Striking a Balance with Augmented Underwriting
Introduction
The mortgage industry has been undergoing a significant transformation, driven by advancements in technology and the need for streamlined processes. One critical aspect of this transformation is mortgage underwriting, a process that has traditionally been plagued by time-consuming manual tasks, high costs, and scalability challenges.
Technology is not just an option but a necessity to stay competitive and enhance customer experiences. Indecomm’s recent webinar, “Straight Talk on Augmented Underwriting,” offered a deep dive into how technology is revolutionizing the mortgage industry, particularly in the realm of underwriting. Industry experts Heather Cheney and Rachael Harris discussed the potential of augmented underwriting to improve efficiency, accuracy, and customer satisfaction.
What is Augmented Underwriting?
In the webinar, Rachael and Heather mentioned that augmented underwriting is the harmonious fusion of automation and human expertise. It capitalizes on technology, incorporating elements like robotic process automation (RPA), artificial intelligence (AI), and machine learning to streamline underwriting processes. This innovative approach empowers underwriters with tools that automate tasks such as document comparison, income calculation, and risk assessment while leveraging human expertise for some of the more nuanced analyses required.
And, while this seems like a very simple description, the fact is that some lenders believe underwriting starts at first contact with the borrower. Therefore, the scope of an automated underwriting solution may vary based on the lender’s definition of underwriting. Rachael and Heather explore some of the challenges of a traditional and highly manual underwriting process and why so many are inquiring about Indecomm’s augmented underwriting program.
Challenges in Traditional Origination Processes
During the webinar, Heather Cheney, Assistant Director of Underwriting at Indecomm, was quick to highlight that the true value of underwriters lies in their ability to make informed decisions based on comprehensive analysis, which is often hindered by the overwhelming volume of routine tasks that consume valuable time that could otherwise be used for critical analysis. When lenders rely exclusively in manual underwriting, it often leads to lengthy turnaround times that leave customers and lenders frustrated. In addition to wasting the talent, time, and knowledge of the underwriter, this approach also contributes to the high cost per loan.
Manual data entry, document verification, and compliance checks slow down the process and require a significant workforce, which drives up costs. Moreover, the risk of errors and inconsistencies remains a challenge, leading to the need for additional reviews and potential delays.
Benefits of Augmented Underwriting
This is where augmented underwriting emerges as a practical solution for lenders who value the time and input of their underwriters. Lenders using Indecomm’s tech and talent often gain tangible benefits such as:
- Reduced Turnaround Times: Faster processing means quicker approvals and a more satisfying experience for borrowers.
- Cost Savings: Reduces the need for extensive in-house manual labor, decreasing personnel costs.
- Enhanced Accuracy: Uses automation to identify and rectify errors early in the process, mitigating the need for costly rework and additional reviews.
- Consistency and Data-Driven Analysis: Reliance on accurate data inputs and validation, minimizes the potential for human error and bias.
- Scalability: An augmented underwriting program helps lenders efficiently manage increased loan volumes without the need to significantly expand their workforce
- Improved Customer Experience: Faster approvals, smoother application process, less back-and-forth communication with the borrower due to data/document errors.
A Note on Risk
Rachael and Heather noted that automated systems can be programmed to adhere strictly to regulatory guidelines, reducing compliance risks and ensuring adherence to industry standards. However, they stressed that while automation reduces certain risks, it is not foolproof. Inherent risks still persist in both human and automated reviews.
Augmented underwriting, therefore, seeks to strike a balance, leveraging technology to handle routine tasks while ensuring that human oversight and expertise are maintained to address complex scenarios.
Striking the Balance of Tech and Talent: Augmented Underwriting
Automation has a significant role in transforming the underwriting landscape and there is no shortage of solutions available to lenders today. The speakers highlighted how technology can extract and analyze borrower information from documents, ensuring accuracy and compliance with loan guidelines. Automation aids in income calculations, reduces errors caused by manual data entry, and even detects missing documentation.
However, in today’s market, many lenders are not quite ready to take on a new system internally and are missing out on some of these benefits. Additionally, the cost of hiring staff to support underwriting system adoption, technology, and maintenance may not be practical for lenders in the current mortgage market.
On the other side of the coin, human judgment remains indispensable. Underwriters possess the skills to evaluate nuanced situations that automated systems might miss. Borrower-specific factors, unique life conditions, and property nuances require human insight. Despite the increasing capabilities of technology, it cannot replicate the intricate decision-making processes that underwriters bring to the table. However, rapid volume shifts can lead to rapid hire/fire scenarios, which are not ideal for lender reputation or employee morale.
Indecomm’s augmented underwriting solution is an opportunity for lenders to get the best of both worlds. Heather and Rachael were careful to point out that Indecomm’s augmented underwriting approach combines the strength and expertise of human underwriters at Indecomm with the power and efficiency of its automation and SaaS solutions such as DecisionGenius, IncomeGenius, and BotGenius (depending on the scope of the underwriting need). These solutions automate routine tasks while empowering underwriters to focus on complex cases that require human judgment, critical thinking, and contextual understanding of complex scenarios. The result is a well-informed decision-making process that balances efficiency and accuracy and reduces cost in the mortgage middle office operation.
In fact, Heather outlined the ROI benefits of this solution which estimated a 54% return, faster turn times, fewer quality issues, improved scalability, and enhanced staff retention further contributing to a compelling ROI. As the industry continues to grapple with margin pressures, augmented underwriting emerges as a viable solution to drive efficiency and profitability.
Conclusion
As the rest of 2023 unfolds, lenders that seize the opportunity to integrate augmented underwriting into their processes stand to benefit from cost savings and a competitive edge in the dynamic mortgage market.
The mortgage industry’s transformation is underway, driven by the convergence of technology and human expertise. Augmented underwriting emerges as a beacon of change, where automation enhances efficiency, accuracy, and the borrower experience. As lenders navigate this dynamic landscape, embracing augmented underwriting can unlock untapped potential, deliver faster approvals, and secure a competitive edge.
About the Experts
Heather Cheney, Assistant Director of Underwriting at Indecomm, boasts 27 years of mortgage industry experience. Her expertise spans underwriting, due diligence, and finance, highlighting the critical role of underwriting in shaping the mortgage sector.
Rachael Harris, Senior Vice President of Product Management at Indecomm, brings over two decades of mortgage industry experience. Her operational proficiency and deep insights drive product development and steer the evolution of augmented underwriting.
About Indecomm’s Augmented Underwriting Solution
Indecomm’s augmented underwriting solution can be tailored to meet the unique scope of the lender. Our GeniusWorks platform takes the loan at set-up and returns a complete and clear-to-close solution back to the lender, reducing back and forth with the lender and drastically reducing costs.
Indecomm also offers a specific underwriting-only solution leveraging IncomeGenius and DecisionGenius systems and human expertise to analyze loan files.
Regardless of the scope, Indecomm offers the right blend of automation and human insight to delivery quicker turnarounds, improved accuracy, and enhanced risk management.