next three-to-five years."

Todd Lunsford, chief information officer at Quicken Loans, Cleveland, said Quicken has had e-signature technology in full production since January 2002.

"It's really hard to tell how long it will be before the rest of the industry adopts it," Lunsford said. "We'll probably see a significant increase in its use over the next 18 months, based on conversations I've had with Fannie Mae and other wholesalers. I suspect though that there will still be lenders that are behind the technology curve as well as folks in the secondary markets who are hesitant to accept electronic signatures on the notes that secure their debt."

Unlike a Home Depot or Best Buy, closing on a home requires a number of different players and, e-signatures could translate into costs for one segment of the mortgage chain, possibly the consumer in the end.

"The big question with regard to the e-signature is who benefits [from it]," Huff said. "While the back-end of the process-the underwriters-are experiencing a lot of the benefit, I think we have to get to the point where the homeowner realizes the benefit. A technology person enjoys using technology to accomplish finger-based processes. Nonetheless, most homebuyers-the least thing they're worrying about is whether or not they are going to e-sign or wet-ink sign. They're more concerned about this large transaction, perhaps the largest one they will ever do in their life, and not how they do the process."

"I have not seen a direct charge to a consumer in any of the programs I have reviewed," Tank said. "There are no charges to a consumer for using an electronic signature. Usually, the lenders or title agents have a business process that includes an electronic signature because it has great benefits to the lender or the title agent. I have not seen any charges to the consumer. If anything, the use of technology is going to reduce costs, not increase costs." Tank also noted that an e-mortgage added to the e-signature would make the process even less expensive.

"The ironic thing is implementing e-signature technology actually results in a cost savings," Lunsford said. "The expenses saved through the more efficient process will ultimately balance out the cost of the technology. I believe the cost savings will be shared by the lender and consumer alike."

Using e-signatures, the e-recording of a mortgage could wind up as the final piece to the e-mortgage puzzle. The Property Records Industry Association (PRIA) announced last week that electronic recording systems topped 200 in this month. The e-recordings include the process of receipt, examination, fee calculation, payment and endorsement of recording information and the return of recorded electronic documents that were submitted for recording in a county's land records office.

"It is exciting to see so many counties embracing this technology," said Joan McCalmant, Linn County, Iowa recorder and PRIA Technology Committee co-chair.  "As the PRIA eRecording standards continue to mature, the number of counties leveraging this technology is rapidly expanding."
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GMS's OnShore Outsourcing Takes Hold
McAfee, Jamie
The need for a collaborative function in the back-office of many mortgage shops is greater than ever, according to Tim Anschutz, vice president of marketing for Guardian Mortgage Documents, Lakewood, Colo.
 
Guardian Mortgage Services, a division of Guardian Mortgage Documents, provides outsource services that focus on back-office operations including: vendor management, title and escrow, closing coordination, document preparation and post-closing.

GMS uses a Web-based Transaction Management System (TMS) to automate vendor management, document production, management functions and workflow into one centralized, paperless model. "We have a unique outsourcing service in that we build the technology we use to service our own clients," Anschutz said.

TMS offers customers several unique features. "One of the things that the customers are attracted to, from our perspective, is getting rid of those fixed costs as much as possible," Anschutz said. "We hear from our customers that they are switching fixed costs to a 100 percent variable cost. By putting everything on a 100 percent variable cost basis, our customers can grow without any commitment to fixed costs and allows for better forecasting, allows customers to operate in defined or desired budgets."

One missing component of many systems is collaboration. "The bigger picture is there doesn't seem to be aggregation that fulfills all the needs from a technology perspective," Anschutz said. "This is a Web-based system that allows for collaboration. There seems to be a real need for the collaboration function."

With marketplace correction taking place, many shops are looking for options to cut costs. According to Anschutz, TMS is taking hold. "The changes and fluctuations in the market, even though customers know they are coming, it is difficult to keep right sizing an organization in the back-office by trying to match costs and volumes," Anschutz said. "As an outsource service, it is one of the reasons that we are very popular right now, is because it takes away that concern for the customers."

"Our outsource service is growing at a really good clip, which when the market volume changes-things get tighter-we typically see that. Our outsourcing, for what we call closing and post closing services, is up about 26 percent," Anschutz added.

