Taking HMDA Reporting from Hassle to Harmony

Taking HMDA Reporting from Hassle to Harmony

There are few regulations more important in the mortgage industry than the Home Mortgage Disclosure Act (HMDA). For more than 40 years, the law has protected consumers from unfair lending practices. But it has also placed more work on lenders’ plates, especially those without the proper tools in place.

Thankfully, when the COVID-19 pandemic hit in March 2020, the Consumer Financial Protection Bureau gave lenders flexibility over reporting their quarterly HMDA data. This was a huge relief to lenders struggling to make the shift to remote work, and it also kept the housing industry chugging along. But it was only temporary.

Now that pandemic lockdowns are lifting, the CFPB is once again requiring lenders to file quarterly HMDA reports, and it has promised to enforce this requirement with stiff penalties. First quarter 2021 HMDA reports are due May 31 and second quarter 2021 reports are due on August 30. This can have significant consequences for lenders that put off investing in the proper HMDA reporting tools.

For example, federal regulators have the power to test any loan samples in a lender’s Loan Application Register (LAR) they want to. That’s a huge problem for lenders that rely primarily on staff and manual tasks for reporting HMDA data—especially today, when most lenders are receiving record numbers of loan applications. The fines for filing false or erroneous HMDA data are steep, too.

Fortunately, there is a way for lenders to meet CFPB reporting requirements with little effort.

Today’s document processing technologies are capable of automating the laborious task of identifying the final versions of crucial loan documents that contain key data points subject to HMDA. This is crucial, because a significant number of HMDA reporting errors are caused by lenders pulling data from documents that aren’t final.

Using AI-based document classification and data extraction tools, lenders can quickly scan hundreds of loan files, capture applicable HMDA data, and place it into a spreadsheet or XML file for accurate LAR reporting. It all happens in seconds, with little to no human oversight. These tools are infinitely scalable as well, which makes them invaluable when dealing with large spikes in application volume.

Modern document processing technologies can deliver other benefits as well. Because they generate highly accurate, actionable data, lenders can apply data analytics and other tools to gain better insights into their business practices and identify areas for improvement. They can also use the same technology for any kind of audit or for custom reports. This enables their staff to spend less time staring at documents, typing in data points, and performing other manual tasks that are highly prone to error.

Even better, lenders can access HMDA reporting technology in the cloud, with just a web browser and a link for uploading their files. This means lenders don’t have to spend a penny of their own money on IT costs to access technology that enables them to stay compliant.

The bottom line: HMDA reporting is serious business. But meeting the CFPB’s reporting requirements doesn’t have to cost an arm and a leg, nor does it have to distract your team from doing what it does best—growing business and making money.

If you would like to see how Paradatec’s automated document processing and data extraction technologies can streamline your HMDA reporting and ensure more accurate, higher quality data, simply email us at contact@paradatec.com. We are happy to show you how easy it can be!

Taking Flight in the Cloud

Taking Flight in the Cloud

 It’s hard to imagine a faster way to process loan documents than through automated mortgage document indexing (ADR) and automated data capture technologies, which are capable of “reading” entire pages of information in milliseconds. In fact, our own automated, artificial intelligence-based document classification and data extraction technology is able to process 25,000 loans in two days or less.

But there is a way to process loans even faster. We know because we’ve made it happen.

The Beauty of the Cloud

 Previously, document processing technology required lenders and servicers to install software behind their own firewalls, either through a private data center or within their own private cloud environment. By accessing these technologies directly from the provider’s fully hosted, secure cloud environment, lenders and servicers no longer need to spend any money on hardware, storage, or IT support just to process loan files.

And they’re able to process loans much faster, too. When placed in a cloud environment, the same document processing technologies can process portfolios of one million loans or more in the cloud in as little as 30 days. That’s several times faster than hosting these technologies yourself.

This is exactly what we’ve been able to achieve through AI-Cloud, our cloud-based platform hosted by Amazon Web Services (AWS). AI-Cloud delivers the same powerful, AI-based text analysis, optical character recognition (OCR) technology and machine learning tools our clients have used for more than 30 years to convert data trapped inside static loan documents into actionable data. AI-Cloud also includes our auditing technology, which breaks down every loan into more than 800 specific document types, completely eliminating the need to perform manual filename mapping during loan onboarding.

Already, AI-Cloud is being used by lenders and servicers for faster loan originations, mortgage servicing rights (MSR) onboarding, portfolio cleanup and more. The best part? It couldn’t be easier to use.

How it Works

To submit loans to AI-Cloud for processing, all a company needs to do is to set up an online account, which triggers the creation of a private “tenant” for its documents. The tenant keeps both the storage and processing of the company’s documents separate from other companies.

The company then gets a unique website address it can use for submitting batches of work, whether it’s a single loan file or an entire portfolio of loans.  However, there’s also the option to create a simple web services application programming interface (API) that enables a company to submit loans through one or more of its applications as encrypted files.

