Found Money: Closing Coordination Software Revealed By Jonathan Cutler From: The New York Mortgage Press August, 2001 This article is about systems that deliver information you can really use, like a real time overview of the status of every pending loan - even across multiple locations and sources - along with one click access to the details of any individual transaction. It is also about saving 20% or more on the cost of processing every loan by cutting steps out of your workflow, without cutting corners. Finally, its about automatically archiving all of your documents and communications to compact disc. Ok - its really about a new type of software now available for the real estate and banking industry that combines secure databases with the Web to manage information flow within your business. It sounds involved and expensive, but it's not. It can be implemented without replacing your current production software, and without significant investment. We're Already Behind The Curve Other industries are way ahead of real estate and banking when it comes to integrating production software with centralized databases and web communications. For example, supply chain management software in the retail industry allows companies to share information in real time between warehouses, shippers, manufacturers, suppliers, and customers. All relevant sales and product information is captured and stored, where it can be analyzed, archived, and then retrieved as needed. No more redundant data entry, no communicating the same information again and again, no more redundant sets of files in every location, no more spending hours compiling information from diverse sources for management reports, and much less time spent on the phone with customers. In real estate, and the mortgage industry in particular, we also need to share and distribute information to complete every transaction. The lender, broker, title agent, escrow officer, appraiser, surveyor, borrower, real estate agent, and others have to coordinate a diverse set of tasks, schedules, service orders, and documents to achieve their common goal - closing. A delay in any one area delays the entire process, and no one gets paid until the transaction is complete. Yes, the fax, copier, phone, voice mail, and email speed up our tasks, but we have already reached the limit of efficiency gains possible using current technologies. To break through the current "efficiency ceiling" and really save time and money, we must actually eliminate tasks. One Approach To Analyzing Processing Times Let's start with a detailed look at the communication workflow for a typical transaction. There are 20 or more distinct tasks required to bring each loan from application to closing, and there are often 10 different individuals who participate in the process. Each fax or phone call takes at least 5 minutes, often longer. One fax or call to each participant on each task would result in 200 separate communication events just to complete a single transaction. Doing the math, this approach suggests that it takes about 16 2/3 hours to process a typical transaction. And this is only part of the picture. Several people need copies of the same document. Required information may be absent or misplaced. Revisions and changes require processes to be repeated. Dozens of trips to the filing cabinet are required. Couriers and overnight services are commonplace. After the transaction closes, files must be stored, and information retrieval becomes that much more time consuming. Closing Coordination Software Cuts Processing Times The idea is to have software that uses the Web to DO work, not MAKE work. While a few large companies have implemented custom "transaction management systems" on their private networks, the real breakthrough is that by using secure communications over the Web instead of a private network, all companies can now get inexpensive, and in fact much better, software for their businesses. This new breed of software, called Closing Coordination Software, allows you to track all documents, all dates and tasks, all ordering, all internal communications, all vendor communications and all customer communications in real time across all pending transactions - while simultaneously giving users powerful management reporting capabilities and automatic archiving of data and files. It is now being deployed by companies across the country who are drooling over saving 20% on their back-office costs Closing Coordination software works by automatically setting up a virtual website for every single loan transaction you begin. That virtual website becomes a "one to many" communication hub for documents, messages, task tracking, email, a calendar, and everything else that pertains that one transaction. Post a message or a document once (even fax it into your website if you like) and it is available on a secure basis to everyone who might need that information. Separate divisions or offices within a company are no longer calling each other looking for information. Order appraisals, title, surveys, inspections and other services with a few clicks. Your order is automatically recorded and you can even have it sent as either an email or a fax depending on your vendor's preference. Your vendors then either upload (or if they prefer, fax) their final reports into the website, where they are automatically available to anyone who needs them, and automatically archived when the transaction closes. Messages posted on the site are also archived, as is every order, every document, and every event. But the real beauty of this software is that it works like a web-based "tool kit," integrating with the production and management software your company already uses. Because it runs in a standard browser, there is no new hardware or software to buy or install, which greatly reduces the implementation cost. Closing Coordination Software is generally sold by the transaction or by the number of users, and costs can be under $30 per transaction - which, as you will see below, is a small fraction of the savings that your company will realize. Because your data is delivered back to you on compact disc at the close of the transaction, there is almost no risk in trying it out. Warning! Closing Coordination Software is different than having web statusing or reporting from your current production software. In order to eliminate steps in your process and actually save money, you must allow for two way communication, reporting, and document sharing across all tasks for all participants. An Example: SettlementRoom You might have guessed that I am intimately familiar with Closing Coordination Software because it is one of the products of my company, SettlementRoom, Inc. While there may be other products that can provide you with similar savings, the following examples are based on our software, as I am most familiar with it. More information is available about SettlementRoom by visiting www.settlementroom.com. A typical lender or mortgage company can save several hours in processing time on every transaction. The following examples are intended to illustrate a few typical situations where the benefits of Closing Coordination Software are clear. Every region in the country uses different processes and different terminology, and good software will adapt easily to your workflow. If you are interested in a complete analysis, visit or contact us through our website. Abbreviations and Assumptions: CCS = Closing Coordination Software (and Website); One Phone Call = 5 minutes; One Fax = 5 minutes; One Copy = 10 minutes • Add