"Our title and escrow is up 46 percent. Within the last year, we started including that [title and escrow] into the mix of what we offer as an outsourced service. Our outsource services are growing nicely. We have more conversations going on now than we have in the last two years," Anschutz added. "We have about 40 contracts to 42 contracts or agreements with clients for review."
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Graduates Earn CMT Designation
MBA Staff
MBA announced five new graduates from its CampusMBA certification program for the Certified Mortgage Technologist (CMT) designation.

The graduates are:

Douglas Doedens, CMT
First American Title Insurance Company

Doug Horton, CMT
LandAmerica Lender Services
 
John Jenkins, CMT
HSBC Mortgage Services
 
Clint D. Johnson, CMT
SunTrust Mortgage, Inc.

Robert Murray, CMT
First American Title Insurance Company

The CMT designation signifies an individual's knowledge of mortgage banking technology. The designation is designed for Information Technology (IT) professionals, managers, and executives (CIOs and CTOs) in the real estate finance industry. The CMT designation requires significant knowledge of current technological tools and processes, such as Internet applications, Automated Underwriting Systems and common development tools (Microsoft, .NET and Sun's Java).

For more information on the CMT designation, visit www.campusmba.org
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Industry Briefs
MBA Staff
Apple Recall Laptop Batteries
Following Dell's notebook battery recall, Apple, Cupertino, Calif., is also recalling batteries of its iBook G4 and PowerBook G4 models sold between October 2003 and August 2006, according to the Consumer Products Safety Commission. Users are advised to remove the batteries immediately and store them in a safe place.

Additional information can be found by calling 1-800-275-2273 or visiting https://support.apple.com/ibook_powerbook/batteryexchange/

Apple's recall involves 1.1 million batteries sold in the United States and an additional 700,000 sold overseas online and through retail stores and resellers.

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Beta IE7 Available
Microsoft said it could release the test version of Internet Explorer 7. The near-final Release Candidate 1 version is available for downloand at http://www.microsoft.com/windows/ie/default.mspx?mg_ID=10010, though users are required to confirm they are running a legitimately purchased version of Windows. The final version of IE7 for Windows XP is due to be released in the fourth quarter.

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Microsoft and Symantec Go Head-to-head
A federal judge in Seattle approved an order for Cupertino, Calif.-based Symantec's trade secret lawsuit against Redmond, Wash.-based Microsoft, that lets both Symantec and Microsoft file documents under seal. They can now fully cooperate in gathering information pertinent to the case, since sensitive details will not become public record.

Symantec sued Microsoft in May, accusing it of misappropriating intellectual property related to data storage technology. The case is part of a high-stakes battle in the software industry, where giant Microsoft is increasingly entering Symantec's realm of security software. Microsoft countersued in late June, alleging Symantec violated three of its patents. It also challenged the validity of the Symantec patent central to that company's case.
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Spreadsheets and SOX
MBA Staff
Spreadsheets used for financial reporting are being scrutinized under the Sarbanes-Oxley Act Section 404 compliance mandates. Spreadsheets are often absent key controls needed to reduce financial reporting errors, including change control, version control, access control, input control, security, documentation, archival and backups.

"Organizations seeking to sustain compliance with SOX 404 mandates need to inventory, analyze, remediate, manage, and track changes to critical spreadsheets to ensure they are trusted sources of financial data," said Kevin Farrell, president at Fillmore Technology Group, Alameda, Calif.

Corporations continue to re-examine their spreadsheet use in financial reporting.
A white paper released by Xactly Corp., San Jose, Calif., "Spreadsheets and Sarbanes-Oxley: Regulations, Risks, and Control Frameworks" by Raymond Panko, a professor of IT management in the College of Business Administration at the University of Hawaii, details the potential for error and/or fraud when using spreadsheets in corporate financial reporting, and the subsequent liability it creates.

According to his research, Dr. Panko "spoke independently with experienced spreadsheet auditors in two different companies in the United Kingdom, where certain spreadsheets must be audited by law. Each company audited about three dozen spreadsheets per year. Both said that they had never seen a major spreadsheet that was free of errors. Both also indicated that about five percent of the spreadsheets they audited have very serious errors that would have had major ramifications had they not been caught."

