*Strategizing For Success*
***On its website ServiceLink describes itself as “the national lender platform for Fidelity National Financial.” The company goes further to say that it “provides a full suite of origination and default related products and services to leading national and regional mortgage originators and servicers. [ServiceLink’s] serve first culture combines the industry’s best people with the products, processes and technology to reduce operating costs, maximize loan value, build customer confidence, mitigate risk, and drive performance through the life of the loan.”
****As ServiceLink looks to grow its already big footprint, it has gathered a very unique management team compiled of people with very deep and varied mortgage experience. Members of that team are automation pioneers Gabe Minton, best known for evangelizing on behalf of open industry data standardization, and Mark Braden, a man who as a lender originated full e-mortgages and as a servicer also serviced e-mortgages. These two men sat down with us to share their vision for the future of mortgage lending.
****Q: What would you say are the key issues that lenders face today?
****MARK BRADEN: There are constant challenges given the complexity of new regulations. In 2009 HVCC entered the space, in 2010 we had the revamp of the GFE and in 2011 we’ll be dealing with the unknowns associated with Dodd-Frank as well as where the GSEs may be going.
****GABE MINTON: I’d add that increased regulatory complexity also adds to technology complexity. You add more systems, more formats, more ways to handle things and new vendors and service providers enter the space to fill those needs. There is a lot of opportunity, but that opportunity gives rise to the connection points that support the industry, as well. If lenders want to scale up and down quickly, you have to utilize technology.
****Also, this year we will likely see a continued tightening of credit. So, you’ll see more emphasis on scoring on the property side of things with valuations and as it pertains to the consumer around their credit. You have to maintain that complexity within your organization and sometimes how you do that varies by origination channel.
****Q: You have both been on the lender and vendor sides of the industry. From that perspective, what technology improvements do you feel vendors can bring to the mortgage industry?
****GABE MINTON: From the perspective of ServiceLink, we have a national footprint and a unique management team. We have a lot of executives that are familiar with the service element of the business, Mark brings the lender element and I bring another unique perspective. In the end, we are able to strategize as a management team on how to use and advance this national platform. This leads to some interesting strategy that we can execute, such as the ability for all of our services to be provided off of one platform, but at the same time allow lenders to pick and choose which services will work for them to fill gaps that may now exist in their organization because of new regulatory challenges. Don’t forget, lenders are also growing and shrinking in this market, and growth and retraction sometimes also bring about inefficiencies. Our tagline is: Consider it done. Our platform is all about allowing lenders to fill those gaps.
****MARK BRADEN: Vendors and service providers can bring solutions to market enabling lenders the ability to move a loan more effectively through their systems. The pain points continue to be the new compliance challenges that are hitting lenders and the regulation that comes along with those hurdles. Vendors and service providers need to be able to bring solutions to the table that can solve those issues from an industry standpoint instead of as a one-off Band-Aid.
****The GFE is a prime example of my point. Each lender is continuously working diligently to meet the challenges associated with complying with the new GFE. There should be solutions that enable lenders to solve these types of challenges in a more universal manner.
****GABE MINTON: The good news is that even though it takes time to implement change, there are a lot of people that do think outside the box and are continually innovating to come up with new ways to improve processes and procedures. There’s a constant cycle of innovation that you can see if you look close enough.
****Q: You both talked about using technology to fill gaps. Following that point, how can technology help with process improvement?
****GABE MINTON: There are stock answers to that question that you hear all the time. People talk generally about exception-based processing, data integrity, electronic mortgages, data cleansing. In addition, there are also buzzwords used to talk about process improvement. The point is that there are a lot of tools available to lenders that they can use to improve their process. Personally, I see a gradual abstraction of workflow and workflow processing into an engine on its own that you can run alongside your other systems and applications. This approach allows you to customize or change your workflow much faster without impacting the other systems. In the end, you can react faster to regulatory and market changes.
****MARK BRADEN: The only thing that I would add is that it’s important for lenders to focus in on key areas if they are going to achieve real process improvement.
****Q: You talked a bit about the challenges associated with the new GFE. What issues are lenders still facing with regard to GFE disclosures? And how can they overcome these obstacles that have remained?
