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Cognizant 20-20 Insights

Borrower Enablement in Mortgages

Executive Summary
At the dawn of the 21st century, borrowers began their home loan search by visiting their broker or nearest bank and exploring financing options. Today, the prospective borrower goes online and surfs the Internet, scouting for information and the best deals from different lenders, checking various online forums to learn from peers about service quality and products and even testing loan options before choosing a lender. With information on various aspects of the loan process, including products, rates and property information at their fingertips, customers are no longer passive observers but active participants. Todays consumers are more analytical and prefer making purchase decisions based on their own judgment rather than having excessive exposure to sales tactics. When lenders realized this new consumer behavior in the 2003-2004 timeframe, they began offering a variety of basic online lending features, which grew in leaps and bounds over the ensuing years. Starting with basic loan search, rate calculators, product comparison engines and branch locators, lenders then expanded their online offerings to include guidance on property search and research news. Mortgage banks now are increasingly focusing on borrower enablement features to achieve transparency, extend reach, improve lead management and even realize operational efficiencies by reducing workload on middle/ back-office employees. How so? By enabling online borrowers to actively participate in each and every step of the mortgage lifecycle.

Industry Trends
Over the past few years, lenders have realized the power of borrower enablement. The win-win goal: By delivering more timely and precise information and services, lenders can keep borrowers more engaged throughout the mortgage lifecycle. This not only brings much needed transparency to the process but it also delivers more efficient and effective customer management, which results in improved operational efficiencies. This is extremely critical given the lingering impact of the recent credit crunch. Figure 1 (next page) depicts various standard and emerging features that lenders offer today across the mortgage lifecycle. Standard features include rate and payment calculators, product comparison, borrower registration, e-application, payment setup, etc. The rate and payment calculator feature takes basic inputs from the borrower, such as loan amount, property value, credit score income, etc., and returns available products and corresponding interest rates. Borrowers can then select various products and naturally move on to the next feature, such as product comparison, which provides an intuitive, visual assessment of products across key parameters like payment, interest rate, duration, total interest component, etc., thus saving time for the front-office team to explain the offerings/ products to borrowers. Borrowers can then register, which allows them to enter demographic information such as name, address, contact details, property address and preferred location to register and save their

cognizant 20-20 insights | july 2011

Borrower Enablement Across the Mortgage Lifecycle

Emerging Features

Online chat Homeowner assistance Finding home value (integrate with third party) Rate and payment calculator Product comparison Product details and offers Borrower registration Tax optimization Branch locator

Incentives for online application

Application status updates at key milestones View application status Closing package/docs tracking Ability to upload documents

Customer blogs and forums Consolidated debt and expense analysis Combined view of accounts across multiple banks Online switcher Interface with insurance agencies Offset mortgages External links (news, weather) Updates to basic borrower info E-mail/SMS reminders for due dates Account statement view Tax certificate Online tax deduction details

View documents between borrower and lender

E-application Submit for decisioning E-Disclosure

Document tracking Approval notification E-mail/SMS notification on disbursement

Standing instruction set up and payments Property tax payment Utility bill payments E-mail/SMS alerts for payment reminders

Standard Features Processes



Fulfillment & Closing

Customer Management & Account Administration

Payment Processing & Collections

Figure 1

settings. This information on the borrowers preferences helps loan officers contact borrowers in an intelligent fashion. Data retention helps in saving selections and borrower data, which reduces data entry on repeat visits and enables easier conversion to e-applications. Through e-applications, the borrower can apply electronically over the Internet by entering standard loan application information. Similarly, after funding of loans, features such as payments setup enable borrowers to make mortgage payments through credit card or bank accounts. The utility bill payment feature ensures that all property-related charges get paid through a single process, thus saving time and effort for both the borrower and the back office. Emerging/new features include online chat, incentives for online application, the ability to upload documents and view documents, etc. After using features such as rate and payment calculators and product comparison engines to obtain more information, borrowers can engage in an online chat with a customer service representative in real time. Banks can offer incentives for online applications, which will not only reduce paperwork and data entry efforts but also incentivize borrowers to apply online. The ability to upload loan-related documents will support and complement online adoption and provide borrowers with functionality to upload key loanrelated documents, such as income and asset

documents, purchase agreements, etc. Banks can publish all documents sent to and received from borrowers online that enable borrowers to have a single view of their communications with the bank, thus improving transparency and reducing workload on the middle/back office; this is also a regulatory requirement per the latest directive from Fannie Mae.

