Facilitating Loan Modification Using BPM
Business Process Management (BPM) systems can help loan servicers better manage the process of modifying loans and deal with the deluge of applications under the HAMP program.
A rising number of foreclosures and drops in home sales have made it more difficult for investors to retrieve their money, resulting in high REO (or real estate owned) for servicers. The $75 billion Home Affordable Modification Program (HAMP) has resulted in a far lower number of loan modifications than it was expected to produce. One reason is the lack of suitable IT systems to support the complex, document-intensive process that requires multiple levels of approvals.
A Business Process Management (BPM) system can facilitate seamless integration among the multiple legacy applications involved in the loan modification process. This helps ensure automated validation of borrower credentials with better quality of information and faster turnaround.
Among the areas where BPM can help are:
Faster Response to Changes
The monolithic applications infrastructures of most financial services companies struggle to keep pace with frequent regulatory changes in modification programs. BPM features such as delegation of busi-ness rules to appropriate user groups helps capture changes “on-the fly” for better market adaptability and enhanced productivity.
Automated Validation
Currently, the high volume of loan requests restricts the amount of validation that can be done manually, while its time-consuming nature reduces productivity. A BPM solution can ensure faster, more accurate automated validation of borrower credentials by eliminating the need to extract information from multiple systems and providing a standard user interface.
Focusing on the Most Appropriate Borrowers
Lucrative incentives have caused servicers to offer trial modifications for huge numbers of loans, a significant portion of which are never made permanent. Not only is the borrower's monthly payment increased to the pre-modification level, but the difference between the pre-modification and the trial payment level is added to the loan. This pushes the borrower further toward foreclosure.
Proper and proactive screening of borrowers, based on complicated logic involving income and loan attributes, helps ensure that only eligible borrowers make the cut. This can be facilitated using a BPM solution offering strong business rule engine capabilities, along with predictive analytics and modeling. These tools can evaluate and classify imminent defaulters and offer trial plans that best suit their needs. It can also reduce the risk of strategic default (financially stable borrowers willfully defaulting on underwater mortgages.)
Improved Task Routing
The typical loan modification process involves a multitude of users from various departments (such as collections, intake, relationship management and quality control) working on a request either sequentially or in collaboration. Efficient task routing minimizes wait time and ensures effective resolution, and can be facilitated using features that come standard with many BPM suites, such as skill-based routing, easy task assignment and real-time collaborative capabilities.
Automated Documentation Processing
Many loan modification applications are delayed, or rendered invalid midway through the process, because of a lack of verified documentation and the need for manual checks. BPM systems provide seamless interfaces with document management systems, which can reduce these delays and errors. These include agent-driven features for automated checks on pending customer documents, follow-ups on customer correspondence triggered by service level agreements and information interchange with third parties for documents such as title search artifacts, credit bureau reports, broker price opinion documents and flood insurance records. Standard BPM suites offer pre-built integration wizards that can be easily configured and triggered based on complex business rules to increase the speed and accuracy of document processing.
Reduced Duplicate Effort Across Platforms
Today, users often must enter the same or similar data (such as borrower income and loan detail) in multiple systems. This not only wastes time and effort, but raises the risk of input errors, data redundancies and erroneous data references. A BPM tool can provide a common platform for enabling various existing systems to communicate in a coherent way. This also eliminates the need to repeatedly collect the same data from the customer or manually extract it from multiple systems, which further increases productivity.
The Road Forward
Organizations looking to improve IT support for the loan modification process should prepare a focused BPM business case to ensure proper buy-in from senior management. This phased approach will help organizations clearly prioritize pain areas and generate significant short-term ROI, helping assure future enterprise-wide involvement.
For more information, read Facilitating Loan Modification Using BPM and learn more about Cognizant's Business Process Management services and Customer Solutions Practice.