Solution Spotlight: Post-Close Automation
Summary: Highlights the benefits of automating multiple processes in Post-Closing showcasing the value of an end-to-end mortgage automation solution.
Last week the Mortgage Bankers Association published an article with an ominous headline: ACES [ACES Quality Management] Finds Second Consecutive Increase in Critical Defect Rate.
The ACES analysis found that in Q2 of 2024, the critical defect rate—a fault in a loan file that would make it uninsurable or ineligible for sale—had risen to 1.81%, nearing the “precarious” 2% threshold.
Why does this matter? As I wrote about in a blog several months ago, poor loan quality can have severe adverse impacts on a lender, including, but not limited to, being forced to buy back the loan at significant costs to the lender—sometimes incurring a penalty with a cost of up to 30% on the loan amount, as well as other penalties—financial and reputational.
All bad news for a lender in today’s tight and competitive market.
But it’s not just about catching and fixing the critical defects before the loan is shipped off. There’s also the issue of how long a lender has a loan on their books, and how quickly they can clear the loan off their warehouse line. Wouldn’t this be a great benefit as loan volumes increase? We think so. And so do our customers. Wouldn’t this be a tremendous benefit as loan volumes increase? We think so. And so do our customers.
MOZAIQ is the only software partner today that delivers integrated-AI automation solutions across the end-to-end mortgage fulfillment lifecycle. Why end-to-end? So customers don’t get stuck with costly and inflexible point solutions, and end up managing multiple, and incompatible, automation solution providers, while trying to compete effectively.
Post-Close Automation
The Post-Close Automation suite of products include:
- Trailing Documents Reconciliation
- Investor Stipulation Retrieval
- Post-Close Audit
- Final CD
- Post-Close CD
- Investor Loan Delivery
1. Trailing Documents Reconciliation
The automation solution confirms whether the Final Title policy, the Deed of Trust (Recorded Mortgage), and the Mortgage Note have been received by the lender on the funded loans.
It involves checking the loan origination system (LOS), email inboxes, and third-party websites, such as DocProbe, for the availability of documents, and sending automated emails to the Title and Settlement agents as required, requesting the missing documents.
2. Investor Stipulation (“Stips”) Retrieval
Investor Stipulation Retrieval is a critical process designed to address conditions / stipulations raised by investors to ensure smooth and timely loan sales. The process automates:
Investor Conditions Review: Investors have specific conditions, or stipulations, that must be met before a loan can be sold to them.
Loan Origination System (LOS) Update: Once the stipulations are identified, the relevant information is entered into the lender’s (seller’s) Loan Origination System (LOS).
Compliance and Efficiency requirements are met: By addressing stipulations, the process upholds compliance with investor conditions, enhances the efficiency, and minimizes delays to ensure that loans meet all necessary conditions for a successful sale.
3. Post-Close Audit
The Post-Close Audit automation solution ensures compliance and accuracy with regulatory and investor guidelines. It runs on the industry-leading Checkpoint Audit Platform enabling the underwriters to confirm that the loan meets the necessary underwriting parameters by identifying and correcting any discrepancies or errors.
The platform enables the post-close auditor (human processor) to easily review and validate the loan, and fix the errors where necessary as highlighted by the automation platform, for example, for missing and expired documents, missing data, mismatched data and documents, and checks for erroneous calculations.
Once the loan passes the audit, the auditor approves the loan, the results are uploaded into the LOS, and the loan is committed to an investor, ready to be delivered. A detailed write-up of the Post-Close Audit process can be found here.
4. Final CD
The MOZAIQ automated Final CD solution facilitates the error-free process of generating and sending the final Closing Disclosure (CD) to all borrowers within 3 days of their loan funding, and updating the disclosures, if necessary, in the LOS. The process runs 24×7 and delivers a higher throughput of loans, enabling the lender to effortlessly scale in line with volumes, and requires less human intervention, ensuring greater accuracy and transparency for all parties.