Benefits of Borrower Enablement

The various benefits of borrower enablement include cost savings by reducing workload across the front-, middle- and back-office, improved lead management and pull-through and brand/ perception building. Front-office workload is reduced through automated lead management, borrower registration and product/offer comparison to application conversion. The middle-office workload is reduced through status updates and document management. Back-office workload is reduced through automated payments, borrower updates and document publishing. These features not only provide operational efficiency but also help build better brand and brand perception by promoting transparency and attracting customers through features such as more intuitive and user-friendly user interfaces for various options, such as calculators and product comparison, product comparison to application conversion, etc. Features such as product comparison tools that lead to loan application and subsequent

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Benefits of Borrower Enablement

Rate and Payment Calendar Lead Generation B2B and B2C Product Comparison Borrower Registration and Data Retention

User-friendly interface; asks for basic information. Borrower can explore options, thus saving time for front-office team. Visual comparison of products across key parameters; promotes transparency. Borrower can explore options, thus saving time for front-office team. Borrower details and product preferences captured during registration help front-office contact borrower in an intelligent manner; reduced data entry on repeat visit. Can help borrowers find property based on the area in which they are seeking property.

Other Features: Product details and offers, guide to buy property, interactive branch locator, contact, newsletter, find home value (integration with free sites like

Online Chat

Chat with leads instantly to convert them to applications; clarify borrower doubts in real time and encourage them to register to get solid leads. Route chat to local officers who are more informed about local prices/rates/properties.

Other Features: Find home value (integration with free sites like, homeowner assistance.

Application B2B and B2C

E-Application Incentives for Online Application

Feeds into next set of processes: Processing, UW, completion (ie, fulfillment). Saves time for front-office team. Pass savings to borrower through incentives so borrowers are encouraged to apply online. Savings in the form of reduced processing costs and ability to quote the difference in fees to borrowers.


Other Features: Application status updates at key milestones, document tracking, e-mail/SMS trigger for verification status at document level, document tracking, approval notification, closing package/completion docs tracking, disbursement notification. (e-mail or SMS)

View Application Status/ Ability to Update Documents Amendments (demographics) Due Date Reminders (e-mail and SMS) Customer Blogs/Forums Standing Instruction Setup and Payment (Cards, Direct Debit, etc.) Payment of Property Tax and Utility Bills View All Letters

Reduce call volumes for status calls. Reduce paper, shipping costs and document processing/indexing efforts. Reduce call volumes for simple changes. Reduce missed payments and payment delays; reduced collections efforts downstream. Reduce outbound call volume for payment reminders. Can provide insights to improve service or develop different products. Can serve as customer testimonials for good service. Reduce call volume for standard payments. Automation leads to reduced efforts from loan administration team. Lender can easily ensure that property tax payments are up to date. For borrower, it is a one-stop-shop for payments. Reduced efforts for re-sending/tracking and solving letter-related queries. Borrower can find all letters in one place.

Standard features Figure 2

Payment Processing Collections

Customer Management

Emerging features

document publishing also improve transparency. For lenders, interacting with borrowers at regular intervals ensures that processes become more streamlined, as well as enabling seamless information flow and communication with borrowers at pivotal points in the lending process. This helps mortgage banks achieve greater cost savings and efficiencies. Before offering a plethora of online features, banks need to weigh the costs and benefits of each feature. While it might be easy to quantify the benefits of some features, its more difficult

for others. For example, incentives for e-application might be easier to quantify than for product comparison. Assuming the cost of a front-office staff person to be $25/hour, and estimating the average time spent interacting with the borrower to complete the loan application over the phone at 45 minutes, the cost of completing one application would be $20. Add to that another $40 for the cost of shipping, printing, scanning and indexing, as well as data validation. In all, the cost of one application is about $60. If the borrower is given an incentive to apply online, such as a $50

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Borrower Enablements Contribution to Operational Efficiency

Cost savings by reduced workload across front, middle and back office
Reduced workload on front office through leads, registration and

product/offer comparison
Reduced workload on middle office for status updates and document management Reduced workload on back office through payments, updates and document publishing

Improve lead management and pull-through

Better lead to application routing and management Real-time help to borrowers

Customer attraction: User-friendly interface enables borrowers to

Brand/perception building

perform various functions

Promotes transparency through various features such as product comparisons

and application, document publishing, etc.