disclosures, welcome letters, standard instructions, and document forms to CCS website from the CCS document library. All documents are now viewable/printable by any participant given access. This saves answering future requests for copies of lost documents, reduces borrower's and agent's questions about procedures and status, eliminates calls for directions to closing, and gives other participants an opportunity to review typical documents online. Estimated time saved is one phone call per week for 6 weeks, two copies, and two faxes (60 minutes). • Use CCS to order appraisal, survey, and title work. Orders are faxed (or emailed) by the website. All property information is automatically attached to each fax. Saves 3 faxes. Service providers fax information directly back into website using fax cover page automatically included in the order. All information is instantly available to all participants with permission. Each participant's report then indicates that new information is waiting for them. Saves 3 status phone calls from participants waiting for this information and 3 faxes to participants who can now download and print the reports from the website (45 minutes saved). • Closing date changes. Use CCS to send or post a group notification. The closing date change is instantly available to all participants, the change is flagged on all of their reports, and they can all get a notification email with a few clicks. Saves a phone call to each participant (6 typical). Assuming that two phone calls are still necessary, 4 phone calls saved. All task due dates in CCS are also automatically updated and all calendar items adjusted accordingly, instantly. In addition to calls, saves 15 minutes of reviewing how date change will affect other pending tasks (35 minutes saved). • CCS automatically creates a daily closing schedule, and with a few clicks you print, email, or export this schedule to Excel for distribution. Saves 20 minutes staff time per day. • Senior Manager logs in to track transaction status across multiple offices, multiple originators, or any other important metric. Reports can be searched, sorted and organized across any of approximately 50 data fields. Staff no longer needs to prepare reports. Saves 2 hours staff time per week. • Post information requirements as tasks in CCS. Borrower, agent, title company and others have a permanent record of the information required, and can check off as completed. Eliminates one phone inquiry about requirements or one phone call reminder about needed information each week for 4 weeks. (40 minutes saved). • Post important messages to CCS for viewing by all participants and for permanent archiving. Could be invaluable in the event of future disputes, since all messages are burned on the archive compact disc automatically each month. • Create final documents using current methods, but deliver the documents by posting them to CCS, adding assigned passwords to allow access only by authorized parties. Adding the documents is a browse and click operation. The documents are then available to the closing agent (whether internal or external) instantly. No need to print, no need to courier, no status phone calls to see if the documents were sent. Revised documents can be posted minutes before closing with ease. Borrower and others can review documents for accuracy and questions PRIOR to closing. All versions of the documents are automatically archived once they are posted. Saves looking for files after closing to answer questions. (Saves copying and delivery costs). • HUD-1 and other closing documents are posted in CCS website. Eliminates the need to fax to each party for review. Assume 4 participants need to see HUD-1 and one of those still wants to receive a fax. Group email participants from CCS to let them know it is important to check the site if they are not already doing so regularly. Comments can be sent by reply email or posted, avoiding phone tag. Assume 3 faxes and two phone calls eliminated. (25 minutes saved). • Borrower calls 5 months after closing for tax information. Information is found on archive CD without having to go to paper files. (15 minutes saved). Savings and Costs Our estimates indicate that net savings in transaction processing times are potentially in excess of $100 per loan. This figure does not account for the significant benefits in management oversight, marketing, and customer service. Furthermore, with proper disclosure, many of our clients are passing the $29.95 per transaction cost (unlimited access) of our Closing Coordination Software to their borrowers as a "web service fee" if the borrower requests to have access to the website. Vendors, Co-Workers, and Affiliates The above examples pertain to the mortgage industry, but other closing and escrow coordinators, large builders, title agencts, real estate agents, and service providers will benefit equally. In other words, by initiating a transaction in your Closing Coordination Software and inviting these other participants in, you are giving a powerful management tool to both your sources of business and your vendors - at no cost to them. Over time this will give you a competitive advantage in seeking new business, and leverage in negotiating prices with vendors. Digital Signatures Most lenders agree that it is not currently practical to implement digital signatures for their businesses, but understand that in the not-too-distant future this is how business will be done. Closing Coordination Software provides an intuitive environment and platform for enabling digital signature technology, and digital signature service options are being developed by most software vendors to be available when the market is ready. With Closing Coordination Software, you are already "digital signature ready." The Experts Agree Every year, one of the world's leading management consulting firms, KPMG Consulting, does in-depth cost and workflow analyses for their clients in the mortgage production and servicing industries. Some of their published 1, 2 conclusions are quoted below (email mortgagestudies@kpmg.com for more information): "The cost savings achieved from technology investments of the past are dwarfed in comparison with the potential savings that can be realized from Internet-enabled operating platform and technologies." "Given these findings, the next several years are likely to be period when one or more companies break away form the rest. The breakaway companies will be those that focus on the implementation and effective use of Web-enabling technologies." "Once Web-based technology is fully implemented with the appropriate changes to the company's operating procedure, the mortgage company can deliver products and services at a very low cost with better customer service. Lenders that plan and develop processes around this new technology will be ahead of those companies that simply add technology around the current traditional processes - this is also where the largest component of savings occurs." I couldn't have said it better myself. 1 "Integrating The E-business Model," Mortgage Banking magazine, March 2000. Bernadette Kogler and Jeffrey Lebowitz. 2 "Megaservicers Posting Real Gains," Mortgage Banking magazine, June 2000. Bernadette Kogler and Julie Hornung. About the author: Jonathan Cutler is 43 years old, received his Ph.D. from Johns Hopkins University, and spend the next 15 years working in real estate, as a builder, developer, title company owner, and software developer. He is the president of SettlementRoom, Inc., a leading provider of web based software to the real estate industry.