"Dr. Panko's research confirms what our customers tell us-that spreadsheets are quite literally a danger for sophisticated corporate financial reporting," said Christopher Cabrera, Xactly founder, president and CEO.

"Spreadsheets and Sarbanes-Oxley: Regulations, Risks, and Control Frameworks" can be viewed at: www.xactlycorp.com/\resource_center/SOX_Whitepaper.pdf
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Next MISMO Trimester Workgroup Meeting Sept. 11-15
MBA Staff
The next MISMO Trimester Workgroup Meeting will take place September 11-15 in Fort Collins, Colo. The meeting is sponsored by Kroll Factual Data.

The Trimester meetings allow MISMO's various Workgroups to meet, share ideas and formulate policy. Sessions include updates on all of MISMO's initiatives, including eMortgages, document classification and core structures.

Registration is now available. For on-site registration, download the Walk-In Registration Form at www.mismo.org/files/mismo/September2006MeetingRegistrationForm.pdf, and bring to the registration desk at the hotel.

The meeting is free to MISMO subscribers. There is a $395 per person meeting fee for MISMO non-subscribers. You may pay this fee online with a credit card during the registration process or you may become a MISMO subscriber. By joining MISMO, your organization is entitled to full subscriber benefits, including free registration for the three MISMO trimester meetings. To join MISMO, download a subscription application at www.mismo.org.

The meeting takes place at the Fort Collins Marriott, 350 East Horsetooth Road. The phone number is (970) 226-5200. Room rates are $109/per night for single occupancy (one king bed) or double occupancy (one king or two double beds). The rate includes a high-speed Internet connection. To make a hotel reservation on-line, go to http://cwp.marriott.com/ftcco/mismo/. You can also call 1-800-228-9290 to make reservations. When making reservations by phone, please be sure to identify that you are with the Kroll/MISMO event. The room block expires on August 23, so make your reservations prior to this date to get the discounted rate. Reservations must be canceled by 6:00 p.m. MDT day of arrival to avoid penalty.

The hotel is 70 miles from the Denver International Airport , a one -hour drive. All major car rental companies are located at the airport. The Shamrock Shuttle offers hour service between Fort Collins, Loveland, Greeley, Longmont and Denver International Airport. To reserve a shuttle, call (970) 482-0505 or book on-line at Shamrock Airport Express, http://www.rideshamrock.com/. Estimated taxi fare is $75 (one way) from DIA to the hotel.

For more information about this meeting, please contact Carrie Morrison at (202) 557-2797 or cmorrison@mortgagebankers.org.
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Technology Briefs
McAfee, Jamie
FARES Moves Down Under
First American Real Estate Solutions, Santa Ana, Calif., entered into a strategic alliance with, and purchased a 38-percent interest in, privately-held RP Data Limited, in Brisbane, Australia. The contribution of rights to intellectual property and cash by First American RES will facilitate RP Data's expansion in the Asia Pacific region.

First American RES' products and services will be integrated into RP Data's existing operations through a licensing agreement for First American RES' intellectual property, platforms and technologies, including First American RES' patent-pending automated valuation and collateral risk solutions.

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BrokerWatch Released
BasePoint Analytics, Carlsbad, Calif., made its BrokerWatch available. The pattern recognition software product assesses mortgage broker risk.  BrokerWatch provides detailed performance reporting and pattern recognition scoring to predict which brokers are most likely to submit loans that will result in fraud, repurchase, early payment default and discount sales. 

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Ocwen and Commerce Velocity Integrate
West Palm Beach, Fla.-based Ocwen Financial Corp., integrated Irvine, Calif.-based Commerce Velocity's Portal, Underwriter Workbench and Admin Module with Ocwen's existing system, automating loan processing, underwriting and fulfillment services.

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CCMC and Ellie Mae Partner
CCMC, Altamonte Springs, Fla., partnered with Ellie Mae, Dublin, Calif., to provide Encompass Mortgage Automation System to its clients. CCMC's Bridge technology eliminates duplicate data entry by providing automated interfaces for Encompass. Customers can move information in and out of Encompass.  