****MARK BRADEN: The creation of the GFE is a challenge that I believe has been primarily overcome. However, once we move from the GFE to the creation of the HUD, the post-closing efforts to compare the GFE to the HUD continues to elevate the challenges lenders will continue to face until there is a tool or service that can perform the electronic validations of the GFE/HUD information.
****GABE MINTON: Looking at LQI and other initiatives around improving data quality, the GFE is a key event. I would add that lenders should take a step back and look at technologies that can help you align the GFE to the HUD. Everything across the origination cycle should be aligned. You should look at the data used to make the underwriting decision and see if you can align that data to the data at the clear-to-close event. I would recommend using the alignment of the GFE and HUD as a way to look at all the key events that happen within the loan manufacture process so those events can also be aligned with the data used to decision the event.
****Q: You have both been intimately involved with e-mortgages throughout your careers. What will it take for e-mortgages to gain further acceptance in the mortgage industry? What benefits do e-mortgages provide across both the origination and default life cycles?
****GABE MINTON: From a technical angle, in terms of what we’re seeing at ServiceLink, you need to accommodate for many different documents and document types. You also need to accommodate for different file formats as well. For example, PDF permeates our industry, but you can wrap XML and digital signatures into that PDF to use that format in different ways. SMART Docs is another standard that is being advanced. With the GSEs pushing the use of MISMO for loan delivery, it will take the SMARTDoc to the next level. TIFF’s are still heavily used in the industry today. In the end, you need to accommodate for mixes and matches of documents and file formats so you can do switches, conditional statements and workflow off of the multiple file formats. The file formats will evolve, so if you can set yourself up to handle that evolution as well, the file format will evolve over time just as the many different formats of documents and files used with paper has evolved.
****MARK BRADEN: Gabe detailed the eMortgage process from a technical perspective very well. I’ve been engaged with this on the lender side for over 10 years. While with a previous lending company we participated in early adoption eMortgage processes and actually serviced e-mortgages. Our intial belief at the time was e-mortgages would change the landscape by eliminating the entire post closing and final document activities, enabling lenders instantaneous loan delivery into the secondary market and eliminate most of the back-end friction. However, the initial eMortgage processes required a substantial technology footprint for closing agents and the adoption was extremely slow among county recorders and investors. Lenders that are currently successful in the “e” space have a robust hybrid process enabling a consistent work-flow process regardless if the loan ends up processed as an eMortgage, traditional paper format or a combination.
****Q: Moving on to the servicing side f the business, why is it important to have transparency throughout the default life cycle?
****MARK BRADEN: Loan’s in default have exploded over the past few years. Many of the technologies and work-flow processes required to effectively process default loans were not robust enough to handle the volume that servicers have had to handle. As a result, servicers dealt a lot with spreadsheets that made their processes clumsy and costly. We at ServiceLink acquired a solution back in September of 2010, CommerceVelocity, geared toward effectively processing default loans utilizing rules and workflow technology. This solution handles activities associated with the loss mitigation process including loan modification, short sales, deed-in-lieu and potential loan refinancing in order to bring new levels of transparency to servicers today.
****GABE MINTON: I would add that default is typically very high touch and as Mark said there is a lot of volume for servicers to manage. As the technologies have been updated, you can have better alerts, dashboards, scorecards and real-time information so you can time things correctly as you’re presenting solutions. The better, more up-to-date information that you have at the time of a decision, the better you can advance the right solution to the borrower.
****Q: What makes ServiceLink successful? And what’s ahead for ServiceLink in 2011 and 2012?
****GABE MINTON: As we look forward over the next year, there are a lot of things impacting us and our customers from a regulatory standpoint. We want to provide a universal platform with a national footprint so clients can pick and choose what they need. We want to make different systems and applications seamless and automatic as well. Instead of replacing what they have, we want to allow lenders to fill gaps and help augment what they already have. We also want to help them add new channels and grow. We can provide large-scale solutions with customized workflows and we can provide cookie-cutter solutions to fill gaps more quickly. We are moving to solidify the platform so that we can be agile and meet the needs of our customers.
