Lenders often consider their loan origination system (LOS) to be the “single source of truth” because it is the place all the loan file information is stored. They presume the LOS knows all—but is that really the case?
Not too long ago, my wife and I refinanced our home. While we were reviewing some documents, I noticed my name was misspelled on one of them as “Bryan.” Certainly, that’s not how I spelled it when filing out the application. The only way it got there was by somebody retyping it, and the only reason we saw it was because there was nothing in place to catch the error and correct it. In other words, the LOS couldn’t tell the difference.
There’s little wonder that an LOS has trouble keeping everything straight. Lenders collect an incredible amount of information from the consumer—assets, income, credit information, bank account data, taxes—and then they collect even more information from third parties. It all goes into the loan file. When you’re gathering information from so many sources, in so many different formats, and through so many different methods, it’s not a matter of if the data starts to cross contaminate, but how bad the eventual contamination will become.
There is one perception that digital mortgages will solve this problem. But this is a myth, too. In fact, it can create an even bigger mess. Many lenders are installing new “borrower portals” that make applying for a mortgage faster and easier, yet they are still using older technology on the back end. Some lenders are even taking all the information the borrower submits and retyping it into the LOS, which is another chance for information to be lost in translation.
Every LOS vendor says their system does not let these issues happen. Having viewed loan files from every system out there, I can say with certainty that not one is immune from data problems or inconsistencies.
Our industry will go a long way towards solving its data integrity issues if we stop talking about the LOS as the “single source of truth” and acknowledge that 100 percent accuracy is hard to come by in the mortgage world. However, it is best attained when lenders leverage technology capable of verifying and validating data that goes into the LOS throughout the process and electronically cross-validates data from multiple source documents and third-party systems and data sources. In this way, data contamination doesn’t spread and borrowers can have trust in the process.
The LOS cannot determine what is true on its own. If lenders care about data quality, they should leverage additional technology to create loan files free from fiction.