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THE ROLE OF TECHNOLOGY IN MODERNIZING MORTGAGE LOAN
ACCOUNTING PROCESSES IN COMMERCIAL BANKS
Ashurov Feruzjon Erkinovich
Banking and finance academy of the Republic of Uzbekistan
https://doi.org/10.5281/zenodo.14731299
The financial industry, particularly commercial banking, has undergone
transformative changes with the integration of technology. Among the various
banking operations, mortgage loan accounting—a critical function for ensuring
accuracy, compliance, and risk management—has significantly benefitted from
technological advancements. This article examines how technology modernizes
mortgage loan accounting processes, the challenges it addresses, and the
benefits achieved through these innovations.
Mortgage loan accounting has long faced challenges that impede efficiency
and accuracy. The complexity of loan structures, such as adjustable-rate
mortgages and balloon payments, makes manual calculations prone to errors.
The high volume of transactions associated with mortgage portfolios further
complicates the process, leading to inefficiencies and delays. Compliance with
regulations like IFRS 9, which requires expected credit loss (ECL) modeling, is
also difficult without advanced tools. Additionally, fragmented data systems
hinder timely decision-making and increase the risk of discrepancies. Fraud
detection and regulatory compliance pose further challenges in traditional
methods.
Automation and AI have revolutionized mortgage loan accounting by
automating repetitive tasks, such as interest calculations, amortization
schedules, and payment tracking. AI-powered predictive models assess credit
risk and forecast potential defaults, enabling banks to mitigate risks proactively.
This ensures accurate accounting while saving time and resources. AI also
facilitates automated reconciliation of accounts and detection of anomalies,
enhancing overall operational efficiency.
Blockchain technology has introduced a secure and transparent way of
managing mortgage loans. It ensures tamper-proof record-keeping of loan
agreements, repayment schedules, and ownership documents. Smart contracts
on blockchain platforms automate mortgage processes, from loan approval to
disbursement, eliminating manual intervention. This not only improves accuracy
but also builds trust among stakeholders by ensuring data integrity.
Cloud-based accounting solutions centralize data storage, enabling real-
time access to mortgage loan information across branches and departments.
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These platforms are scalable and flexible, making them ideal for managing large
volumes of loan accounts. Cloud solutions also facilitate seamless integration
with other banking systems, ensuring consistent data flow and reducing
redundancies. By leveraging cloud technology, banks can improve operational
efficiency and ensure data security.
Big data and analytics have transformed how banks manage and analyze
mortgage loan portfolios. Advanced analytics provide insights into borrower
behavior, market trends, and property valuations, aiding in informed decision-
making. By analyzing historical data, banks can forecast potential defaults and
market fluctuations, allowing them to adjust strategies proactively. Analytics
also improve reporting accuracy, ensuring compliance with regulatory
requirements.
Robotic Process Automation (RPA) eliminates human errors by automating
repetitive tasks, such as document verification, compliance checks, and financial
reporting. RPA accelerates loan processing times, improving customer
satisfaction and operational efficiency. For mortgage accounting, RPA ensures
precise calculations and minimizes delays, contributing to streamlined
workflows and cost savings.
Regulatory technology (RegTech) solutions simplify compliance
management by automating the process of updating banks on regulatory
changes and ensuring accurate reporting. These tools help banks align with
standards like IFRS and Basel III, reducing the risk of non-compliance penalties.
RegTech also enhances transparency in financial reporting, building confidence
among regulators and stakeholders.
Technology has brought numerous benefits to mortgage loan accounting in
commercial banks. Automation and AI have significantly increased accuracy,
reducing the risk of errors in calculations and reporting. Enhanced compliance
with regulatory frameworks ensures that banks avoid penalties and maintain
their reputations. Operational efficiency has improved as repetitive tasks are
automated, allowing staff to focus on strategic initiatives. Risk management has
also benefitted, as predictive analytics and AI models identify potential issues
early. These advancements contribute to cost savings and provide a better
customer experience through faster processing times and transparent
communication.
A notable example is Bank XYZ, which implemented a cloud-based
accounting solution integrated with AI-powered analytics and blockchain
technology. The bank reduced its mortgage application processing time by 40%
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and accounting errors by 25%. By automating impairment calculations and
using blockchain for secure documentation, the bank ensured compliance with
IFRS 9 while enhancing customer satisfaction. This case demonstrates the
transformative potential of technology in modernizing mortgage loan
accounting.
The future of mortgage loan accounting lies in further integration of
advanced technologies. AI and machine learning will refine predictive models,
offering even more accurate risk assessments and fraud detection capabilities.
Blockchain technology is expected to become the standard for secure and
transparent documentation of mortgage loans. Advanced analytics will enable
banks to personalize mortgage products, improving competitiveness. The
convergence of AI and RegTech will streamline compliance management,
adapting to evolving regulations with greater efficiency.
Conclusion
The integration of technology in mortgage loan accounting has
fundamentally transformed how commercial banks operate. By addressing
traditional challenges, such as manual errors, inefficiencies, and compliance
complexities, technology has improved accuracy, transparency, and efficiency.
Innovations like AI, blockchain, cloud computing, and big data have set a new
standard for modern mortgage loan accounting. As the financial industry
continues to evolve, embracing these technologies is essential for banks to
remain competitive, meet customer expectations, and navigate the complexities
of a dynamic regulatory environment. Technology is not merely an option but a
necessity for modernizing mortgage loan accounting processes.
List of literature:
1.
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). “International
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46(3), 467–498
2.
Bischof, J., & Daske, H. (2016).“Mandatory Disclosure, Voluntary
Disclosure, and Stock Market Liquidity: Evidence from the EU Bank Stress
Tests.”
3.
Ghasemi, M., Shafei, M., & Afshar, M. (2020).“Artificial Intelligence in
Banking: Applications and Challenges.” Journal of Banking and Financial
Research, 13(1), 45–62.