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DocuLex Enhances WebSearch
DocuLex, Winter Haven, Fla., released an enhanced WebSearch, a Web-based document management program with Instant Document Access. The software is a SQL or SQL Express database to support file volumes. WebSearch also serves as a document hosting facilitator, with public-key infrastructure (PKI).

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CoreLogic Makes Inc.'s 500 list
CoreLogic, Sacramento, was named to Inc. magazine's list of the 500 fastest growing companies. CoreLogic was also among the top 50 companies on the list measured by annual revenue.
The Inc. 500 is an annual list of the nation's fastest-growing private companies based on percent sales growth from 2002 to 2005.
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MBA Membership Directory Available Online
Murray, Venita
The Mortgage Bankers Association's Membership Directory is now available to members directly from the MBA Web site at www.mortgagebankers.org.

Touted as one of MBA's most coveted resources, the Membership Directory has been enhanced to give you and your company access to the most up-to-date information on MBA member companies.

Available exclusively to the staff of MBA's more than 3,000 member companies, the Membership Directory allows members to find each other and communicate via a recognizable and credible source. Using your individual username and password, you can search by market focus, business or product type, location and other detailed categories, all to help you find other MBA members faster and easier than ever before.

MBA's Membership Directory is available to MBA members only. The information listed is provided by MBA member companies for publication in MBA's Membership Directory.

For more information, visit the Directory Web site at www.mortgagebankers.org/Tools/MemberDirectory.aspx.
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MBA Tech NewsLink Reprints Available
MBA Staff
Articles appearing in MBA Tech NewsLink are available as reprints for a nominal fee. Reprints are done on quality paper or can be sent electronically as a .pdf file. Reprints can be distributed to your employees, to illustrate presentations or for other communication purposes.

For reprint information on stories in MBA Tech NewsLink, contact Bob Thornton at 1-800-394-5157, extension 28.
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Digitization and Automation: A Flexible Framework for the Mortgage Industry
Alcorn, Lowell; Davis, Tim
(Lowell Alcorn and Tim Davis are managing directors at Bearing Point Inc., McLean, Va., a provider of strategic consulting, application services, technology services and managed services to companies and government organizations.)
 
Most businesses have their ups and downs. Few, however, can predict the swings as well as mortgage lenders. It's not that lenders are more prescient. To glimpse the future, they simply have to watch interest rates, which rise and fall in a fairly predictable three-year cycle.
 
These days, rates are rising, with predictable implications. Loan volumes are falling, putting a premium on customer service and finding new ways to streamline loan processing.  
 
This period in which business is "slow" presents an opportunity for lenders: Make the loan origination process more effective and efficient through greater digitization and automation. BearingPoint has identified key considerations for lenders in capitalizing on this window of opportunity.
 
Digitization and Automation Business Drivers
The current economic environment is focusing lenders' attention on digitizing and automating the loan origination process, in combination with four major business drivers-cost reduction, adjusting staff to demand, reducing loan application cycle times and taking new products to market more quickly.
 
· Cost Reduction: Lenders have made considerable progress in reducing the amount of paper involved in loan origination. Still, paper-driven processes contribute heavily to the expense of loan origination. Mortgage companies must bear the costs of creating, filing, moving, retaining, imaging and destroying documents. The reliance on paper also makes it extremely difficult for a company to manage capacity and reallocate volume between sites. In addition, eliminating paper is crucial for companies seeking to capitalize on the opportunities in business process outsourcing (BPO).
 
· Adjusting Staffing to Demand: It is not uncommon for large mortgage companies to add hundreds of temporary workers when interest rates plummet, only to discontinue the services of these workers when the rates rise. If firms could automate much of the loan origination process, they would have to make fewer sudden changes in staff levels. Moreover, digitization and automation tools-such as workflow-enabled application processing, resource management tools and dashboard reporting-could make it easier to meet urgent needs for increased capacity by using more affordable alternatives, such as outsourcing or offshoring.
 
· Reducing Loan Application Cycle Times: Delivery of physical loan files or documents from one location or person to another is by nature much slower than automated delivery of digitized documents. In an environment where consumers will be closely comparing speed and quality of service, cutting the length of the loan application process using digitization and automated workflow will be an important competitive advantage.
 
