Seeking Processing Power

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Selecting a Mortgage Processing System

By Howard Schneider

Community banks can find numerous software alternatives for more fully automating their home mortgage lending processes. But matching a residential mortgage processing system to a lender’s particular needs and budget isn’t always easy or straightforward, say two community bankers who have been through the process.

Lori Murray of American Riviera Bank in Santa Barbara, Calif., and Paul Peterson of Glacier Bancorp Inc. in Kalispell, Mont., recently helped their community banks choose and implement an end-to-end mortgage lending software system. Murray and Peterson shared snapshot perspectives on what such systems should accomplish for community bank residential mortgage lenders.

Typically, a mortgage lending processing system will take applications and support loan processing and underwriting. Around 30 software vendors offer mortgage origination systems. Mortgage operating systems vary tremendously in terms of their cost, features and flexibility, says Len Tichy, a principal at Stratmor Group, an IT consulting firm in Peachtree City, Ga. How many users will be working on a system, the volume of Web-based interactions with consumers a lender wants, and the extent to which community banks will want to adapt software to suit their business practices are important software-selection considerations, he says.

Some community banks may also need a mortgage processing system that offers strong loan-servicing capabilities or better integration with their consumer-lending platforms.

Murray and Peterson say that mortgage processing software should help American Riviera Bank and Glacier Bank handle more loans more efficiently while enforcing tight compliance standards. Maintaining strong customer service and compliance processes are the top two objectives voiced by community banks seeking mortgage processing systems, says Craig Bechtle, chief operating officer and executive vice president at software provider MortgageFlex Systems Inc. in Jacksonville, Fla.

Considering scale

Two years ago, American Riviera Bank, a $200 million-asset community bank, chose a mortgage processing software system from Calyx Software in Dallas, along with loan document preparation software from DocMagic Inc. in Torrance, Calif. Murray says those two systems were easy to implement and their price tags fell in line with the bank’s budget. She and a loan processing assistant are the primary users of the Calyx system at American Riviera Bank.

The size of a community bank’s mortgage business and its loan volume growth plans should factor into which mortgage processing software any bank should consider, says Murray, a vice president and mortgage lending officer at American Riviera Bank. The bank brokers conforming residential mortgages but keeps hybrid adjustable-rate jumbo mortgages in its portfolio. Murray forecasts that the bank’s 2014 residential mortgage production will be lower than the $37 million in total home loans it originated in 2013.

Glacier Bank’s new system “will keep files pushing through the pipeline” as well as track where loans are in the lending process.
—Paul Peterson, Glacier Bancorp Inc.

Peterson has been senior vice president and corporate real estate manager at Glacier Bank for 18 months. Loan automation software for large mortgage lenders like Glacier Bank, an $8 billion-asset institution originating home loans from 119 branches in six states, is essential, he says. Residential mortgage production at Glacier Bank is forecast to reach a total volume of $800 million in 2014. About 10 percent of the bank’s mortgages are held in portfolio, and the rest are sold into the secondary market.

Standardized workflow procedures were implemented across Glacier Bank’s mortgage business in June 2013—one year before a contract was signed with Ellie Mae. Glacier Bank’s new system “will keep files pushing through the pipeline” as well as track where loans are in the lending process, Peterson says. The software also allows local branch supervisors to assign tasks to different staff members depending on their capabilities. For instance, only some Glacier Bank loan processors underwrite or oversee mortgage closings.

Tailoring systems

Peterson has spent considerable time standardizing the procedures for Glacier Bank’s mortgage division, and he also helped select and implement the bank’s mortgage origination software from Ellie Mae Inc. of Pleasanton, Calif. The bank opted for software from Ellie Mae after considering other systems. Peterson says he appreciates that the system can be configured to fit Glacier Bank’s particular workflow practices. The bank’s previous software was “an expensive word processor” which printed documents but required human intervention from origination to closing, he says.

“The size of a community bank’s mortgage business and its loan volume growth plans should factor into which mortgage processing software any bank should consider.”
—Lori Murray, American Riviera Bank

Peterson and Murray agree that mortgage processing systems, which manage residential lending from origination to secondary market sale and servicing, should provide community banks processing efficiency as well as flexibility. For community banks, these systems can be configured for how each bank uniquely processes loans and relates to its customers. Some mortgage lenders, for example, want their Web portals to quote current rates and encourage borrowers to fill out applications online. Others may ask prospects to contact a loan officer initially. The mortgage processing system a bank selects should support whatever approaches those banks pursue.

Glacier Bank’s software lets the bank reduce its credit report vendors from more than half a dozen to just two, and Peterson says that move has allowed the bank to negotiate better terms for that service as a result. Meanwhile, appraisals, mortgage insurance and credit reports all are ordered automatically without leaving Ellie Mae’s Encompass system.

Ellie Mae devises workflows for different loan types and provides the appropriate documents and compliance checks, says Jonathan Corr, president and chief operating officer of Ellie Mae. The company’s software helps ensure pricing is compliant and that closing documents and disclosures match each other, he says. Ellie Mae operates on a software-as-a-service model, with much of the cost based on a lender’s total closing volume. In contrast, American Riviera Bank purchased its system under a licensing agreement.

Peterson says that Glacier Bank’s loan processing software should help reduce its overall mortgage lending compliance costs. Lenders can achieve this reduction by adjusting their loan software systems to perform tasks such as automatically ordering mortgage insurance as needed or sending out email notifications to the appropriate loan officer when an appraisal arrives.

Additionally, compliance checks should be ongoing, rather than being performed only at the end of the loan process.


Howard Schneider is a writer in California.