****MARK BRADEN: Our secret sauce is our national footprint and the foundation on which ServiceLink was built. We began as a title closing business geared on fulfilling those processes so effectively they became lights-out for our customers. As we’ve grown and added all the other services like appraisal/valuations, default title, TSG, loss mitigation services, REO/asset management, and more, we’ve built technology around that foundation to fulfill these processes seamlessly.
****Q: How would you define the state of innovation in the mortgage space today?
****GABE MINTON: I see people innovating all the time. It looks like the industry is slow to change, but there is always new innovation. A lot of that innovation comes in the form of product innovation. However, lenders are always reorganizing workflows to do things better, faster, cheaper. That is balanced in the4 current market with people taking a step back because of the unknown. For example, there has been a lot of discussion as to what will happen with the GSEs but it hasn’t all been decided. So, everyone is cautious. Maybe I’m not going to spend a lot of money on R&D until everything plays out further. If I’m a lender, maybe I don’t want to offer this new product until some aspect of Dodd-Frank is resolved. Regardless, innovation is still happening.
****MARK BRADEN: Changes around the valuation process and how a property is valued will continue to be a challenge for lenders and investors. There have been improvements over the past couple of years, but it still boils down to similar processes that have happened for many years. I believe there’s a strong potential for game-changing technology and workflow processes enabling new more efficient ways to valuate properties.
****Fannie Mae’s Desktop Underwriter and Freddie Mac’s Loan Prospector were game-changing innovations for mortgage loan underwriting in the mid 90’s, MISMO enabled efficient mechanisms for integrations in the early 2000’s, and now it is time for further innovation regarding appraisal/valuation processes, end-to-end compliance technology services and enhanced default solutions.
****GABE MINTON: Last year you saw SigniaDocs facilitate warehousing an e-note. That was a big moment to show that it could be done. Going forward, we’ll see technologies emerge that allow lenders to operate in a hybrid paper/electronic world. I think those technologies will be critical.
****Gabe Minton thinks:
****1. On the technology side, we will see continued consolidation. Also, we’ll see technology companies working closer together.
****2. I’m not an economist, but this year we’ll certainly see more credit tightening. Originations won’t stop, but they won’t skyrocket.
****3. More should be known about Dodd-Frank by the end of the year. There are loads of people working on this and we’ll see more rules and regulations emerge as a result.
****Mark Braden thinks:
****1. We will continue to see new entrants in the origination and servicing space That is a good thing for our industry.
****2. This year will continue to be challenging to move a loan through the system with the continued tightening of regulations as well as the unknown effect of the Dodd-Frank legislation. However, once lenders and servicers get a better grasp on the new processes and procedures I believe the industry will get to a more stable process of originating and servicing loans—probably in 2012.
****3. Technology and service providers will have a profound impact on the industry as servicers and lenders alike not only look to move loans through the process faster, but also in a more cost-effective manner, especially in the face of constant new regulation.
****ABOUT GABE MINTON: Gabe Minton is Senior Vice President, Information Services of ServiceLink where he oversees software engineering, quality assurance, and business analysis services for the company and facilitates the strategic execution of its products and services. Gabe brings a 15-year portfolio of information systems experience, working with and creating software systems, products and standards. He has held the executive positions of Chief Strategy Officer for Motivity Solutions Inc., Chief Operating Officer for Mortgage Cadence, Chief Technology Officer and Vice President of Standards and Alliances with Ultraprise Corporation. Gabe also served as an executive of the Mortgage Bankers Association (MBA) and was a pioneer in the establishment of technology standards for the mortgage industry through MISMO.
****ABOUT MARK BRADEN: Mark Braden is Executive Vice President and Chief Information Officer of ServiceLink and is responsible for providing expert counsel and guidance to senior management on information technology and its impact across the organization. He currently oversees all technology-related activities including: IT Governance, Infrastructure, Systems and Application Support, Applications Development and Architecture, and Business Analysis. Mark also works directly with ServiceLink’s management team in developing short-term and long-term information technology vision and strategic plans. Mark’s 25-year portfolio of mortgage experience includes him acting as Senior Vice President/Chief Information Officer with Sierra Pacific Mortgage in California and the Irwin Mortgage Corporation in Indiana.***