BLOGS | QUALITIA FOR MORTGAGE
Author: Qualitia Team Member
Date: Feb 20, 2024
Introduction
Institutions covered by HMDA must make available downloadable Loan Application Register, also known as the LAR file into the public domain. Access to these LAR files ensures that any unfair or discriminatory lending practices can be spotted by regulators, whistle blowers or any concerned individual or agency. Verifying individual records in the LAR file manually is a tedious task which consumes a lot of time and in-spite of all the efforts, does not guarantee 100% verification.
In this article, we will try to understand various challenges involved in the manual verification of LAR records and how automation can make this process fast and reliable.
Challenges associated with the Manual Verification of LAR Records
Chances of Human error:
No matter how much precaution one takes, manual data entry is always prone to errors. These errors lead to inconsistencies in reporting. Even simple mistakes such as typographical mistakes, transposition errors, omissions or incomplete information, inconsistent formatting etc. Can lead to severe error and serious consequences.
Inability to verify complete data:
Once a LAR file is created manually, it is highly advised to verify all the entries for errors we mentioned above. Most of the times, institutions are unable to verify the LAR file data fully. This inability to check complete data always leave them susceptible to possible errors and consequences thereof.
Lack of scalability:
Building and verifying a Loan Application Register is a lengthy process and involves multiple intermediary steps. Carrying out these tasks manually can work only till a certain volume beyond which the manual system just breaks down. In other words, the manual process of creating and verifying LAR files completely lacks scalability.
Resource intensiveness:
Manually verifying Loan Application Register (LAR) records requires extensive use of human resources which is becoming costly every passing day. Many times, skilled personnel are dedicated to tasks like manually checking and confirming LAR information. As a result, their expertise is not optimally utilized.
How automation mitigates the challenges associated with manual verification of LAR files
Automation brings freedom to every stakeholder involved in the process, being a compliance officer or data analyst or a Tech specialist.
Automating LAR verification process eliminates the chances of human errors completely. LAR file verification is a repetitive task which induces fatigue in humans. But automated verification is free of any fatigue and offers consistent and precise verification at any scale.
Transparency and Traceability:
Automated verification of LAR files is done through a software which will generate a verification report post every round of verification. These reports bring in absolute transparency and traceability in the entire process.
Efficiency and Time Saving:
Automated verification of LAR files happens on a single click and full execution takes only a few seconds as against days and weeks spent by human resource.
Easy adaptability to regulatory changes:
Automated systems can be quickly modified and updated whenever rules change, or new rules are introduced.
Resource optimization and cost savings:
Automated verification of LAR files cuts the dependency on human resource and reduces the associated costs significantly.
Mitigation of compliance risks:
Automated Loan Application Register (LAR) verification mitigates compliance risks by ensuring consistent and accurate reporting.
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