LAS VEGAS -- Any homeowner who's ever spent an hour or more signing mortgage documents can appreciate how appealing a hand cramp-free closing date sounds.
Joe Brancucci, executive vice president and chief lending officer at $8.5 billion Boeing Employees Credit Union, captivated his general session ACUMA audience with details about how BECU pioneered an entirely paperless mortgage origination process that doesn't just appeal to members.
The new system shaves 62 basis points per loan off costs on average, derived not only from paper and supplies savings, but also tremendous gains in operational efficiency. For example, each mortgage loan employee saves more than two hours per day normally spent gathering paper documents and leading members through the hour-plus process of signing closing documents.
Brancucci began his quest to create an entirely paperless mortgage department back in 1999, when he first took over BECU's lending operations. Back in those days, he said, it took six to eight weeks to set an appointment with a mortgage loan officer. And, most loan officers believed the thickness of a green mortgage loan file folder, which weighed four pounds on average, had a direct relationship to the quality of the loan.
"We just made it a painful process for the borrower all the way through," he said.
Painful not only for the member but for BECU, too. The nation's fourth-largest credit union was losing business during the refinance boom of 1999 and 2000 because it kept missing closing dates.
So, Brancucci made a bold statement: his division would deliver closing documents a full seven days before the mortgage closing date.
"And that was a big order back in those days because we didn't have all the technology we have now," he recalled.
One of the roadblocks to an efficient mortgage process is a cornerstone that Brancucci himself helped develop back when he worked for Fannie Mae--Form 1003, the GSE's Uniform Residential Loan Application. While the 1003 is very thorough, it creates its own set of additional processes, he said.
"We questioned Fannie Mae and asked them if all the data elements required in the 1003 were really required for a solid credit decision," Brancucci said.
True, the former Fannie employee has a comfort level with the company that most in the industry don't. However, Brancucci encouraged his audience to challenge regulators and industry heavyweights like Fannie, saying it takes a strong backbone to pioneer new processes, products or services.
"We tend to look at mortgages with a regulatory lens and force the experience on the member," Brancucci said. "Instead, we need to look at the process from the member's perspective and build the process from there."
That's easier said than done come audit time. However, Brancucci again stressed that credit unions can't let auditors dictate how they run their shops.
"The auditors freaked a little bit when they asked for the loan files, and we said there weren't any," Brancucci said, "but, we showed them the electronic files, showed them that everything they needed was right there, and they got used to it."
BECU's vendors also had to adjust to the new paperless system. The credit union's third-party vendors not only had to deal with the expected system incompatibilities but also change the way they did business.
"You need to be able to communicate with your vendors using those paperless files," Brancucci said. "You can't just print out paper copies for them, that's not paperless."
In fact, technically, BECU isn't entirely paperless, because only a handful of the nation's county recorders accept electronic files. But, Brancucci said, paper copies for county recorders are the only remnants of the old system.
Surprisingly, the difficult part was convincing BECU employees the switch was a good one.
"We had some resistance, particularly from loan underwriters, who worried the new system would take their jobs, and rightfully so," Brancucci said.
Even once the paperless processes were introduced, employees required additional coaching to stay within the paperless mindset, Brancucci said. For example, some loan officers would require members to come into a branch to discuss the loan in person, devaluing the convenience factor.
All told, BECU now processes 1,200 mortgage applications per month to the tune of a robust $1 billion portfolio, with virtually no paper. The mortgage lending department employs 35 full-time staff, including five supporting positions that aren't involved in credit decision-making.
BECU's predominantly young, first-time homebuyers have adopted the technology quickly. Gen X and Gen Y markets appreciate the eco-friendly green process, online access and delivery of closing docs on a USB drive.
"It's not about what role we play in the mortgage marketplace but about developing the role we want to play," he concluded.