Funding Suite used to receive these documents via fax and e-mail. As our business grew, we recognized this highly manual process created bottlenecks in an otherwise automated process. Our processors constantly sorted through a steady stream of incoming faxes attempting to match each with the correct service order. This was a difficult and time consuming process and one prone (unfortunately) to human error. We eventually solved the problem and made document delivery easier (and less wasteful) for our customers, while creating more efficient internal process. Here’s how we did it.

Automated Fax Server: The first step was to eliminate our bank of fax machines by building our own fax server. Once this was integrated into our secure network the server digitized every Funding Suite fax and converted it to a PDF.

Indexing System: Next we used barcoding and indexing to tell Funding Suite what kind of fax it had received. Additionally it recognized the specific mortgage lender and borrower file to which it belonged.

An E-Folder for Every Borrower: Once a fax is received it is stored in an e-folder attached to the corresponding applicant file. Our clients now receive a digital copy of every document for their reference, along with the specific time it was received.

Client Side Document Delivery: We recognized that if the client already had the document in a digital format, our e-folder could actually eliminate the need for faxing altogether! Our next step was to provide our clients with three different document delivery options accessible directly from their Funding Suite application.

• Barcoded Fax Cover Sheets: If the lender needs to send Funding Suite a document that exists in paper form, a couple mouse clicks creates a barcoded coversheet. When faxed to us, the fully indexed document appears in seconds within their applicant’s e-folder.
• Direct Upload: If the client receives a document via e-mail – why print it just to fax it over to us? Instead, to eliminate faxing altogether, the lender can upload the document directly into the applicant’s e-folder. Funding Suite recognizes the type of document received and responds accordingly.
• Virtual Printer: For any other document, the lender can select Funding Suite’s virtual printer to print it directly into the applicant’s e-folder. No paper is ever used.

Intelligent Routing: The final and most involved step was to write a series of algorithms to match incoming documents with the correct service order, department and processor. Consider the lender requesting two years of W2s. In this example the W2 order is placed electronically and queued up until Funding Suite receives the signed 4506 IRS form. Immediately upon placing the order a completed 4506 and barcoded coversheet is presented to the lender which can now be e-mailed to the applicant. The applicant signs the 4506 and faxes it back. Funding Suite servers read the document, match it to the pending W2 order and tee it up for the next available processor. A digital copy of the signed 4506 is also made available to the lender for their internal files. By eliminating the manual processes we significantly improved our completion speed – which in turn improves our customer service levels.

Although we won’t see a return on investment in terms of additional revenue since Funding Suite doesn’t charge for these enhancements – solving this problem provided an overall service improvement for our customers.

Cogent Road is growing rapidly and my partner and I are extremely busy. To ensure we spend time thinking, we engage each day in what we call our “Focused Forty”. This is committed block of 40 minutes during which we sit in front of a whiteboard and discuss the future of the business. For those 40 minutes we sit atop Cogent Road’s crows nest peering through binoculars to determine which way our ship should go. If we didn’t schedule this time, we may well drift any which way the industry winds blow.

It was during a recent Focused Forty that we began harping on our competitors. Over the years we have watched our competitors copy nearly everything we do. More than a few competitors have even cut and pasted entire pages of copy from our website  into their own. (I’m talking entire pages word for word!). And they’ve copied our software innovations too. Most recently ScoreAll, an innovative idea in which all available credit scores may be purchased for a low cost with a credit report – and the highest ones added to the file.

Yet, after a short time we laughed because we realized Cogent Road had thought leadership. Rather than  creating their own futures – they are simply looking at us. Where we go – so go the rest. For them, this is easier and safer. But in the long run this management style is self defeating.

Instead of worrying about your competitors copying your latest strategy – stay focused on the future. Spend time thinking and creating innovations that will lead your business into new markets – and hence new revenue streams. Competition exists when two or more companies battle it out using the exact same products, service and strategy. Consider the airlines or the American automobile industry. This is a bloody war that leaves no victor. Instead, look ahead…where there is only endless ocean and blue sky.

Thinking like this is difficult. Acting on your ideas is harder still. But as the leader of your business, there is no more important work.

The risk I’m referring to is the so called Authorized User account, a ridiculous legacy based credit reporting methodology that allows a borrower’s credit score to be calculated using someone else’s payment history. Saying it another way, a bank grants a mortgage to a borrower whose credit report contains the tradelines and payment records of other people. While this would seem incredulous, its common mortgage lending practice.

Authorized user accounts occur when a credit card account holder asks for a credit card to give to someone else. This practice makes sense as its quite common for one to give their spouse or child a card. But what doesn’t make sense is the way in which these new cards (called “authorized user” accounts) are reported by the credit bureaus.

To illustrate this lunacy further, let me share an actual example.  I’ve had an American Express card since 1990, I charge a good amount on it every month and have always paid on time. My credit report reflects this account, which seasoning and payment record boost my credit score. Years after I opened this account I got married and requested an American Express card for my wife. Although she has no income and does not pay for this credit account, her credit file now contains a tradeline that reflects a credit card opened since 1990 with excellent payment history; basically an exact copy of my credit history with American Express shows up on her credit report. And her credit score gets the same exact boost as mine does – even though she is not the one responsible for this card.

Maybe your initial response is that it doesn’t matter because she is my wife, or that it’s not a big deal because if we apply for a mortgage loan we’re looked at as a couple. Well, you’re not alone in your thinking because when I’ve discussed this with banks they express the same idea. But the logic is fatally flawed and these authorized user accounts create a very big problem. Allow me one more example – this one fictitious, yet illustrative nonetheless.

Let’s assume my wife and I are applying jointly for a mortgage loan. Let’s also assume my wife is the authorized user on several of my accounts, each with a good payment history. However, in this example let’s also assume I have some derogatory accounts, maybe even a bankruptcy. Now the bank, knowing we are applying jointly, decide to approve the mortgage based my wife’s good credit. (This too is common mortgage lending practice). However, what has the bank actually done? Since my wife’s credit is based on authorized user accounts she actually has no real credit of her own – but what she does have is a “subset” of my credit – just the good stuff. What really happened is the bank gave a go decision based entirely on my few good tradelines, while completely disregarding all the derogatory history. It’s unlikely the bank would have made this loan if they understood how the authorized user accounts were masking true credit risk.

Cogent Road has spent the past year researching this phenomenon – and I’ll share some rather alarming data points.

1. More than 3 out of 10 people  have authorized user accounts in the credit files
2. 2 out of 100 people have a credit score raised by more than 10% because of someone else’s credit. This means that someone whose actual credit history should reflect a 648 credit score, would instead produce a 720 score for lenders.
3. Most shocking of all: 1 out of 200 people actually would have no score if you discard the authorized user accounts. In these cases banks are approving mortgage loans for people with absolutely no credit history at all.

Today’s mortgage portfolios must be screened to asses which loans were approved based on credit scores elevated by authorized user accounts. These loans should then be routed to a call center that can regularly monitor the borrower’s ability to pay during this foreclosure crisis. More importantly, every new loan should be screened to detect how much influence authorized user accounts have on the credit score. Depending on the results, some applications (regardless of a high credit score) should be declined altogether – while others would be sidelined for review prior to approval.

The good news is that new technologies can help banks do this immediately.

Over the past several months I’ve received many questions regarding credit repair firms – ranging from the actual service these firms provide to why I remain so dead set against them.

These questions reveal how little mortgage professionals understand about credit repair. How can an industry so vocal in their advertising (just try a Google search on “credit repair”), remain so mysterious about what they actually do?