Process mining is a cost-effective solution that decreases mortgage costs and improves margin management while helping lenders mitigate risk as they address significant economic headwinds.
Today’s uncertain economic climate and fears of a looming recession pose challenges for many mortgage lenders. Without a clearly defined strategy to improve margins and reduce costs many mortgage lenders will be left behind.
Those successful lenders who do emerge will have utilized a data-driven approach to managing the bottom line. This typically involves the deployment of a comprehensive data monitoring strategy that tracks real-time metrics and the resulting impacts on process performance.
A disruptive approach to process management that leverages data science, process mining is a highly cost-effective tool that facilitates a data-driven approach to measuring and monitoring a mortgage lender’s business using real-time data – and as such should be a key component within every lender’s transformation and automation strategy. A process mining solution sits on top of the existing IT infrastructure and generates a new level of process transparency, surfacing execution issues and risks in real-time.
As many successful implementations have demonstrated, key insights derived from process mining are invaluable when it comes to managing revenue and margins while improving overall risk management across the mortgage business.
BACK-TO-BASICS FOR MORTGAGE LENDERS
With interest rates rising, the impacts to originations and the bottom line have fostered a back-to-basics mentality, with executives focused on the ‘Mortgage Banking 101’ basics: maximize revenue, minimize expenses, improve quality.
For the better part of the past two years, lenders have benefited from increasing home values and home sales and have recorded near-record volumes. Now, given recent increases in interest rates, volumes have dropped precipitously, and many originators are questioning the viability of their business models.
By providing a real-time view into their data and analytics, process mining allows savvy originators to better understand the impacts of the changing economic landscape on their business, whether by identifying revenue impacts affecting profitability, opportunities for process improvement, or ways to further maximize the efficiency of resources and improve loan quality.
WHAT IS PROCESS MINING?
As noted above, process mining leverages data science to analyze the digital footprint of a process sourced from event log and master data files. With process mining, we can get full visibility into how a business process is executed in reality, including actual process activities, deviations from designed target processes and throughput times.
This enables users to effectively measure performance in real-time, generate actionable insights on inefficiencies and root causes, and simulate impacts of processual changes to drive process improvement and automation.
As one of the most effective technologies available to management to drive process and performance improvement, process mining allows for many additional benefits, some of which we set out below.
PROCESS MINING FOR MORTGAGE LENDERS
Mortgage lending is just one of many business functions that is a prime candidate for disruption via process mining. Once linked to a lender’s Loan Origination System (LOS), the lender will be able to immediately note deviations to a process – which for some stretch into the thousands – which lends to providing a view into bottlenecks that are ripe for unblocking.
Within mortgage lending, process mining may be applied across the entire originations lending value chain from sales through post-closing.
When homing in on specific process, such as closing and funding, for example, lenders are afforded with the opportunity to view real-time data including relevant closing and funding metrics, such as time spent in respective closing and funding queues, closing term redisclosure rates, document redraw rates and a quantifiable number of loans that went into re-processing.
Armed with this data, a lender is prime to make actionable improvements. Below we highlight the benefits based on a recent use case.
Improved Client Experience – Higher than expected re-disclosure rates led to process changes that reduced average closing times below an already leading industry standard of less than 30 days. The decrease in turn times was reflected in Closing and Funding queues and contributed to improvements in client experience.
Efficiency and Productivity Gains – Measuring performance and volumes with real-time data via seamless drill-out capabilities allowed managers to get a better view of the upcoming pipeline and load balance file assignments based on productivity levels. The real-time data also provided a view of leaders and laggards, highlighting those who were able to outperform and underperform their peers.
Strengthened Compliance – Measuring disclosure and document draw timeframes provided for a view into meeting compliance standards. Although meeting timelines was not previously an issue, process mining provided a primary view into the pipeline to facilitate the lender’s ability to meet regulatory disclosure timelines.
Through our partnership with Celonis, Capco has successfully realized substantial business benefits for our clients by applying Celonis’ market leading process mining technology. To accelerate our client’s process mining journey, we have a pre-built App for Mortgage Pipeline Management combining Capco’s strong business understanding and our experience from previous process mining implementations. For more information on how our partnership can improve your organization, be sure to reach out.