By Austin Kilgore
Using mortgage document preparation software is kind of like shopping for a new suit, and it is changing with the aim of providing users with a better fit.
Like the rows of suits in a variety of styles, colors and sizes; systems' massive libraries contain a variety of ready-to-use electronic forms for lenders to use in outfitting themselves with initial disclosure and closing documents.
To complete the look, the store has a clerk perfectly coordinating suits with the right dress shirts and ties, while most doc prep technologies boast integrations with loan origination systems to pull relevant borrower and loan data to complete the final package.
But as the technology continues to evolve it is becoming less analogous to an off-the-rack suit store and more to the custom-fit approach of an individually tailored piece as rules engines are increasingly incorporating real-time compliance updates, documents that automatically adjust entry fields to accommodate unique data and specialized features to meet lender specifications.
The change is a function of increasing lender expectations, explained Mark Mackey, vice president of Draper, Utah-based doc prep vendor International Document Services. No longer can vendors simply provide basic templates that can't be customized or quickly updated.
"It used to be that we were just a forms company, but anyone who's doing has been left behind," Mackey said. "You now have to be able to perform the ability to customize those documents and make those documents mold to specific loan situations."
Lenders also expect their doc prep vendors to help them with selecting the right documents for the right loan scenarios. "Instead of leaving it up to the customers to decide what documents to use, DocMagic has a default logic and programming so the appropriate documents are returned in the loan package based on laws and investor requirements," explained Melanie Feliciano, chief legal officer of the Carson, Calif.-based software provider.
Both IDS and DocMagic rely on forms libraries to supply the basic outline of disclosure and closing documents. Those libraries are constantly updated to reflect business changes that affect regulatory and investor compliance, as well as to provide any additional process, workflow or additional documents that lenders want.
Mackey said lenders also expect mortgage documents to be aesthetically pleasing. Old form software didn't provide dynamic templates that could wrap text or automatically resize it to fit. Now, if an entry on a form is longer or shorter than normal-names and property addresses are regular issues-the doc software automatically adjusts to fit.
"We're going away from the typewriter look," he said. "The documents need to be dynamic instead of a static document."
Other times, forms have to meet specific layout and design specifications, which the software also keeps in check. "We program those blank fields and to the extent that there are laws that govern how the field should be completed, we provide the programming specifications so the form is completed correctly," Feliciano said.
In the wake of the mortgage and housing downturns, investors are increasingly turning to lenders to repurchase loans that were underwritten improperly and regulators have sharpened their focus on lender processes. Much of those challenges are tied to accurate and compliant document preparation, said Michael Detwiler, CEO of Denver-based Mortgage Cadence, which provides LOS, document generation and other mortgage technology.
"Docs cannot be overlooked as something inconsequential," he said. "It has been, and will so in the future, be the way regulators look at how you communicate with borrowers and whether you were fair or not."
Detwiler said his company calls doc prep "data prep," because Mortgage Cadence's software doesn't rely on form templates. "It doesn't have a library; the concept doesn't exist," he said. Instead, the technology relies on a software engine that analyzes loan data and builds forms in real time based on the specific transaction. Mortgage Cadence boasts that its software can process and generate 300 pages of mortgage documents per second.
"I look at it as an on-demand documents," Detwiler said. "Rather than just saying it's a Fannie 30-year fixed, we say it's a 30-year fixed product, originated in this state and county out of this organization. Then it analyzes all that data builds the disclosure or closing package and delivers it in real time to the specified location."
Detwiler said this approach makes compliance changes easier to implement because the same adjustment doesn't have to be individually applied to each form in a library. "It can only do that because we're generating documents through code instead of trying to assemble forms," he said.
Traditional doc software forced lenders to select among static forms. But with or without forms libraries, software engines are now providing lenders a tailor-made approach to mortgage document generation at a time when the feature is a critical need, not a luxury.
"The off the rack is getting an account set up and there are your docs. It's complaint, but it won't do anything custom unique for your company," Mackey said. But the custom-fit option is easy to use and fits lenders' needs. "You hit a button and everything is done, versus you hit a button and that's when your work starts."