Mortgage banks are increasingly focused on borrower enablement features to achieve transparency, extend reach, improve lead management and realize operational efficiencies.

1. • Cognizant 20-20 Insights
Borrower Enablement in Mortgages
Executive Summary Industry Trends
At the dawn of the 21st century, borrowers began Over the past few years, lenders have realized
their home loan search by visiting their broker the power of borrower enablement. The win-win
or nearest bank and exploring financing options. goal: By delivering more timely and precise infor-
Today, the prospective borrower goes online and mation and services, lenders can keep borrowers
surfs the Internet, scouting for information and more engaged throughout the mortgage lifecycle.
the best deals from different lenders, checking This not only brings much needed transparency to
various online forums to learn from peers about the process but it also delivers more efficient and
service quality and products and even testing effective customer management, which results in
loan options before choosing a lender. With infor- improved operational efficiencies. This is extremely
mation on various aspects of the loan process, critical given the lingering impact of the recent
including products, rates and property informa- credit crunch. Figure 1 (next page) depicts various
tion at their fingertips, customers are no longer standard and emerging features that lenders offer
passive observers but active participants. Today’s today across the mortgage lifecycle.
consumers are more analytical and prefer making
purchase decisions based on their own judgment Standard features include rate and payment cal-
rather than having excessive exposure to sales culators, product comparison, borrower registra-
tactics. tion, e-application, payment setup, etc. The rate
and payment calculator feature takes basic inputs
When lenders realized this new consumer behavior from the borrower, such as loan amount, property
in the 2003-2004 timeframe, they began offering value, credit score income, etc., and returns
a variety of basic online lending features, which available products and corresponding interest
grew in leaps and bounds over the ensuing years. rates. Borrowers can then select various products
Starting with basic loan search, rate calculators, and naturally move on to the next feature, such
product comparison engines and branch locators, as product comparison, which provides an
lenders then expanded their online offerings intuitive, visual assessment of products across key
to include guidance on property search and parameters like payment, interest rate, duration,
research news. Mortgage banks now are increas- total interest component, etc., thus saving time
ingly focusing on borrower enablement features for the front-office team to explain the offerings/
to achieve transparency, extend reach, improve products to borrowers.
lead management and even realize operational
efficiencies by reducing workload on middle/ Borrowers can then register, which allows them to
back-office employees. How so? By enabling enter demographic information — such as name,
online borrowers to actively participate in each address, contact details, property address and
and every step of the mortgage lifecycle. preferred location to register — and save their
cognizant 20-20 insights | july 2011

2. Borrower Enablement Across the Mortgage Lifecycle
• Customer blogs and forums
• View documents
• Consolidated debt and
between borrower
expense analysis
and lender
• Combined view of accounts
• Application status across multiple banks
updates at key • Online switcher
milestones • Interface with insurance
• View application status agencies
• Incentives
• Closing package/docs • Offset mortgages
for online
tracking • External links (news,
application
• Ability to upload weather)
• Online chat
documents
• Homeowner assistance
• Finding home value • Updates to basic • Standing instruction
(integrate with borrower info set up and payments
third party) • Document tracking • E-mail/SMS reminders • Property tax payment
Emerging for due dates • Utility bill payments
• E-application • Approval notification
Features • Rate and payment • Submit for • E-mail/SMS notification • Account statement view • E-mail/SMS alerts for
on disbursement • Tax certificate payment reminders
calculator decisioning
• Product comparison • E-Disclosure • Online tax deduction
• Product details and offers details
Standard • Borrower registration
Features • Tax optimization
• Branch locator
Processes Lead Application Fulfillment & Customer Management Payment Processing
Closing & Account & Collections
Administration
Figure 1
settings. This information on the borrower’s pref- documents, purchase agreements, etc. Banks can
erences helps loan officers contact borrowers publish all documents sent to and received from
in an intelligent fashion. Data retention helps borrowers online that enable borrowers to have
in saving selections and borrower data, which a single view of their communications with the
reduces data entry on repeat visits and enables bank, thus improving transparency and reducing
easier conversion to e-applications. Through workload on the middle/back office; this is also
e-applications, the borrower can apply electroni- a regulatory requirement per the latest directive
cally over the Internet by entering standard loan from Fannie Mae.
application information. Similarly, after funding
of loans, features such as payments setup enable Benefits of Borrower Enablement
borrowers to make mortgage payments through The various benefits of borrower enablement
credit card or bank accounts. The utility bill include cost savings by reducing workload across
payment feature ensures that all property-related the front-, middle- and back-office, improved
charges get paid through a single process, thus lead management and pull-through and brand/
saving time and effort for both the borrower and perception building. Front-office workload is
the back office. reduced through automated lead management,
borrower registration and product/offer compari-
Emerging/new features include online chat, son to application conversion. The middle-office
incentives for online application, the ability to workload is reduced through status updates and
upload documents and view documents, etc. After document management. Back-office workload is
using features such as rate and payment calcula- reduced through automated payments, borrower
tors and product comparison engines to obtain updates and document publishing.
more information, borrowers can engage in an
online chat with a customer service representa- These features not only provide operational effi-
tive in real time. Banks can offer incentives for ciency but also help build better brand and brand
online applications, which will not only reduce perception by promoting transparency and attract-
paperwork and data entry efforts but also incen- ing customers through features such as more intu-
tivize borrowers to apply online. The ability to itive and user-friendly user interfaces for various
upload loan-related documents will support options, such as calculators and product compari-
and complement online adoption and provide son, product comparison to application conver-
borrowers with functionality to upload key loan- sion, etc. Features such as product comparison
related documents, such as income and asset tools that lead to loan application and subsequent
cognizant 20-20 insights 2

