Product leaders in the mortgage industry are always seeking ways to improve their business model. Over recent years, some of the industry’s biggest gains in business outcomes have been achieved through loan origination systems (LOSs).
Although these systems have helped streamline loan manufacturing, the same cannot be said about the borrower data that powers them. The work of converting borrowers’ documents into data that LOSs can use remains highly manual and expensive, and restricts lenders’ ability to react to fluctuating demand.
That no longer needs to be the case. Artificial intelligence (AI) from TRUE finally breaks the link between workforce staffing and tasks such as document classification, data extraction, and data verification.
There are some exaggerated claims about AI, but TRUE AI is uniquely built for the lending industry. It enables mortgage lending, servicing, and insurance businesses to achieve breakthrough performance. Here are five ways that TRUE makes life better for product professionals.
Lending involves fundamental tensions between business competitiveness and financial risk. Lenders are under pressure to make rapid yet smart lending decisions, and these outcomes require skilled people – always the costliest element in loan manufacturing.
Most human effort is expended at the start of the origination process: borrowers’ documents must be classified and the relevant data must be extracted and organized into profiles that inform lending decisions. A trained agent requires many hours per loan application to complete these tasks.
Lenders have made significant investments in LOSs, many of which include automation technology intended to reduce human input into docs-to-data processes. Despite this, loan manufacturing costs have remained stubbornly high. Why?
The problem is a lack of accuracy, with automated systems needing significant human intervention to spot and correct errors made by the technology. That limits cost savings up front or, worse, results in higher costs if mistakes are missed. It is typical for a 5% increase in docs-to-data conversion errors to multiply to a 30% increase in human intervention later in the lending process.
As the only purpose-built, AI-powered lending intelligence system on the market, TRUE delivers unprecedented data accuracy, starting at 95-percent out-of-the-box and exceeding 99-percent within months. This significantly reduces human intervention while radically improving speed and efficiency.
Such outcomes allow product leaders to rethink their business model, using cost savings to increase competitiveness or improved borrower insight to expand market reach to a wider range of borrowers.
2. Increase business elasticity
As the Federal Reserve tries to rein in inflation by raising interest rates, mortgage applications are down. According to one report, there are 23 percent fewer applications today than there were a year ago.
Adapting to cycles of falling and rising demand is a recurring challenge. Many product leaders agree that a quieter period provides the ideal moment to make changes to business process.
Supplementing loan origination and servicing processes with AI that fully automates docs-to data conversion and verification tasks is a game-changer. Data quality improves dramatically even as costs decline. Loan manufacturing happens faster, risk falls, and when demand returns there’s less need for hiring or outsourcing.
In the short-term the business sees lower operating costs. Over time, more benefits emerge: improved customer satisfaction, greater flexibility to adapt to changing market conditions, and the data foundation necessary to achieve the long-vaunted goal of full touchless automation.
The high cost of manual document classification and data extraction limits the scope of borrower profiles. That limitation ends when these processes are automated with AI.
Trapeze by TRUE allows lenders to understand borrowers on a deeper level and in less time. More extensive and accurate data extraction — including data that wouldn’t normally be extracted by time-limited data entry specialists — gives lenders a stronger basis for lending decisions.
The benefits don’t end there. As the name suggests, lending intelligence means a richer and more accurate picture of borrowers. It enables product leaders to gain insights into hidden opportunities and risks. Data scientists can mine this intelligence to innovate, improve future products, design a more efficient and sustainable business model, and strengthen their competitive edge.
TRUE is used by loan servicing companies as well as originators. VerifAI by TRUE uses the same AI to audit the accuracy and integrity of entire loan portfolios.
Previously, time and expense meant only samples of loans would be audited before a portfolio was purchased. VerifAI makes it fast and affordable to review the entire portfolio – every individual loan, every single data point, and all the underlying documents. Complete confidence in the quality of a loan portfolio allows mortgage servicing companies to significantly reduce risk and avoid suspect loans entirely.
Product leaders in origination companies can use lending intelligence to ensure they meet the expectations of the servicing market. TRUE is a signifier of data quality and integrity, justifying the best price when selling loan portfolios and safeguarding against losses from bad loans being returned.
5. Continuous quality control
Bad lending decisions have a direct and devastating impact on the bottom line. As loans progress through the origination process, the cost of rectifying any mistakes increases.
Trapeze and VerifAI by TRUE are designed to prevent such costly errors from happening. Trapeze means the initial docs-to-data conversion is typically more than 99-percent accurate, but like a safety valve the AI highlights any issues with documents or conflicting data, alerting a lending professional before loan origination can continue. VerifAI ensures the data quality of each loan before a lending decision is made
TRUE helps product leaders to build their business on a foundation of assured data. In origination, this leads to quantifiable improvements in risk reduction, cost savings, processing speeds, and profit margin. It also improves quality control in secondary markets by auditing entire loan pools in hours and putting an end to sampling.
It also helps lenders establish a culture of continuous quality control by unifying technology and business processes, leading to a virtuous circle of improvements across performance, competitiveness, customer experience, and profits.
Taking the opportunity to invest in proven AI while volumes are lower gives time for this transition to bed in and a more elastic business model to develop. When volumes begin to grow again, TRUE will help lenders increase activity without the complexities and costs of rebuilding teams.
Put TRUE to the Test
With TRUE integrated into lending processes, Product leaders in the mortgage industry can build a business that delivers better outcomes at a lower cost.