A New Approach To Mortgage Lending

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With key management based in New York City, Genpact helps clients become more competitive by making their enterprises more intelligent. With 64,000 employees in 24 countries and hundreds of clients, including more than 125 of the Fortune Global 500, Genpact started as a division of General Electric that served GE businesses for over 15 years. Today, Genpact is transforming business services with technology, facilities on six continents, and BPaaS (Business Process as a Service), bringing efficiencies to mortgage lenders never before available. What exactly is BPaaS? And how will the company reshape lending in the future? Genpact’s VP, Head of Mortgage Technology, Roger Hull shared his ideas on these subjects and others right here:

Q: Let’s start off by discussing the evolution of business process outsourcing. How has that changed over the years in your opinion?

ROGER HULL: That’s a great question. I think there largely have been two categories of BPO. One would be full private label services, outsourcing, just like what PHH has done, and then really what I will call more component-based outsourcing, where it’s essentially bodies working on the client technology, providing essentially overflow capacity. I think the shift that has started to occur today is a move toward a little bit of a hybrid of both approaches, which we think is a new model for success and we really think it’s actually a brand new model called Business Processes as a Service or BPaaS.

BPaaS is all about deploying a combination of our technology, sometimes integrated with client technology, or all our technology all together. We’ve got a current client in the middle of deploying, that’s using our platform end-to-end, but certain roles will be employees of the client, the lender, and then certain roles are outsourced to Genpact. I think that’s really the new emerging model, where you are all on one common technology platform, which creates total transparency along the transaction, but the roles can be staffed either by the lender or by Genpact. We’re getting a tremendous amount of traction in that space.

The old private label model really dictated that you use the provider’s platform and all of the provider’s people, and it left a lot of holes. If I’m the lender and I’m on the outside of my own process looking in, given today’s regulatory environment, that’s an unattainable position for the lender.

The new regulation that we’ve seen combined with what’s coming in August has really caused lenders to look at BPaaS as the best alternative vs. total traditional BPO. A lot of prospects are looking at full consumption of an end-to-end technology as well as a component outsourcing strategy for things like processing, underwriting, closing, funding, delivery. Lenders want to retain more of the client-based roles, like the loan officer and even create super hybrid processor roles within their organizations.

So, we’re seeing a big change in mortgage lending today. And we at Genpact like the change, because we’re well equipped for it.

Q: You talked a little bit about the regulatory changes scheduled for August. What’s your opinion of those changes? And from a competitive standpoint, how does Genpact differentiate itself in terms of how you will deal with those regulatory changes and future regulation, as well?

ROGER HULL: It’s a great question. First, I think we’re well ahead of the curve in making the changes from a technology perspective. And then also working with our doc providers because we use different outsourced document preparation providers to get our changes made well in advance of that deadline.

But, as you know, it’s not all about just the documents and the technology. There are also compliance process procedures that need to go with it. I think the natural advantage we have is having all of those in one shop, which allows us to package a fully ready set of compliance changes well in advance of the deadline to ensure that our clients can properly vet it, get comfortable with it, well before we roll it out.

When you execute the change piece by piece with multiple vendors, that can be messy. Also, in this scenario the burden of orchestrating that change and testing that change all falls on the lender. In the end, that becomes a much more complicated task.

Q: Genpact offers its services much like mobile apps in that you can go to one store and pick all the apps or just the apps you want to use at that time. How has that approach evolved and where do you see that going as it pertains to your overall product and services mix in 2015?

ROGER HULL: That’s a great question. Right now we’ve had a lot of demand for the full end-to-end offering. However, we do have prospects that are looking at that type of full-sale change coming in 2015 and are looking at how we can buttress a lot of the deficiencies in their existing platform. Certainly all lenders want compliance, but they also want efficiency gains, as well.

Q: What do you think lenders really want when it comes to technology? Also, what do they want when it comes to just outsourcing processes and operations?

