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National Mortgage News
January 18, 2015
BYLINE: By James Faucett

Picture 720,000 pieces of paper. To help you out a bit, 720,000 sheets of paper stacked one on top of the other would amount to a pile approximately 240 feet high. That’s roughly the height of a20-story building. Now picture 10 stacked compact disc jewel cases. If you mentally place the two stacks side by side, you’ll start to understand why.

Judy McLawhorn, vice president of Richmond, Va.-based Charter One Mortgage Corp. is very happy.Ms. McLawhorn was given the task of overseeing the transfer of the servicing rights of 28,000 loans for Charter One.

In a loan transfer, the party receiving the loans has to get 100% of the documentation in each individual file. They also have to get all of the records the previous company kept on servicing that loan.

The computer records can be easy to transfer, Ms. McLawhorn said, because they can be amassed, coded and transmitted. That basic premise follows with the Charter One transfer, only it’s on an enormous scale.

But it is with the individual loan files that Ms. McLawhorn identifies the true challenge.

According to Ms. McLawhorn, each individual mortgage loan is representative of about an inch to an inch and a half of individual papers. So, in this particular deal, there are 28,000 loans, each an inch to an inch and a half thick, for which Charter must give account, including legal documents specific to each loan and required on every loan.

Every loan file must have an original note, a security instrument recorded at the county courthouse where the property is located, and title insurance certifying that that is a valid first lien.

There are three original documents – minimum – that are considered Charter One’s security, Ms. McLawhorn said. Those have to be inventoried and accounted for in addition to everything else that’s in the file.

“To handle that many pieces of paper and run them through a copy machine so that you have a record when they leave your building would be a horrendous task, because we have to certify that they’re there, and they have to get to the other company,” Ms. McLawhorn said. “If they don’t, then there are other contract negotiations discussing how much it’s going to cost us if it’s not there, how much we have to pay to duplicate it. I mean, it gets very, very complicated.”

In Ms. McLawhorn’s estimation, there are approximately 26 pages for each loan that must be inventoried and accounted for to make up Charter’s security. That comes to more than 720,000 pages.

“The number of boxes it would take to put that in is just outrageous,”Ms. McLawhorn laughed. “It’s overwhelming.”

Visions of standing at a copy machine for days on end came to her mind. As if that wouldn’t be worrisome enough, all the pages would have to be kept together in proper order, identified with the correct numbers, and stored somewhere they would be available for retrieval. And someone would have to be put in charge to oversee them.

Not to mention the prospect of pages getting damaged and misplaced.

“You just have a nightmare,” Ms. McLawhorn said.

Adding to the nightmare scenario is another stipulation of this particular loan transfer: it has to be completed by March 1. With a start date of January 2, Ms. McLawhorn estimates that she would have 50 working days, since she and her staff have decided to work Saturdays and two corporate holidays.

Ms. McLawhorn said that, based on that timeframe, they would need to do at least 600 loans a day, including the day they have to be delivered. This, she said, would be impossible because the boxes would have to be put on pallets and loaded on tractor-trailers to be driven across the country. So, theoretically, her team’s goal is to complete 750 loans per day.

“Now 750 loans a day at 26 pages a loan is 19,500 copies a day,” Ms. McLawhorn said. “We don’t have copy machines that can do that. We just don’t. So there is not a conceivable way I could do that.”

Enter VirPack

Her previous experience using VirPack for Charter One originations on a limited scale made selecting the software for this job a no-brainer, said Ms. McLawhorn.

Specifically, she identified VirPack’s template feature as a major help for a job this large. After Charter One creates the template – an organizational, electronic filing system for the VirPack – the loan documents will be identified (which would have to be done anyway, Ms. McLawhorn points out), given bar code designations, and scanned into a computer system. VirPack automatically houses each document in its appropriate “slot” based on the bar code designations. The software then stores all of the information, which can be saved to a CD or in other form.

“You don’t have to worry about somebody losing a page, you don’t have to worry about a page getting ripped, you’ve got copies you can make for anybody and their brother that wants them, and it’s a secure, organized, methodical process,” Ms. McLawhorn said.

Later, when a retrieval is needed, users can click open files which will be – in Charter One’s case -identified by loan number. After finding the loan, users select whatever folder they wish – the one set up for the security instrument, the one for the original note, the one for the power of attorney -according to the fashion in which Charter One designed the template.

How It Will Work

Instead of slaving over copy machines, Ms. McLawhorn and her relieved staff will be feeding documents into two scanners, one that can handle 60 pages per minute and one that can facilitate 29, the variance due to the fact that Charter One is scanning servicing files and collateral files, one of which is larger than the other.