5. Post-Close CD
The automation solution records and sends the Post-Close CD to the relevant parties, with any required adjustments made to the CD, after the loan has closed. The revised document includes changes such as prorations for taxes or fees (e.g., appraisal) that were not finalized at the time of the Final CD. Any adjustments are made in the form of refunds, or cures, and sent to both the borrower and the seller to ensure accurate records are shared with both the parties.
The automation ensures that the process and the loan adhere to the required compliance and regulatory guidelines, helping to maintain compliance and transparency for all the parties involved.
6. Investor Loan Delivery
The Loan Delivery automation solution runs 24×7 ensuring an accurate, timely, and zero failed deliveries of the loan to the investor. It enables the mortgage lender to automatically deliver loans to GSEs—Fannie Mae, Freddie Mac, and non-GSEs—via aggregators configured in the LOS, for example, Encompass’s Investor Connect.
Once a funded loan is committed for purchase to an investor, the automation updates fields in the LOS, generates the XML loan file, clears data entry validations, and submits the loan to the investor.
It also generates LCA/UCD reports, post-closing forms, indexes the delivery documents, updates the ULDD details, and generates the PDF investor package via an integrated Package Delivery solution where for loans that are funded with Investors, Servicing Packages are automatically printed from the LOS, and the package is then delivered to the Servicer through the appropriate delivery methods, including Secure File Transfer (SFTP): Freddie Mac—FAST, Fannie Mae—Easy Transfer, and Encompass’s Investor Connect.
One More Thing—Loan File Setup
The same end-to-end platform is used to execute the Loan Setup process to prep the loan file and ensure it is as clean and complete as possible before it reaches the underwriter.
The automated Loan Setup process automatically extracts data from the loan docs (we’ve trained our platform to extract data from over 200 mortgage document types), inputs the data into the LOS, triggers the required functions in the LOS, such as third-party service orders, intent to proceed, lock confirmation etc., ensures that the right documents are present and complete in the loan file, and compares the data on the documents to the data in the LOS to ensure that the data matches e.g., ensuring Credit Report consistency.
This way the underwriter—the lender’s most valuable resource—can focus on what they do best, and not waste time chasing missing documents or correct erroneous data.
Why More Lenders are Opting for an End-to-End Solution Provider
Automation of such highly crucial compliance related processes can benefit lenders in multiple ways:
- Quality: Increase the accuracy of the loan file before sending it to the investor i.e., reduce the defect rate by catching errors in the loan file early
- Cost Savings: Clear loans off the warehouse line, allowing the lender to service more loans faster
- 24 x 7: Round the clock availability to process loans as volumes grow
- Scale: Ramp up quickly in line with growing loan volumes, without having to wait to hire, trains, and deploy a human resource
- Enhanced Compliance: Ensures strict adherence to regulatory requirements, reducing the risk of non-compliance and associated heavy penalties in case of failure of meeting compliance.
- Speed & Efficiency: By automating repetitive and time-consuming tasks, lenders can streamline operations and speed up the loan processing and closing times. This leads to faster loan approvals and closures by 2x or more, enhancing customer satisfaction
- Risk Management: Provide deeper insights into loan quality, helping to identify and mitigate potential risks at early stages, and enabling a feedback loop to highlight and correct errors upstream in the process that may be structural in nature, or being made over and over by the same resources downstream
And one final benefit of an integrated-AI end-to-end platform is that there’s a feedback loop built into the platform, where the downstream processes can benefit the upstream processes, providing the ability to continuously iterate on optimizing the loan origination process, consistently reducing the critical defect rate across the entire loan portfolio.
If you’re interested in realizing real business benefits via a winning automation strategy, contact MOZAIQ today and find out how our Integrated-AI, End-to-End, Intelligent Mortgage Automation solutions can help you win.
Note: This blog post was written by a human and does not contain content generated by ChatGPT or any other Generative-AI platform.
