With property values at an all-time high, credit unions have found home equity lines of credit (HELOCs) an easy way to meet members’ needs while increasing revenue.
But it’s increasingly difficult to process these loans efficiently. Loan origination costs have grown nearly 9% in 2016, putting pressure on credit unions to complete processing in a shorter time frame at a reduced cost.
Typically, staff must execute the numerous processes manually rather than rely on automation. This can lead to inefficiencies, higher operational costs, greater potential risk, and customer dissatisfaction due to the complex operational functions involved.
Credit unions should replace outdated and error-prone “stare and compare” operations—paper-based, manual processes that involve physically looking back and forth across multiple documents to verify information consistency—with integrated, automated digital software.
Smaller credit unions might find it difficult to move fully in this direction. Still, they can take advantage of some best practices, such as keeping electronic records electronic after transitioning from paper processes.
Thinking strategically, the consumer-driven technology approach can offset risk and expenses while increasing efficiency and compliance.
Moving to a loan completion system
To simplify and accelerate HELOC processing, credit unions can leverage technology that uses best-in-class optical character recognition (OCR) technology. This ensures complete and accurate loan record creation by automatically ingesting, classifying, and identifying needed documents.
This type of “loan completion system” intelligently indexes documents and extracts critical data for easy comparison by the OCR engine, and sifts through superfluous screeds of text to single out the pertinent information.
This method overcomes the limitations of ad hoc and siloed processing that inhibits loan quality assurance and risk mitigation. Powerful tools flag data mismatches early in critical processes to expedite corrections and maintain data integrity throughout the life of the loan.
Complete audit trails facilitate compliance, making reporting capabilities more robust and providing transparency into life-of-loan processes. An intuitive single-view interface stores documents electronically in a central repository, categorizing and tracking loan portfolio content for all lending types.
A loan completion system also ensures loan documents and financial reports exist and are current, and assists in managing all borrower and loan portfolio documentation. Above all, error detection and improved data matching reduce an investor’s purchasing risk, deliver a stronger customer experience to the buyer, and reduce processing time and expense for the lender.
Safeguard HELOC quality
Today’s competitive lending environment requires strategic planning and action from credit unions to fortify HELOC lending operations.
Siloed lending processes hamper loan quality assurance and risk mitigation. In addition to increasing operational cost and risk, using disparate technology adversely affects the customer experience with unmet expectations for error-free loan processing.
For HELOC loans, credit unions must confirm applications meet appropriate thresholds, such as loan-to-value ratio. Technology can streamline processes and support accuracy by automatically categorizing documents and extracting information, then comparing that information with other existing documents and system data to ensure accuracy and consistency.
And workflow automation provides reminders about required actions or documentation, optimizing efficiency and streamlining processing.
In addition to HELOCs, loan automation technology can streamline and improve loan content quality for any type of loan, including mortgage, consumer, and auto.
Credit unions that take a centralized approach to managing loan quality and risk by implementing loan completion solutions will better position themselves to overcome systems limitations, leverage secondary market opportunity, avoid compliance issues, and enhance the life-of-loan experience for members, ultimately emerging as industry leaders.
JAY COOMES is Fiserv’s vice president of product strategy, financial risk management solutions.