The staff will use X-Mark bar code sheets to prepare the documents for scan. Since all of the loan data is in its database, Charter One will essentially extract the loan data for the transfer and deposit it in an access database. Then the staff will print out X-Mark bar code cover sheets which will identify the loans and any other relevant loan data.

The staff will also print out generic document separator sheets: one for the note, one for the title policy, et cetera. They will then take a loan and its cover sheet and, if the first document in the loan package is a note, get the note bar code. Then they will put the note down, and do the same for all of the successive documents.

The loan is, at that point, prepared for scanning; it has a cover sheet, a document sheet and a document for each required part of the package. The staff simply places the prepared loan into the scanner’s hopper and starts to scan.

The staff scans the documents, organizing them into electronic VirPack files by reading the bar codes. The software identifies and organizes all of the VirPack – one for each loan in a directory. Because of the cover sheet, Charter One staff can scan in any documents missed the first time. The software is designed to find whether the VirPack for that document exists. If it does, the software will add that document to that VirPack. If it doesn’t, the software will create a new one.

Thanks to the bar code technology, the documents don’t have to be in any particular order. If, for example, a company wants to present documents to an outsource agent in a particular sequence, they don’t have to scan them in that sequence. The software automatically presents them the way the company mandates they be viewed.

“It makes the overall delivery capability much more efficient,” said VirPack president and chief executive officer Michael J. Coar, Jr. “If you look at the process, there are several things that you can improve.”

Some of those things, Mr. Coar explained, are the questions of how to get the objects to the other party, how quickly they can be sent and how quickly the other party can start working once they have arrived.

“Those are three particular areas that we focus on,” he said.Since it’s an electronic file, users can e-mail a VirPack, save it onto a CD, or even post it on a website.

If a company performing a loan transfer sends boxes of paperwork to the other party, the receiver will probably have to sort through them and deliver them to processors. If, on the other hand, those same loans are transferred in a VirPack, the loans can be listed by number in an organized manner on a directory of the file server for easy access and completion.

If the receiving company comes back with a claim, for example, of a missing note or assignment document, the first company can counter the challenges with its own recorded VirPack. They can then deliver that VirPack to the complainant.

“That is one of the big benefits, because, in talking to some of these banks that have these loan sales, they’re saying that there’s a huge proportion of those loans that get sold that get challenged for some detail or another,” Mr. Coar said. “With VirPack, they don’t have to make any photocopies or anything else.”

In addition, the company receiving the loans – in this case, on CDs – doesn’t have to pay anything for the format. They get a free VirPack viewer with which they can browse the files. If they are considering a loan transfer, companies with imaging systems can export images out of the system, place them in a VirPack and give them to potential buyers for prequalification. Buyers can see what kind of condition the loans are in and, based on that, negotiate the terms of the transfer.

Outsourcing Possibilities

Outsource agents could also take their work products and put them back into the VirPack. According to Mr. Coar, an agent could execute the assignment, place the executed copy in a VirPack, take it to the county recorder’s office, have the recorder perform their task and then add that document to the VirPack as well. Then the agent could deliver the VirPack to the buyer with hard and online copy.

If the buyer lost the hard copy of the assignment document, the outsource agent would have a copy of it and could recreate it.

“The outsource agent now does not have to deal with paper all over people’s desks – they just have a bunch of VirPacks,” Mr. Coar said. They could store the VirPacks on their file system and view them online as they work. Again, there would be nothing to buy since the VirPack viewer is free. “If they want to start doing integration with imaging systems, then they can take advantage of some of our tools and other products,” Mr. Coar continued. “If they want to start adding documents back into the VirPack, they can do that too.”

According to Mr. Coar, the outsource agent won’t be waiting for documents to be delivered to them in the Charter One transfer. Instead, Charter One will be waiting for the assignment documents to be completed. “They really weren’t going to be able to pull this off with photocopiers and paper-handling and FedEx and everything else,” he said regarding Charter One’s options.

Barbara Chauncey, president of Charter One, agrees. “We could make the transaction happen in this timeframe as far as getting data to the outside vendor, but we would be unable within this timeframe to capture copies of all the collateral docs,” she said.

For Ms. McLawhorn, when it comes down to 720,000 pieces of paper versus 10 CDs, there’s no argument. She estimates that she and her staff could complete the job in 30 days with VirPack, running nonstop at eight hours a day. But she knows they won’t be running nonstop.

“We’re going to have down time, because we’re going to have to find the documents, prep the documents, pull staples, that kind of stuff,” she said. “So even if I ran at their estimate of 30 days, that gives me 10 additional days of a window for error based on those 40 working days.

“And that’s not even counting my Saturdays.”