Companies can track the processing of their loans through a web page created just for them. Afterwards, they can verify any uncertain data elements—typically very few—directly online through a unique user interface, or Paradatec can perform the data purification itself.

Get Ready for Liftoff  

Make no mistake, automating loan processes to produce higher quality loans at greater speeds and fewer costs is no longer a competitive advantage—it’s essential. That’s especially true today, as lenders begin transitioning into a more purchase-oriented market, and as servicers face greater scrutiny from the Consumer Financial Protection Bureau.

The bottom line is that there is no faster way to process documents than through the cloud, which allows lenders and servicers to maximize their resources while focusing the bulk of their attention where it belongs—on their core businesses.

Interested in seeing how fast document processing can really get? It costs nothing to take a free test flight on AI-Cloud. With a sample of your mortgage files, AI-Cloud can immediately provide a fully indexed and bookmarked PDF for each loan file, with extracted data elements highlighted on each source document—all without any effort on your part.

Book your flight today by dropping a note at contact@paradatec.com

 

 

Northpointe Bank Case Study

Northpointe Bank Case Study

Northpointe Bank

This nationwide correspondent lender needed a solution to replace its manual loan indexing and data capture processes, which were prone to error and creating excessive labor costs.

Solution

After an exhaustive evaluation process, Paradatec was determined to be by far the fastest OCR and ADR technology on the market. The company’s pre-built mortgage logic understood the vast majority of loan document types and variations, and its library of 8,500 data extraction fields supported NorthPointe’s correspondent lending processes.

Results

 Since implementing Paradatec, Northpointe has experienced significant reductions in labor costs, error rates, and processing times. It has since taken advantage of the large volume of highly accurate and valuable data generated by Paradatec to implement sophisticated business rules to streamline loan production.

How New is AI in the Mortgage Industry, Really?

How New is AI in the Mortgage Industry, Really?

 Artificial intelligence, or AI, has never been more popular in the mortgage industry than it is today. Ten years ago, hardly anyone was talking about it. Today there are countless articles, webinars and reports about how AI will “revolutionize” the mortgage process.

Which we find a little odd, since AI is not new at all—not even to the mortgage industry. But then, what passes for AI these days is not often what it’s cracked up to be.

AI is More Than Templates

Over the past several years, countless mortgage software providers and even a growing number of mortgage lenders and servicers have been boasting about how they are using AI to reduce or eliminate manual work, particularly when it comes to processing and auditing loan files. In reality, however, AI has been used for loan document processing and data extraction for more than 30 years. How do we know? Because that’s how long we’ve been doing it.

Yet these days, almost every document processing software provider claims its products use AI. The reality is that most of our competitors’ products do not really use “intelligence” to classify documents. Instead, they identify loan documents by comparing it to documents with the same template. This is great if you’re using commonly used documents, such as 1003 and 4506-T forms. The problem is there are many variances in the types of loan documents most lenders and servicers come across.

As a result, most document processing software is unable to classify a document that is unfamiliar or has an unstructured layout. Without a template, it has no way to identify it, let alone extract meaningful data from it. For this reason, most of these products aren’t really “intelligent.” They can only make decisions based on the documents they already know.

How Real AI Goes Deeper

Like other providers, Paradatec is capable of identifying common loan documents based on templates. But unlike other providers, our technology can identify virtually any document, whether it has seen the document before or not.

That’s because we combined our proprietary optical character recognition (OCR) technology with natural language processing technology, which uses AI-based algorithms to “read” entire documents. By doing so, it can also find and extract data on virtually any document, even if the document layout varies significantly from other documents of the same type.

This is particularly useful for unique documents, like deeds, liens, notes and addendums. Take warranty deeds, for instance. There are many different variations of what a warranty deed looks like. However, almost every warranty deed contains the same information. By looking at the OCR output, our technology can tell it’s a warranty deed because it has learned what sort of information warranty deeds contained.

Not Just Better—Faster, Too

By the way, you might think that a technology that reads entire pages of documents at a time would be much slower than software that relies on templates. But that’s not the case. Our technology can process roughly 3,600 pages per hour, which is at last five times faster than any other product on the market today. In fact, a top three sub-servicer used our technology to ingest 25,000 loans in four days—while simultaneously fully re-indexing and restacking every loan, extracting key data elements and comparing that data to the prior servicer’s database.

That’s the true power of AI. So, the next time you hear someone talk about AI, you’ll know whether they’re truly intelligent about the subject—or maybe being a little artificial.

If you’d like to learn more about how Paradatec can transform how you manage loan documents, drop us a note at contact@paradatec.com. We are happy to tell you more.

Our Clients Love Us

From originators to servicers, BPOs and external due diligence firms trust Paradatec to streamline document processing.

We asked a number of vendors, including the Paradatec team, to help us perform an extensive due diligence process that included an out-of-the-box, blind test with our own loan samples and proof of concept test.  Paradatec was the clear winner based on our comprehensive vetting process.

Steven Davids
Senior Vice President of Correspondent Lending, Northpointe Bank