Borrower Enablement in Mortgages


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

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Borrower Enablement in Mortgages

  1. 1. • Cognizant 20-20 InsightsBorrower 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. 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 AdministrationFigure 1settings. This information on the borrower’s pref- documents, purchase agreements, etc. Banks canerences helps loan officers contact borrowers publish all documents sent to and received fromin an intelligent fashion. Data retention helps borrowers online that enable borrowers to havein saving selections and borrower data, which a single view of their communications with thereduces data entry on repeat visits and enables bank, thus improving transparency and reducingeasier conversion to e-applications. Through workload on the middle/back office; this is alsoe-applications, the borrower can apply electroni- a regulatory requirement per the latest directivecally over the Internet by entering standard loan from Fannie Mae.application information. Similarly, after fundingof loans, features such as payments setup enable Benefits of Borrower Enablementborrowers to make mortgage payments through The various benefits of borrower enablementcredit card or bank accounts. The utility bill include cost savings by reducing workload acrosspayment feature ensures that all property-related the front-, middle- and back-office, improvedcharges 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 isthe 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-officeincentives for online application, the ability to workload is reduced through status updates andupload documents and view documents, etc. After document management. Back-office workload isusing features such as rate and payment calcula- reduced through automated payments, borrowertors and product comparison engines to obtain updates and document publishing.more information, borrowers can engage in anonline 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 brandonline 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 variousupload 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 comparisonrelated documents, such as income and asset tools that lead to loan application and subsequent cognizant 20-20 insights 2
  3. 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 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, 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 featuresFigure 2document 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 productintervals ensures that processes become more comparison. Assuming the cost of a front-officestreamlined, as well as enabling seamless infor- staff person to be $25/hour, and estimating themation flow and communication with borrowers average time spent interacting with the borrowerat pivotal points in the lending process. This helps to complete the loan application over the phonemortgage 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 andBefore offering a plethora of online features, indexing, as well as data validation. In all, the costbanks need to weigh the costs and benefits of of one application is about $60. If the borrower iseach feature. While it might be easy to quantify given an incentive to apply online, such as a $50the benefits of some features, it’s more difficult cognizant 20-20 insights 3
  4. 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. 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 effortFigure 4the competitive landscape, the business model perceived negative into a positive. Success in highand business drivers. A determination of the human touchpoint industries like lending is drivenimplementation effort should take into account by the ability to engage the customer at differentthe existing technology landscape, current fea- stages of the lifecycle and enhance the customertures and feature complexity. The final step in experience at each stage.the process will be prioritization of these featuresbased on business impact, implementation cost, Initiatives like borrower enablement help keepinternal resource constraints and budgetary con- the borrower engaged throughout the mortgagestraints. lifecycle. This ensures that customers remain happy and productive, which in turn increasesThe implementation priority depends on the confidence in the bank andtrade-off between business impact and implemen- fosters a long-lasting rela-tation effort. The quick wins are obviously the tionship. Satisfied borrow- Every step towardones with high impact and low implementation ers not only contribute more borrower enablementeffort. The next set would require deeper thinking revenue themselves, but is a step towardby 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 andEmpowerment: A Win-Win media sphere.At a time when recovery of the housing industry transparency between While the visible benefits the borrower andseems to always be three to four quarters down for the borrower includethe road and lenders are targeted by consumer transparency, enablement the lender.activists, the media, investors, regulatory bodies and accessibility, the lenderand industry watchdogs, lenders have to go the prospers through cost savings, improved leadextra mile to be transparent and customer oriented, generation and management, increased processas well as build trust. Every step toward borrower efficiency and better brand building. The costenablement is a step toward promoting relation- savings from these initiatives can significantlyship, empowerment, accessibility and transpar- contribute to the organization’s overarchingency 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 adjacenttransparency exposes banks to heavy scrutiny, strategic initiatives.lenders must devise their strategies to turn thisAbout the AuthorsSanjit Bose and Ashish Shreni are Senior Consultants within Cognizant Business Consulting. They haveexecuted 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.comand cognizant 20-20 insights 5
  6. 6. About Cognizant’s Mortgage PracticeCognizant’s Mortgage Practice employs over 70 subject matter experts and analysts and 800 associates. We havesuccessfully delivered over 100 large and complex engagements across origination, secondary markets, servicing andloss mitigation in the U.S. and Europe. We offer consulting, IT, BPO and IT infrastructure services across all functionalareas, with IT services that encompass business and IT transformation, systems consolidation, application develop-ment, application maintenance, testing, data warehousing, business intelligence and analytics.About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 111,000 employees as of March 31, 2011, Cognizant is a member of theNASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 1000 and is ranked among the top performingand fastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. Haymarket House #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA 28-29 Haymarket Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London SW1Y 4SP UK Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7321 4888 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7321 4890 Fax: +91 (0) 44 4209 6060 Email: Email: Email:© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.