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Red letter day.

April 5, though not listed as a special day on any calendar or accompanied by a parade or, in fact, even specially noticed by most individuals, was truly a red-letter day in the history of our industry. While the event affected only two mortgage bankers and a government agency, it truly foretells a technological revolution: one that is fast on our heels, deep in our pockets and at the core of our future.

This technological innovation occurred simply, quietly and with little more signs than a few confirming remarks on the screen. This product of more than a year's effort, culminating in a formatted electronic transmission, represented the first live request for payment of a mortgage insurance claim to the U.S. government. The fact that few watched the process take place is a testament to its success. More importantly, the automated clearinghouse (ACH) payment of the claim, occurring equally unnoticed in the middle of the night, further confirmed that electronic interaction (request and response) is viable, implementable and, at long last, available today.

Procedures have been carefully developed to handle all the paper-bound parts of the process. Mapping, translation and editing guides had been produced and discussed with the two lenders involved and their software vendors. Arrangements for delivery and reporting had been arranged with a value-added network that could handle the transmission of the request and the confirmation. Documents such as trading partner agreements and Treasury authorizations were executed by all parties. Finally, servicing operations staff at the pilot were trained in detail and taught a new lesson: the paper records of a claims transaction were now the backup.

The computer could file a claim, track its processing and note receipt of payment. One paper-based activity, connected with that classic of our industry, the bulging loan file, had been successfully grounded. Scores of other potential trading partners (hazard insurers, tax services, credit bureaus, mortgage insurance companies) waited eagerly to find out if they too could take advantage of electronic data interchange (EDI).

What can we take away from this event? Total systems-level interaction is possible. The costs are not terribly high, and the advantages are many. If properly planned for, implementation is smooth. Though this is only the first function to be automated, becoming capable of performing one transaction set is the ticket to all the solutions that are both developing and that will be proposed.

In addition, we have confirmed that the information on paper is more important than the treatment of the paper itself. Acceptance of this ideal is essential for our progress. Finally, we now have a concrete and statutorily correct procedure that relies on a "signature alternative" in place of the live stroke of a pen. This is perhaps the largest success of all as it indicated that our industry's trading partners are also interested in developing an information culture.

Even when there is a high level of bureaucratic red tape to cut through, innovative solutions to our existing workflows are suggested and accepted as the interaction between mortgage bankers and their trading partners becomes better defined in the engineering process. For example, months of thought went into the issue of how mortgage insurance certificates (MICs) would be handled in the electronic claims process. Though the final result is not as liberal a treatment as the one we expect to evolve with industrywide participation in EDI, it is certainly better than what we were doing before. We have been far more successful at grounding paper than we have been at eliminating it. As we tackle other solutions to the interactive exchange of information, we will keep this strategy in mind.

The next targets include default reporting, hazard insurance billing and renewal, credit report receipt and servicing transfers. More important than any one transaction, we hope to champion the method we have refined for bringing generic and useable transactions to the strategic arsenal that mortgage bankers can draw on in the shortest possible time with the lowest cost to implement. Because Department of Housing and Urban Development (HUD) lenders are so pervasive in our industry, we will soon have the added benefit that, as we develop transaction sets, many will already be EDI capable, as the investment in software to communicate with HUD will also allow for communication with other trading partners.
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Title Annotation:Technology; technological innovations in the mortgage banking industry
Author:Hershkowitz, Brian
Publication:Mortgage Banking
Article Type:Column
Date:May 1, 1993
Previous Article:Handbook of Mortgage Processing.
Next Article:Interest rates and charts.

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