ROGER HULL: They are obviously looking for, first and foremost, a platform that can be one platform vs. multiple platforms that can support the cradle to grave mortgage origination experience in a way that obviously makes them compliant—that’s probably first and foremost, but following closely behind, lenders want a system that will give them both the competitive difference from a customer experience standpoint and then just as well, one that will give them a significant lift over the cost profile, because as you know, a lot of the regulatory actions have led to more process steps, and more effort in the overall origination process.

And then when you put that in light of a market that, from a volume perspective, doesn’t look extremely attractive, you get really, really squeezed margins for a lot of lenders. They are looking for really, all three of those elements in a solution. In summary, they want something that can ensure that they are compliant; something that can differentiate them from their competitors so that they have the potential to have a larger bite of the smaller origination pie; and they want a system that can increase their profit margins per loan by giving them a competitive advantage relative to operating efficiency.

it’s really a three-legged stool. Compliance, something that can help them attract more business in a declining market and then getting better margins per loan. Anything that can offer that kind of triple threat value proposition is going to be a winning combination in this market, in my opinion.

Q: Looking ahead, where do you see the market as a whole going in 2015 both when it comes to lending and technology?

ROGER HULL: It’s obviously going to be a tough market. I know you’ve seen all the prognostications of what the volume is going to look like, which looks like a very, very tough market. We are talking to lenders that have compliance issues, as well. With the new rules a lot of lenders have added manual processes that are costing them profits. That’s a big concern that will drive automation in 2015.

Q: In terms of pure ROI, how is Genpact best prepared to help lenders over come these challenges in 2015 and beyond?

ROGER HULL: We’ll check that first box of being a fully compliant system. Second thing is we bring a tremendous amount of operating efficiency with the automation that we have. Third, you have the BPO component and our ability to, if you will, bifurcate certain jobs and remotely perform.

And that doesn’t necessarily mean off-shore. A lot of people think that outsourcing means off-shore. We have delivery centers in four different locations in the U.S. as well as near-shore in South America, and certainly offshore, as well. Our system gives you the ability to take tasks or roles like a processor role, and decouple some of those things that are lower-end functions that don’t require the same depth as say senior processor, and have them performed remotely at lower-cost locations and the lender actually gets a pick-up in quality.

Q: Some people have said that you can still innovate despite the new compliance issues. Other people have said that these compliance issues have caused both lenders and technology vendors alike to stall their innovations. What do you think about industry innovation?

ROGER HULL: There’s great opportunity for industry innovation. I’m pretty excited about some of the innovation we’re bringing forward. Certainly compliance has created a complication, but I don’t know that it doesn’t actually allow us to separate those who can do it well from those who really struggle with it.

We did some very interesting things in the area of conditions management to essentially treat compliance as conditions much like you would eligibility or underwriting. What I mean by that is we’ve leveraged a number of industry-endorsed external compliance engines to make a call from our system, perform a dynamic compliance test, and then bring the results back and have it quickly effect something in the workflow.

If the severity of the return is such that it should create a stop in the workflow, we’ve treated that as an outstanding condition that has to either be cleared or waived before the loan can proceed. What that does is it makes sure that the compliance issue doesn’t slip by and doesn’t get to a point in the organization’s process where it becomes very, very difficult to remediate.

We think that’s extremely progressive. And by the way, it doesn’t take human identification. We think some of the compliance changes actually create opportunity for innovation as opposed to constrain innovation.

INSIDER PROFILE

Roger Hull is VP, Head of Mortgage Technology at Genpact Mortgage Services. He leads the technology side of Genpact and has 30 years of experience in all areas of real estate finance technology. He works directly with clients and prospects to create efficiently implemented Genpact solutions. Prior to joining Genpact in 2011, he was CEO of technology firm High Performance Partners, LLC; CIO of First American Corporation; CIO of First American Title and Vice President of Technology for Coldwell Banker Relocation Services.

INDUSTRY PREDICTIONS

Roger Hull thinks:

1. You’re going to see an accelerated pace of technology replacement.

2. You’re going to see a much more significant move to private-label origination in some of the smaller and midtier lenders.

3. Among the upper tier, you’re going to see adoption of increasing amounts of technology, and probably some level of component outsourcing.

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