Figure 3

credit, this provides a saving of $10 per application. Assuming 5,000 loans per month and a 50% rate of e-application adoption, this still translates to $300,000 in annual savings for the originator. Banks can attempt to determine the benefits of providing a product comparison feature through indicative time and resource costs, but they will be challenged due to a lack of data and metrics, as well as the high cost of data gathering. Borrowers exploring products on their own does not necessarily translate into saved front-office time, since they might want to go through the comparison again with the bank staff. Moreover, the pullthrough to the application would be difficult to measure and compare with structured and lead-generation costs.

tive landscape, current features, feature complexity, business impact and business drivers. A lender that originates mortgages primarily through retail channels vs. one that originates through wholesale would require very different features. An analysis of the current offerings of the bank is required to understand its maturity. A bank with a very basic Web presence (little more than brochure-ware describing products and interest rates) might choose to implement just a basic rate and payment calculator and some alert features rather than taking a big-bang approach of embracing a full feature set or adding advanced emerging features. An initiative like this requires considerable budget and resource allocation to achieve the desired impact. This would include staff re-allocation, training and change management, in addition to the considerable IT investment.

comprehensive approach is required to lay out a roadmap that takes into account the banks internal resource constraints, budgetary constraints, technology landscape, competitive landscape, current features, feature complexity, business impact and business drivers.

Roadmap for Enabling Borrowers

While defining the roadmap to implement various borrower enablement features, it is easy for mortgage banks to get lost in the myriad of possible features they can offer. A structured and comprehensive approach is required to lay out a defined and definitive roadmap that takes into account the banks internal resource constraints, budgetary constraints, technology landscape, competi-

Implementation Approach
The approach to defining the borrower enablement roadmap should include identification of a complete list of features, determination of business impact for each feature and determination of the corresponding implementation cost to help decision-makers prioritize features based on facts. The complete list of features should include features across all process areas, with details as to what each will offer to the customer and the corresponding benefits. Determination of business impact of the feature will be based on benefits,

cognizant 20-20 insights

An Implementation Blueprint
Determine complete list of features that can be offered Determine business impact based on the importance in the process Determine implementation effort Prioritize based on business impact and effort

Figure 4

the competitive landscape, the business model and business drivers. A determination of the implementation effort should take into account the existing technology landscape, current features and feature complexity. The final step in the process will be prioritization of these features based on business impact, implementation cost, internal resource constraints and budgetary constraints. The implementation priority depends on the trade-off between business impact and implementation effort. The quick wins are obviously the ones with high impact and low implementation effort. The next set would require deeper thinking by management, based on business benefits and budgets.

perceived negative into a positive. Success in high human touchpoint industries like lending is driven by the ability to engage the customer at different stages of the lifecycle and enhance the customer experience at each stage. Initiatives like borrower enablement help keep the borrower engaged throughout the mortgage lifecycle. This ensures that customers remain happy and productive, which in turn increases confidence in the bank and fosters a long-lasting relationship. Satisfied borrow- Every step toward ers not only contribute more borrower enablement revenue themselves, but is a step toward they also help generate business from fellow borrowers promoting relationship, by acting as brand ambassa- empowerment, dors for the bank in the social accessibility and media sphere. While the visible benefits the borrower for the borrower include the lender. transparency, enablement and accessibility, the lender prospers through cost savings, improved lead generation and management, increased process efficiency and better brand building. The cost savings from these initiatives can significantly contribute to the organizations overarching goal of expense reduction, while freeing resources to boost investment in related or adjacent strategic initiatives.

Borrower Enablement and Empowerment: A Win-Win

At a time when recovery of the housing industry seems to always be three to four quarters down the road and lenders are targeted by consumer activists, the media, investors, regulatory bodies and industry watchdogs, lenders have to go the extra mile to be transparent and customer oriented, as well as build trust. Every step toward borrower enablement is a step toward promoting relationship, empowerment, accessibility and transparency between the borrower and the lender. While the general perception is that increased transparency exposes banks to heavy scrutiny, lenders must devise their strategies to turn this

transparency between and

About the Authors

Sanjit Bose and Ashish Shreni are Senior Consultants within Cognizant Business Consulting. They have executed multiple projects for top-10 players in the banking industry, spanning consulting, CRM strategy, business process optimization and IT project execution. They can be reached at and

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About Cognizants Mortgage Practice

Cognizants Mortgage Practice employs over 70 subject matter experts and analysts and 800 associates. We have successfully delivered over 100 large and complex engagements across origination, secondary markets, servicing and loss mitigation in the U.S. and Europe. We offer consulting, IT, BPO and IT infrastructure services across all functional areas, with IT services that encompass business and IT transformation, systems consolidation, application development, application maintenance, testing, data warehousing, business intelligence and analytics.

About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the worlds leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 111,000 employees as of March 31, 2011, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 1000 and is ranked among the top performing and fastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant.

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