Mortgage Compliance | Using Straight-Through Processing to Drive Mortgage Compliance
Accurate title evidence and reports are critical to ensuring a seamless and compliant mortgage process. Like workflows in any industry seeking high compliance standards, repetitive tasks in the title production process can slow productivity and generate opportunities for errors.
Enter “straight-through processing” (STP).
STP: NOT A MEANINGLESS ACRONYM
Originating in the 1980s within the finance industry, according to the United States Securities and Exchange Commission, STP solutions were needed to help financial market firms move to one-day trade settlement of equity transactions, as well as to meet the global demand resulting from the explosive growth of online trading. The basic benefits-reduced systemic and operational risk—can be realized in any business seeking efficiencies (subject to legal and regulatory restrictions, of course).
Financial Times offers a standard example of STP from the financial perspective: Asset managers, for instance, may use STP during the lifecycle of an equity transaction by automating communication between the firm's front office (dealing) and back office (settlement). Investment managers, in another workflow, may use STP to eliminate the risk of human error and speed up processes by eliminating the need to send information by fax.
The goal of STP remains the same regardless of industry: realize efficiencies by decreasing redundancies and manual re-entry of information during an end-to-end business process. As conventional title processing encompasses various manual steps and duplication of efforts, this type of objective clearly has applications for companies in the settlement chain.
Through our work with companies, RedVision suspected customers could seize immediate opportunities to increase efficiencies based on integrating an automated workflow. Those thoughts were confirmed after commissioning a major business consultancy to help identify what, exactly, was creating costs and where the inefficiencies lie within the title origination process. It became abundantly clear from the study that title companies need a viable approach to seamless digital title transactions.
For example, in the title production process, the study revealed that an average of 8.5 handoffs occur for purchase and refinance work, meaning that the steps within the chain will have eight human touch points for each report. With this knowledge, firms can make better decisions on where and when to adopt new technologies to increase process efficiency. System integration between firms might lessen the human touch points, resulting in STP benefits such as reduced cycle times and lessened manual processes.
STP provides users with a more automated production process—allowing each firm’s top-talent staff to be more dedicated to “high value” activities rather than “low value” activities including manual and redundant steps.
Users can utilize one title production platform to order, manage, and examine title reports through a live queue. Based on custom permission sets, the service provider and client users receive desktop access—across all U.S. properties—to real-time information on order status and activity, performance indicators, and management reporting. Real-time access, where manual steps and delays are eliminated, exemplifies STP.
An ideal STP automation platform includes easy-to-use dashboards so users can quickly analyze key order data. The dashboards can include all types of intuitive, interactive charts and data grids and drill-down capabilities based on user preferences.
The end results of using STP in a technology platform are more streamlined business processes, improved compliance with SLAs, and enterprise-wide quality standards.
Perhaps the greatest benefit though of using STP, though, is users can more easily achieve compliance and risk management for their organization as a result of the best practice and quality standards.
From compliance standpoint, there are many measures a service provider can take to help pass on a quality product. One example is the American Institute of CPAs’ Service Organization Control (SOC) examination, specifically called “SOC 2” (formally known as a “Report on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy.”)
By engaging an independent CPA to examine and report on service organization controls, a technology service provider can respond to meet the needs of customers and obtain an objective evaluation on the effectiveness of its operations and compliance.
Within the title industry, firms can incorporate a service provider’s “Service Auditor’s Report” in its compliance programs as proof that appropriate controls are in place. The SOC 2 audit can also help customers comply with other regulations, including the Consumer Financial Protection Bureau (CFPB) and Real Estate Settlement Procedures Act (RESPA).
A service provider’s successful STP platform approach is not created overnight. Significant investments in technology and data systems on the service provider’s end can accelerate evolution, of course, but it is a laborious undertaking for the service provider to build the best-practice product standards required on state and county search guidelines. However, investments in compliance will enable the industry to reap the benefits. Customers can be empowered with transaction cost savings, SLA attainment, compliance, and risk management.
FIVE “MUST-HAVES” TO ACHIEVE STRAIGHT-THROUGH PROCESSING TECHNOLOGY
In order to reduce manual steps and seamlessly produce a uniform report, a technology platform using STP should meet five requirements:
- Create efficiencies by automating workflows
- Integrate with major and existing customer platforms
- Standardize best practices and controls
- Manage the supply chain and big data
- Be user-friendly.
By automating steps in the real estate transaction process with STP, from initial request to completion, companies can focus on greater profit per order, service level agreement (SLA) attainment and high-value strategic activities. From a compliance perspective, transparency and risk mitigation will be inherent as a result of automation.
Create efficiencies by automating workflows.
Using rule-based workflows embedded into the production system, firms can complete tasks in a parallel approach, reducing cycle time. Automating workflow engines also increases accountability via reportable task timelines and quality. Standardizing business processes and procedures, from consistent order receipt to stringent supply-chain management, also enables companies to realize the benefits of STP.
Integrate with major and existing platforms.
Visionary companies are adopting STP to automate the entire transaction from record procurement through search and exam with their production systems. Cost savings are achieved by minimizing title-processing time through defined XML system integration between the customer and the provider. Additionally, SLA attainment is gained through automation and uniform reporting. By eliminating the human factor of re-keyingdata, companies are instilling quality assurance and mistake-proofing controls into their processes.
Standardize best practices and controls.
It is fundamental for an STP technology platform to meet regulations and requirements by building state and county search standards into its workflow, as well as conforming to major underwriter requirements. Standardizing integrated business processes and procedures, from consistent order receipt to product delivery, supports continuous quality improvement controls.
Manage the supply chain and big data.
To manage ongoing changes in supply and demand, supply chains must evolve to support the strategic business operations—this may include expanding geographic coverage and product offerings, adjusting to cost and market fluctuations and monitoring risk controls.
In today’s title and settlement market, solely conducting a property records search to accurately evaluate the lien position and inherent risks for many is no longer status quo. Companies must make it a point to partner with a provider that can aggregate, filter, and analyze title information in a wide range of recording jurisdictions and discrete research data sources. That type of supply-chain optimization and robust property data repositories can enable users of title evidence to compile a full range of ownership chains, lien information, and property data nationwide when previously the process was heavily manually dependent and costly.
With STP, companies can create a robust set of embedded capabilities for optimizing supply and distribution processes, ensuring business best practices and integration into the agent’s software platform, thereby driving efficient, sustainable growth and continuous improvement.
STP technology must be easy to use to maximize workforce adoption. Firms should have the ability to order, manage and examine data through a live queue and intuitive dashboard. Based on custom permission sets, customers can receive desktop access to real-time information on order status and activity, performance indicators, and management reporting. For example, key order data should be able to be seen in a single view. Dashboards should include intuitive interactive charts and data grids with drill-down capabilities.
By implementing a streamlined strategy and process, firms will build a strong foundation to respond to external factors and focus on high-value strategic activities, including the ability to position themselves to adapt to market fluctuations while driving sustainable internal growth and profitability.
As a solution-based approach to processing real estate transactions electronically without the need for an abundance of manual intervention, the end result of STP technology is realizing greater efficiencies and mitigating risk within daily processes. STP provides firms with more effective strategy, process time and operation shifts to meet the industry’s ever-changing compliance requirements while positioning for the long-term.