· Introducing New Products More Quickly: One way mortgage companies can generate more revenue in an environment of higher interest rates is by rolling out new products, such as recently introduced interest-only loans. Digitizing and automating this process not only helps companies introduce these new products more quickly, but also allows them to keep tighter control over how the products are marketed and supported.
 
Step One: Digitizing the Data:
The first step in improving lending operations is to digitize the loan origination process, turning manually created documents into digital information. Digitization provides a number of significant benefits:
 
Ability to work with a variety of delivery channels. Digitization allows mortgage companies to adapt their processes to different loan products, disparate borrower requirements and diverse entry points, including brokers, wholesalers, correspondents, retail branches and direct from consumers. It improves management of unstructured content flow-documents, e-mail, records, correspondence, forms and other material typically associated with loan origination.
 
Cost savings. BearingPoint's experience indicates that digitization can cut the direct costs of loan origination by as much as 50 percent in the near term. Digitization also can lead to significant additional savings by giving mortgage companies myriad options to use lower-cost processing options, such as:
· Insourcing through work-from-home arrangements, virtual offices, resource sharing and capacity alignment.
· Outsourcing noncritical and, eventually, critical processes.
· Offshoring noncritical and, eventually, critical processes.
 
Improved efficiency. Digitization can reduce errors by increasing compliance with company processes across diverse networks of departments and brokers, while making it easier to keep track of all aspects of the loan origination process.
 
Sets the stage for automation. Once the data has been digitized, the loan origination process can be automated through the use of advanced management systems.
 
Step Two: Automating Processes
Mortgage companies can reap additional benefits with digitized loan data by automating their loan origination systems using business process management, content management, records management and collaboration tools and processes.
For example, an automated loan origination process might include:
· A single, unified platform for all unstructured content that uses open application programming interfaces, Web services and strong Extensible Markup Language (XML) services.
· Manager dashboards equipped with workflow management algorithms, artificial intelligence and optimized pricing modules.
· Comprehensive business process management systems for process optimization and automation.
· Easy-to-use user interfaces tailored to various roles.
· Integrated records management and retention policy management for all content.
· Collaboration tools for unstructured, highly collaborative processes.
· Storage optimization for lower-cost infrastructure.
These technologies and processes can help mortgage companies make their information more accessible and useful through:
 
· Virtual folders, electronic forms and data extraction.
· Smart metadata, automated metadata extraction, and virtual and distributed search.
· Unified platforms that support all content but recognize and respect format requirements such as XML.
 
In our work with leading mortgage lenders, BearingPoint has seen companies reap important benefits from automation, including:
· Increased operation performance and platform scale.
· Improved credit quality.
· Increased operational efficiency.
· Effective cost control and management.
· Increased loan size.
· More opportunities for ancillary income.
 
The Path to a More Efficient Future
The current cyclical rise in interest rates, coupled with the emergence of digitization and automation tools, has created an unprecedented environment for mortgage lenders to improve loan origination. By seizing the opportunity to streamline processes, lenders can reduce costs, better use staff, reduce loan application cycle times and introduce new products more quickly. The results: more efficient operations and happy customers emerging from the sea of paper.
 
(The views expressed in Tech Forum do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA Tech NewsLink welcomes your contributions. Articles and inquiries should be submitted to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)
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About MBA Tech Newslink
 
Publisher: Cheryl Crispen, Senior Vice President - Communications and Marketing
Director of Online Publications: Mike Sorohan MSorohan@mortgagebankers.org
Deputy Editor: Michael Murray MMurray@mortgagebankers.org
Senior Staff Writer: Vijay Palaparty 202/557/2904 VPalaparty@mortgagebankers.org
Advertising Opportunities: Bill Farmakis 203/834-8832 bill@jlfarmakis.com

Any reprints or other use of these articles in whole or in substantial part, in any medium, requires advance written permission from the Mortgage Bankers Association. For reprint information on stories in MBA Tech Newslink, please contact Joanna Vulakh at 1-800-394-5157 x25.

MBA Tech Newslink, a weekly electronic publication, is a member benefit free to employees of MBA member companies, and available by paid subscription to non-members. For membership information, visit MBA's website at http://www.mortgagebankers.org/AboutMBA/membership

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