Mortgage Document Processing: 10 Best Practices for Managing the Loan Application Process

Loan application processing is a pivotal factor influencing the competitive standing of a mortgage lender or financial institution.  Slow, inefficient, and error prone mortgage document processes can result in poor customer satisfaction, higher costs, and increased risk of regulatory compliance issues.  

But the volume and complexity of mortgage documents can make application processing a challenge.  

With speed, accuracy, and accessibility becoming paramount in today’s digital age, lenders are under intense pressure to improve the way they process mortgage documents.  That’s why more mortgage lenders and financial institutions are rethinking the way they process documents during the loan application process.  Artificial intelligence (AI), digital workflows, employee training, and other best practices enable lenders to enhance the efficiency and effectiveness of their loan application process. 

This article explores best practices for automating the processing of loan application documents.  By adopting these best practices, mortgage lenders and financial institutions can not only streamline their operations but also elevate their customer experience, standing out from the competition. 

Loan application best practices 

Automation is revolutionizing the way that mortgage lenders and financial institutions process loan application documents.  Below are 10 best practices for managing the loan application process. 

1. Implement intelligent document capture.  Intelligent document capture is foundational for best-in-class mortgage document processing.  The technology converts machine-printed and handwritten documents into machine-readable text, significantly reducing the need for manual data entry, minimizing errors, and accelerating cycle times.  AI and optical character recognition (OCR) extract essential information such as applicant details, employment and income details, financial information, credit history, and additional documentation.   
2. Leverage document classification and sorting.  Few loan application processing tasks are as time-consuming and error prone as manually sorting mortgage documents.  Machine learning (ML) algorithms automate the classification and sorting of mortgage documents.  The algorithms analyze document content and metadata to categorize documents into pre-defined groups such as proof-of-identity documents, income statements, credit histories, and property details.  By categorizing and sorting these documents automatically, mortgage lenders and financial institutions can ensure that each document is routed to the appropriate workflow, reducing human operator intervention and increasing processing efficiency. 
3. Automate data validation and quality control.  Accurate and complete data is crucial to informed decision-making.  A typo, transposed number, or overlooked data field during the loan application process can create downstream exceptions that could delay the application process or leave a lender vulnerable to compliance issues and fraudulent activities.  Look for a mortgage document capture solution that validates data points such as income sources, credit scores, and property valuations against databases and pre-defined business rules.  Some solutions also use AI algorithms to ensure the accuracy and completeness of extracted data. 
4. Strive for connectivity.  Efficient and effective loan processing depends on the smooth exchange of data between a mortgage document processing system and a lender’s existing core banking system, loan origination system (LOS), or customer relationship management (CRM) platform.  Prioritize the seamless integration of these systems to enable real-time data synchronization, instant status updates, centralized access to information across departments and stakeholders, and streamlined communication and collaboration among stakeholders. 
5. Digitize and simplify your workflows.  If it seems like your organization wastes too much time chasing down information, checking on the status of applications, and searching for lost or misplaced documents, you are not alone.  Digitizing your workflows can help.  Workflow automation tools streamline the loan application process end-to-end, from submission to approval or rejection.  Predefined business rules and decision criteria expedite routine approvals and flag complex cases for manual review by loan officers.  And complete visibility into the status of loan applications reduces the possibility of processing delays.
6. Strengthen your compliance and security controls.  Safeguarding sensitive customer information is critical in the mortgage space.  The consequences of running afoul of General Data Protection Regulation (GDPR) and other regulatory standards can be severe.  That’s why more mortgage lenders and financial institutions are deploying mortgage document capture solutions with built-in controls such as user access permissions, segregation of duties, systematic workflows, complete audit logging of all actions taken on application, and advanced data encryption.  Leveraging a loan application processing platform with these types of built-in controls can help ensure data integrity and protect against cyber threats.
7. Monitor your performance.  Many mortgage lenders and financial institutions take a “set it and forget it” approach to automation.  However, continuous monitoring of Key Performance Indicators (KPIs) is essential to achieving best-in-class loan application processing results.  Stay on top of your operational performance and identify areas for improvement by implementing mechanisms for tracking metrics such as loan application cycle times, error rates, and customer satisfaction levels.  The analytics built into mortgage document capture solutions also can help pinpoint bottlenecks and opportunities to refine workflows.
8. Don’t skimp on employee training.  Frontline staff are critical to achieving best-in-class mortgage document processing results.  Empower your employees with the skills and confidence they need to attain peak performance by investing in training on system functionality, workflow processes, and troubleshooting techniques.  Foster a culture of continuous learning and improvement by offering ongoing support and resources to ensure that employees can effortlessly navigate new business requirements and workflows.     
9. Be adaptable.  The mortgage industry is constantly evolving.  AI-powered loan application processing solutions can help mortgage lenders and financial institutions keep up with these changes and stay one step ahead of the competition.  AI automates customer inquiries and risk assessment.  ML enhances automation capabilities and accelerates document processing workflows.  And Natural Language Processing (NLP) improves data extraction results.       
10. Ensure scalability and flexiblity.  Designing scalable and flexible processes is essential to accommodating fluctuating loan application volumes and business growth.  Multi-function document scanners and intelligent data capture can handle increased borrower demand without compromising performance, while flexible workflows allow for adjustments to regulatory changes, industry standards, and organizational requirements.  And investing in cloud-based platforms that support seamless upgrades and expansions future-proofs automation investments, ensuring long-term sustainability and operational resilience.

Leveraging these best practices empowers mortgage lenders and financial institutions to achieve operational excellence, mitigate risks, and deliver superior customer experiences. 

Conclusion
The adoption of advanced automation technologies and best practices is essential for mortgage lenders and financial institutions seeking to optimize the processing of loan application documents. By implementing solutions with intelligent data capture, document classification and sorting, data validation and quality control, digital workflows, and performance monitoring, organizations can significantly enhance efficiency, reduce cycle times, and ensure compliance with regulations.