Executive summary

In the lending industry, there is a common misconception that the bottleneck occurs in the underwriting stage of the lending process. However, the actual bottleneck happens in the processing stage, which, in turn, leads to a bottleneck in the underwriting process. This has caused significant delays in loan processing times and a significant increase in the cost of processing loans.

The processing stage is where lenders collect, verify, and analyze borrower data and documents, including bank statements, tax returns, and employment history. This stage is critical in determining a borrower's creditworthiness and the amount of loan they qualify for. However, the current manual and paper-based process is slow, error-prone, and inefficient, leading to delays and a high cost of processing loans.

The ideal solution to remove the processing bottleneck is by introducing straight-through processing (STP) into the current loan origination process. STP enables the automation of the processing stage, from data and document collection to analysis and decision-making, thereby reducing the processing time and the cost of processing loans. With STP, underwriting is free from chasing data and can focus on their core role – accurate credit judgements.

Prudent AI is a cloud-based intelligent document analysis platform that enables lenders to make smart lending decisions. Prudent AI helps lenders implement straight-through processing (STP) into their current lending process by offering speed, accuracy, and judgement layers in the right balance.

Introduction

The lending industry is well aware of the processing bottleneck that affects loan origination processes. This bottleneck exhausts underwriters, extends loan processing times, costs a fortune on training and compliance, and most importantly, negatively affects the borrower experience.  

While many articles highlight the problem, this whitepaper focuses on the solution. We present Prudent AI, a mortgage technology solution that eradicates the processing bottleneck, improves underwriter productivity, and enhances borrower experience. But before delving into the solution, let us analyze the problem at hand.

The current Lending Process is Broken

The average time to process a loan application is 45-60 days, costing between $8,000 to $9,500. A significant portion of this time is spent on manual processes, especially in the processing and underwriting stages. The use of low-touch point loan application systems has automated the application and document collection process, bringing a ton of new applications into the processing funnel. However, there is only a small group of processing professionals and underwriters to review these applications. Missing documents and queries that pop up while processing an application lead to a constant back and forth between the lenders and the borrowers. This process consumes time and is non-productive, according to 66% of underwriters.

Apart from time, the current lending process affects other areas, such as errors while processing loan applications, zero transparency, and high operating costs.  

• Risk of frauds , and increased chances of errors and discrepancies.  
• Borrowers have no clue about the status of their loan application, which affects their ability to close deals on their dream homes in high demand market.  
• Processing and underwriting are expensive processes, eating away a significant portion of a lender's margins, leaving them with minimal profits.

Misconceptions in the Industry

The common misconception in the industry is that the bottleneck occurs in the underwriting stage of the lending process. However, the actual bottleneck happens one step earlier in the processing stage, which, in turn, leads to a bottleneck in the underwriting process.

Current Solutions

Lenders are using various methods to solve the processing/underwriting bottleneck, such as hiring and training more underwriters, signing up BPOs to outsource processing, using automated underwriting solutions, and custom solutions using APIs. However, these solutions have their limitations and do not provide a seamless experience.

The Ideal Solution: Straight-Through Processing (STP)

The ideal solution to remove the processing bottleneck is by introducing straight-through processing (STP) into the current loan origination process. The three key pillars of STP are speed, accuracy, and judgement. Smart document processing, error and edge case handling, and data decision interface are the key areas that require automation. Prudent AI has developed a mortgage technology solution that covers all these areas and provides a seamless experience to the lenders and the borrowers.

Prudent AI's Offerings

Prudent AI is a cloud-based intelligent document analysis platform that enables lenders to make smart lending decisions. Prudent AI helps lenders implement straight-through processing (STP) into their current lending process by offering speed, accuracy, and judgement layers in the right balance.

Speed: Prudent AI has developed powerful AI models that enable lenders to process bank statements in record time. With Prudent AI's solutions, lenders are able to issue more loans because of faster turnaround times. Our customers process 24 months' worth of bank statements in 15 minutes or less.

Accuracy: Over 90% of the documents that come into Prudent AI's document processing pipeline are automatically analyzed with the help of AI. For the remaining documents, Prudent AI has a human-in-loop process that allows our expert team to analyze and fix data in poorly scanned documents.

Judgement: Prudent AI's lending decision engine collects intelligent data from borrowers' bank statements and helps lenders make informed lending decisions. The system automatically classifies borrowers' bank statement data into various income and non-income categories and calculates the net qualified income within minutes.

In addition to speed and accuracy, Prudent AI's solutions offer the following benefits:

• Seamless customer onboarding and migration
• 24x7 support
• Cloud-based and easy-to-deploy
• Easy fitment and scalability for lenders of all sizes

Top lenders across the country including Angel Oak, Lendsure, Flexpoint, Oaktree, etc. use Prudent AI every day to streamline their lending experience. Within a few months, they were able to free up their processing bottleneck, improve underwriter productivity, and increase their loan volumes by a significant percentage.

Conclusion

Prudent AI's mortgage technology solution has the potential to revolutionize the mortgage industry by eradicating the processing bottleneck, improving underwriter productivity, and enhancing the borrower experience. The combination of speed, accuracy, and judgement will free up the processing bottleneck, and qualified applications with clean data will be sent to the underwriters. If done right, the time to process a loan application can be brought down from 60 days to 5 days. This means more loans, more business, and happier borrowers for lenders. Prudent AI is here to transform the mortgage industry with innovative technology solutions.

‍