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Sat, 03/31/2012

Grow your business with the right document-preparation provider

By Melanie A. Feliciano, Chief Legal Officer, DocMagic Inc. 

Finding a quality document-preparation provider can be vital to any origination business. Mortgage brokers and originators should be able to continually rely on their document-preparation providers — even as the industry and its technological needs continue to evolve.

As such, mortgage professionals should take care when choosing providers for their businesses. First and foremost, brokers should determine which providers offer the same loan programs and packages that their own businesses originate. Whether your company specializes in niche loans or conventional loans, Federal Housing Administration (FHA) loans or U.S. Department of Agriculture (USDA) loans, a document-preparation provider’s products should be compatible with all aspects of your origination business.

For instance, do you need application packages? What about initial disclosure, adverse action, underwriting, re-disclosure or closing-loan packages? The best document-preparation providers should be able to meet all of your organization’s needs, however specific or varied they may be.

It also should be noted that some document-preparation providers allow originators to upload their own custom documents and disclosures in addition to the provider’s inventory of forms. Some providers may even allow originators to manually delete and add forms from a particular loan package.

Although these are a few of the most important particulars to note, they’re by no means the only features and functionalities that originators should look for when choosing a provider. If you want to ensure a provider’s quality and adaptability, be certain to thoroughly examine the following six aspects of that provider’s business model.

1. Customer service

It’s important for a document-preparation provider’s customer-service department to be staffed with individuals who fulfill a number of expectations. A provider’s customer-service staff should be professional, knowledgeable, communicative and prompt in its delivery of required tasks and services.

In short, you should have confidence in the customer-service specialists who are attending to your company’s needs. When it comes to working with a customer-service staff member, ask yourself several key questions:

  • Does the staff member answer my questions comprehensively and accurately?
  • Does the staff member know if and when to escalate an issue to the provider’s compliance department?
  • Is the staff member helping to alleviate my workflow?

Be sure to check references in order to validate vendors’ claims about superior customer service. The mortgage industry can be a small world; ask your partners or connections about a given provider’s reputation.

Further, any excellent document-preparation provider should have seamless integration with all major loan-origination systems (LOS). As such, make sure that the vendor has an integration department that can work with your LOS and assist you with related questions about mapping and managing your loan documents.

2. Disclosure and signing

With the mortgage market quickly embracing digital delivery and communication, brokers and originators also should consider providers that are capable of electronically delivering loan packages, including initial disclosures and re-disclosure.

Providers also should have the capability of enabling borrowers to affix their electronic signature to loan documents, in compliance with the Electronic Signatures in Global and National Commerce Act (aka the ESIGN Act) and the Uniform Electronic Transactions Act. Alternately, where traditional signatures are required, giving borrowers the ability to print, sign and return documents automatically in the loan package can be a great benefit, as well.

Finally, for borrowers who do not consent to the electronic delivery of loan documents within a certain time frame, a quality document-preparation provider should have in-house fulfillment services. These services will ensure that initial disclosures and re-disclosures are mailed in a prompt enough time frame to comply with all pertinent policies and guidelines.

Regardless of the exact circumstances, digital delivery and signing of loan packages affords your company increased efficiency and service. In this way, digital delivery also enables deals to be closed more quickly — and more abundantly.

3. Compliance

With increased statutory and regulatory changes, mortgage loans are subject to enhanced scrutiny from federal and state examiners, as well as investors buying loans. This enhanced scrutiny can lead to more risk for originators, as noncompliance can result in penalties, fines or borrower refunds.

Considering this, quality document-preparation providers should act as yet another way to ensure proper compliance. Providers should have competent staff members that promptly analyze and synthesize legislative bills and adopted regulations, and make required changes to related documents.

This staff should be easily accessible to ensure that any compliance-related questions are answered in a timely fashion. An experienced team of in-house compliance specialists and support staff can be essential to the health of any business, and a quality document-preparation provider can help give your business just that.

4. Errors and omissions

Although any good document-preparation provider should promote thorough compliance, mistakes may still invariably occur. In these cases, brokers and originators should be certain that the provider offers effective representations, warranties and remedies for any possible compliance problem.

As such, be sure that measures would be taken to mitigate your potential liability. For instance, in the case that your loss is a significant one, make sure that the document-preparation provider has a robust errors-and-omissions policy to compensate for noncompliant documents or data-security breaches. This policy may reveal the difference between an excellent provider and a less-than-satisfactory provider.

5. Audits

A quality document-preparation provider should have software that’s equipped with tests and audits that ensure loans comply even with laws that are not related to mortgage-loan documentation. For example, a provider should be able to audit loan data to determine — among many other things — any of the following:

  • Whether the loan passes the Real Estate Settlement Procedures Act (RESPA) zero or 10 percent tolerance thresholds
  • Whether the loan passes the Fannie Mae points and fees test
  • Whether re-disclosure to the borrower is required, in the case that a loan’s annual percentage rate (APR) exceeds Mortgage Disclosure Improvement Act (MDIA) tolerance thresholds

An adequate auditing system should automatically analyze your company’s loan data, itemize all applicable audits and then provide a report of warning-and-error messages. In addition, the audit system should take you directly to the relevant data in the worksheet and enable you to correct any warnings or fatal errors — an error thatcompletely halts the processing of a loan package until the error is correct.

Additionally, a good auditing system should allow you to configure the document-preparation provider’s system and add your own warnings and audits, all of which could be customized to your specific business practices.

6. Certification

Finally, a good document-preparation provider also will be compliant with the Statement on Standards for Attestation Engagements (SSAE) No. 16 Type 2 attestation standard, as developed by the Auditing Standards Board of the American Institute of Certified Public Accountants. In short, this helps to assure your customers and borrowers that their sensitive information is secure because of operational controls implemented by the provider.

These operational controls also can further assist with compliance, as they allow your company to meet the rigorous controls associated with the Sarbanes-Oxley Act.

• • •

Brokers and originators who find a document-preparation provider that satisfies all of the above criteria can rest assured that their provider will be a good one. Remember: Quality providers can deliver more than just efficiency, safeguards and better service. Ideally, the best providers should allow your company to evolve and grow with the industry itself.

As featured in Scotsman Guide's Residential Edition, April 2012.