3. Benefits of Borrower Enablement
Feature Benefits
Rate and Payment Calendar • User-friendly interface; asks for basic information.
• Borrower can explore options, thus saving time for front-office team.
Product Comparison • Visual comparison of products across key parameters; promotes transparency.
Lead Generation — B2B and B2C
• Borrower can explore options, thus saving time for front-office team.
Borrower Registration and • Borrower details and product preferences captured during registration help front-office
Data Retention contact borrower in an intelligent manner; reduced data entry on repeat visit.
• Can help borrowers find property based on the area in which they are seeking property.
Other Features: Product details and offers, guide to buy property, interactive branch locator, contact, newsletter, find home
value (integration with free sites like zillow.com).
Online Chat • Chat with leads instantly to convert them to applications; clarify borrower doubts in real time
and encourage them to register to get solid leads.
• Route chat to local officers who are more informed about local prices/rates/properties.
Other Features: Find home value (integration with free sites like zillow.com), homeowner assistance.
• Feeds into next set of processes: Processing, UW, completion (ie, fulfillment).
E-Application
Application —
B2B and B2C
• Saves time for front-office team.
Incentives for • Pass savings to borrower through incentives so borrowers are encouraged to apply online.
Online Application • Savings in the form of reduced processing costs and ability to quote the difference in fees to
borrowers.
Other Features: Application status updates at key milestones, document tracking, e-mail/SMS trigger for verification status at
document level, document tracking, approval notification, closing package/completion docs tracking, disbursement notification.
Fulfillment
(e-mail or SMS)
View Application Status/ • Reduce call volumes for status calls.
Ability to Update Documents • Reduce paper, shipping costs and document processing/indexing efforts.
Amendments (demographics) • Reduce call volumes for simple changes.
Management
Due Date Reminders • Reduce missed payments and payment delays; reduced collections efforts downstream.
Customer
(e-mail and SMS) • Reduce outbound call volume for payment reminders.
Customer Blogs/Forums • Can provide insights to improve service or develop different products.
• Can serve as customer testimonials for good service.
Standing Instruction • Reduce call volume for standard payments.
Payment Processing
Setup and Payment
• Automation leads to reduced efforts from loan administration team.
(Cards, Direct Debit, etc.)
Collections
Payment of Property Tax and • Lender can easily ensure that property tax payments are up to date.
Utility Bills • For borrower, it is a one-stop-shop for payments.
View All Letters • Reduced efforts for re-sending/tracking and solving letter-related queries.
• Borrower can find all letters in one place.
Standard features Emerging features
Figure 2
document publishing also improve transparency. for others. For example, incentives for e-applica-
For lenders, interacting with borrowers at regular tion might be easier to quantify than for product
intervals ensures that processes become more comparison. Assuming the cost of a front-office
streamlined, as well as enabling seamless infor- staff person to be $25/hour, and estimating the
mation flow and communication with borrowers average time spent interacting with the borrower
at pivotal points in the lending process. This helps to complete the loan application over the phone
mortgage banks achieve greater cost savings and at 45 minutes, the cost of completing one appli-
efficiencies. cation would be $20. Add to that another $40
for the cost of shipping, printing, scanning and
Before offering a plethora of online features, indexing, as well as data validation. In all, the cost
banks need to weigh the costs and benefits of of one application is about $60. If the borrower is
each feature. While it might be easy to quantify given an incentive to apply online, such as a $50
the benefits of some features, it’s more difficult
cognizant 20-20 insights 3

