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Digitizing Mortgage Coupon Books Lowers Costs and Risks for IMBs

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Independent mortgage banks operate in a market crowded with other IMBs, online lenders, and large banks. Yet many IMBs are saddled with paper-driven processes that make it difficult to compete. Traditional paper coupons are one source of inefficiency and frustration that IMBs can now replace with a low-risk, low-cost digital, automated process.

Are you still manually processing the first mortgage payment with paper checks and coupons?

The inefficiencies of a paper-driven manual process aren’t scalable. During the coupon payment term, time-consuming processing steps increase your costs, present opportunities for error, and elevate risk.

Lenders typically spend approximately four dollars to manually process the first borrower payment, prior to selling the loan. As you attract more borrowers and build more servicer relationships, the time and cost of paper coupon processing increase exponentially. As the cost to manufacture loans continues to rise, every penny counts for businesses already operating with a tight margin.

In addition to monetary costs, relying on payment coupons also means you fall further behind your competitors in terms of customer experience. Large lenders have already moved away from paper-driven coupons by creating customized digital payment solutions. This is the experience borrowers have come to expect. To compete at scale, digital transformation is a must.

Let’s take a closer look at the risks that paper coupons introduce during two key stages of the mortgage closing process.

Stage 1: Paper coupon books can delay initial loan payments

With manual processing, you have to store initial loan payment checks in a lockbox repository, retrieve them, and then reconcile them to borrower accounts. This process is time-consuming and error prone. For example, when your staff are managing large volumes of paper checks they can easily transpose numbers. Even if you’ve invested in OCR scanning to reduce paper processing time, you must still track and report your progress manually.

Stage 2: Paperwork delays payments for loans you sell

If you repackage and sell loans on the secondary market, more steps are added to your process that can cause friction in the customer experience and increase risk of non-payment.

A paper-based process can easily break. Transition letters can get lost in the mail. Or, borrowers may not recognize the name of their new lender or loan servicing company and ignore payment notices.

As a result, borrowers can easily start off their new lending relationship already delinquent. Missing the first payment to the investor or servicer creates a poor experience for everyone involved. Borrowers aren’t happy, and neither are investors, who may worry that the loans they just purchased from you aren’t high quality.


Case in point: Delays in paper processes create expensive bottlenecks for an IMB

EarnUp recently worked with a small independent mortgage bank that originates 200 new loans per month and sends all new loans to three servicers. Due to understaffing, a senior employee making over $100,000/year had to step in to physically process first-payment checks and set up the transition process to servicers. Not only did this manual work pull the executive away from her other priorities, the cost of paper processing increased dramatically.


Streamline the first payment and loan transition with a payment and collaboration platform

EarnUp’s digital platform streamlines the payment process for borrowers, lenders, and servicers for business continuity. It maintains an uninterrupted connection as a loan is sold and moved to servicing, with all payments attached to a sold loan package.

Your borrowers are introduced to EarnUp as a white-labeled digital platform during the post-application phase. Their loan is enrolled onto the platform during the final steps at closing. EarnUp pre-fills the account with borrower data, without any need for integration to the LOS or POS.

Borrowers make all payments, including their first payment, on the EarnUp platform. The platform automates debits and remits payments on the borrower's behalf, in full, when due. EarnUp delivers relevant, digital notifications to the lender, servicer, and borrower so everyone can see payments being made in real time.

The platform provides borrowers unique functionality, such as options for flexible payment schedules. For example, they may choose to tie payments to paydays, or change their schedule to match their needs. As a result, borrowers have lower delinquency rates, higher credit scores, and stronger overall financial health.

By replacing an inefficient paper process, you achieve measurable return on investment, including:

  • Lower processing costs
  • Greater efficiency and ability to scale
  • Decreased risk of payment delinquency
  • Improved relationships with borrowers and servicers

You’ll have a clear path that doesn’t require manual labor, so you can deploy staff toward other priorities. When you sell loans on the secondary market, accounts and payment structures will already be in place and they’ll travel with your borrowers so they never miss a beat. Servicers will look favorably on the loans they buy from you and come back for more.

Once you switch to a digital process, you'll wonder how you ever managed coupons manually.

Learn more about how EarnUp’s paper coupon replacement solution works.

If you’re ready to move away from paper coupons, let’s talk!