By Gerard Heinz

It's not just about making documents easy to find, it's also about complying with increasing regulation.

Everyone knows that paper is a problem for the mortgage industry. It is by no means the fastest, most reliable or least expensive tool for the job. And yet, 90% of the documents in the workplace are still processed that way. Even without paper, companies still need documents in order to operate, and a document management system to create, store, retrieve and track them.

I hope to share some insight into what the right imaging and document management system should look like and accomplish.

In an effort to move toward a paperless process, many companies have invested in systems that capture and store images of their paper documents. However, imaging in its basic form is just capturing paper and companies still have to manage those images and effectively store them to prevent them from getting misplaced.

Today, documents come in a variety of different forms other than paper. As companies come to grips with this fact, the older systems they implemented to store images of paper documents will be revealed as transitional technologies or an incomplete solution that hasn't really solved the problem.

Smart firms will look to avoid systems that strictly handle images in favor of real document management solutions. Systems where documents of different types from different locations are captured and then processed and indexed in a manner that allows users to locate the data in the future easily. These systems exist today and will continue to get even more powerful in the future.

Companies needing document management today should be sure they are getting a system that can deal with paper documents, as they will continue to be a part of their business process for many years to come. They must also be capable of managing any kind of document encountered in the future, whether paper or electronic, in order to be prepared for the electronic loan. In addition, the system should be able to capture documents from as many different sources as possible, both inside and outside of the firm.

A real document management system must be capable of handling information in any format, from Microsoft Word or Excel documents, to e-mail messages, to instant messages. In the future, many documents that lenders receive will be streams of XML-encoded data. The document management system has to be able to handle these different types if the lender hopes to use it for any length of time. Even when the industry gets to the perfect e-loan, documents (probably electronic themselves) will still be required as backup or another form of auditing will be required to ensure a compliant loan.

How companies manage the collection and organization of documents is critical to their overall success. A mortgage company can receive documents via mail, e-mail, hand delivery even XML. The limitation to these mediums is that the documents needed for one loan file end up in multiple locations making them very difficult to locate and manage.

An imaging application needs to capture and store documents within a centralized repository. Being able to capture documents immediately from the originating source mitigates errors, time to decision, and most importantly – cost.

Capturing capabilities are incredibly important, yet the key lies within an indexing mechanism. Most firms realize that documents flow in through their doors so rapidly that it is impossible to handle the indexing manually The document management system must have a process for handling all data types automatically if companies hope to keep a handle on the information they are storing.

In addition to being automated, the indexing system should be easily understandable. The system must allow the lender to configure the indexing so that the documents relating to the work at hand can be easily recovered by the human processors working the files. It should also provide user-friendly tools that can speed up document retrieval.

But it's not just about making documents easy to find, it's also about complying with increasing regulation about the way sensitive information is handled and stored. Companies have to account for client data itself, who can see it, who can change it, is there an audit of changes, and how long it should be stored. The right document management solution will make that easy. Lenders are in a business that requires a lot of risk management. It doesn't make sense to install systems that will increase risk, especially when it deals with regulatory compliance.

The U.S.A. PATRIOT Act, Gramm- Leach-Bliley, and other federal and state - and increasingly, local - legislation impact how lenders handle their documents and data. Whereas the imaging systems of the past were not sophisticated enough to offer much support here, today's document management solutions can.

Scanning in a document when it enters the shop eliminates the need to store and refer to paper. With the use of technology, such as bar codes and form recognition, primary indexing values can usually be captured from the document, allowing lenders to automatically index documents into an electronic loan file.

By integrating the document management solution with the primary business software, such as the lender's LOS, document capture can now be used as a trigger to move the process forward.

A true imaging solution will treat all information imaged into the system as independent data that can be manipulated as required by the business user. This will enable the core system, for instance, to provide information to an investor in a specific stacking order, or focus the presentation of the material based on the audience that will be receiving it.

In the end, these systems are capable of intelligent character recognition and truly turn paper documents into data that the core system and user can use. For mortgage lending, it makes sense to embed the document management solution into the LOS to better control the lending process.

In the rush to solve paper-related problems, some companies invested in document management tools that included workflow capabilities, in effect taking the power out of the hands of their LOS. Today's SOA-based systems are capable of automating the majority of the lending process (for some loan products, automation is possible for the entire loan process). If you take the power to control the job's workflow away from these advanced systems, you are throwing away a lot of the value you paid for when the LOS was originally purchased and implemented.

If the unstructured data in the paper documents is made available to the LOS, a system that already has all the structured data entered by company personnel can make quick decisions about where to route the job next, automatically populating the next work queue. That makes a lot more sense than having the imaging system poll the LOS for information to make a decision about workflow.

Technology should always serve a purpose. It should make your operation better, cheaper, faster or some combination of these. That improvement translates to a competitive advantage. Document management is no different.

As the lending industry continues to move toward the all-electronic mortgage, firms will continue to explore ways to manage the documents and the data they require to process loans. Many companies will find that the money they invested in transitional imaging technologies will not carry them far enough to remain competitive for long. Firms that hold out for a true document management solution that meets all the criteria discussed above will have a competitive advantage for many years ahead.