4. Borrower Enablement’s Contribution to Operational Efficiency
Cost savings by • Reduced workload on front office through leads, registration and
reduced workload product/offer comparison
across front, middle • Reduced workload on middle office for status updates and document management
and back office • Reduced workload on back office through payments, updates and document publishing
Improve lead
• Better lead to application routing and management
management and
• Real-time help to borrowers
pull-through
• Customer attraction: User-friendly interface enables borrowers to
Brand/perception perform various functions
building • Promotes transparency through various features such as product comparisons
and application, document publishing, etc.
Figure 3
credit, this provides a saving of $10 per applica- tive landscape, current features, feature complex-
tion. Assuming 5,000 loans per month and a 50% ity, business impact and business drivers.
rate of e-application adoption, this still translates
to $300,000 in annual savings for the originator. A lender that originates mortgages primarily
through retail channels vs. one that originates
Banks can attempt to determine the benefits of through wholesale would require very different
providing a product comparison feature through features. An analysis of the current offerings of
indicative time and resource costs, but they will be the bank is required to understand its maturity. A
challenged due to a lack of data and metrics, as bank with a very basic Web presence (little more
well as the high cost of data gathering. Borrowers than “brochure-ware” describing products and
exploring products on their own does not neces- interest rates) might choose to implement just a
sarily translate into saved front-office time, since basic rate and payment calculator and some alert
they might want to go through the comparison features rather than taking a big-bang approach
again with the bank staff. Moreover, the pull- of embracing a full feature set or adding advanced
through to the application would be difficult to emerging features. An initiative like this requires
measure and compare with considerable budget and resource allocation to
A structured and lead-generation costs. achieve the desired impact. This would include
comprehensive staff re-allocation, training and change manage-
Roadmap for Enabling ment, in addition to the considerable IT invest-
approach is required to Borrowers ment.
lay out a roadmap that While defining the roadmap
takes into account the to implement various bor- Implementation Approach
rower enablement features, The approach to defining the borrower enable-
bank’s internal resource ment roadmap should include identification of a
it is easy for mortgage banks
constraints, budgetary to get lost in the myriad complete list of features, determination of busi-
constraints, technology of possible features they ness impact for each feature and determination
can offer. A structured and of the corresponding implementation cost to help
landscape, competitive decision-makers prioritize features based on facts.
comprehensive approach is
landscape, current required to lay out a defined
The complete list of features should include fea-
features, feature and definitive roadmap that
takes into account the bank’s tures across all process areas, with details as to
complexity, business what each will offer to the customer and the cor-
internal resource constraints,
impact and business budgetary constraints, tech- responding benefits. Determination of business
impact of the feature will be based on benefits,
drivers. nology landscape, competi-
cognizant 20-20 insights 4

5. An Implementation Blueprint
Determine Determine Determine Prioritize
complete business impact implementation based on
list of features based on the effort business
that can be importance in impact and
offered the process effort
Figure 4
the competitive landscape, the business model perceived negative into a positive. Success in high
and business drivers. A determination of the human touchpoint industries like lending is driven
implementation effort should take into account by the ability to engage the customer at different
the existing technology landscape, current fea- stages of the lifecycle and enhance the customer
tures and feature complexity. The final step in experience at each stage.
the process will be prioritization of these features
based on business impact, implementation cost, Initiatives like borrower enablement help keep
internal resource constraints and budgetary con- the borrower engaged throughout the mortgage
straints. lifecycle. This ensures that customers remain
happy and productive, which in turn increases
The implementation priority depends on the confidence in the bank and
trade-off between business impact and implemen- fosters a long-lasting rela-
tation effort. The quick wins are obviously the tionship. Satisfied borrow- Every step toward
ones with high impact and low implementation ers not only contribute more borrower enablement
effort. The next set would require deeper thinking revenue themselves, but is a step toward
by management, based on business benefits and they also help generate busi-
budgets. ness from fellow borrowers promoting relationship,
by acting as brand ambassa- empowerment,
Borrower Enablement and dors for the bank in the social accessibility and
Empowerment: A Win-Win media sphere.
At a time when recovery of the housing industry
transparency between
While the visible benefits the borrower and
seems to always be three to four quarters down
for the borrower include
the road and lenders are targeted by consumer
transparency, enablement
the lender.
activists, the media, investors, regulatory bodies
and accessibility, the lender
and industry watchdogs, lenders have to go the
prospers through cost savings, improved lead
extra mile to be transparent and customer oriented,
generation and management, increased process
as well as build trust. Every step toward borrower
efficiency and better brand building. The cost
enablement is a step toward promoting relation-
savings from these initiatives can significantly
ship, empowerment, accessibility and transpar-
contribute to the organization’s overarching
ency between the borrower and the lender.
goal of expense reduction, while freeing resourc-
While the general perception is that increased es to boost investment in related or adjacent
transparency exposes banks to heavy scrutiny, strategic initiatives.
lenders must devise their strategies to turn this
About the Authors
Sanjit Bose and Ashish Shreni are Senior Consultants within Cognizant Business Consulting. They have
executed multiple projects for top-10 players in the banking industry, spanning consulting, CRM strategy,
business process optimization and IT project execution. They can be reached at Sanjit.Bose@cognizant.com
and Ashish.Shreni@cognizant.com.
cognizant 20-20 insights 5

6. About Cognizant’s Mortgage Practice
Cognizant’s Mortgage Practice employs over 70 subject matter experts and analysts and 800 associates. We have
successfully delivered over 100 large and complex engagements across origination, secondary markets, servicing and
loss mitigation in the U.S. and Europe. We offer consulting, IT, BPO and IT infrastructure services across all functional
areas, with IT services that encompass business and IT transformation, systems consolidation, application develop-
ment, application maintenance, testing, data warehousing, business intelligence and analytics.
About Cognizant
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