This week, the spotlight shines on issues ranging from fraud to data management, and our guest subject is Phil McCall, who recently joined the Pompano Beach, Fla.-based ARMCO – Aces Risk Management as chief operating officer.
Q: You have more than 20 years of experience in the industry. In your opinion, has the industry changed over this period for the better or for the worse?
Phil McCall: Definitely for the better. If you would have asked me this question 10 years ago, I probably would have provided a completely different answer. But for the overall, high-level view of the past 20 years, I have seen changes take place that make me proud to be a part of the mortgage industry. Most notable to me is a redefined commitment to quality. This has spanned all aspects of the industry – from the licensing and training of our originators, to the extensive QA that is in place to monitor the quality of our manufacturing process from the day of application to the day a loan is paid in full.
Q: What is your opinion on the current state of mortgage fraud?
Phil McCall: I think the industry is currently in a very delicate position with regard to mortgage fraud. We as an industry have made huge strides in improving our overall book of business and, by doing so, we are giving the needed attention to the manufacturing process of loan originations.
With that said, I think this improvement to mortgage quality may unintentionally mask fraudulent activities taking place. We have moved to a much more intense QA and QC process, but these reviews are typically geared to perfect the manufacturing process and identify defects. In most cases, the personnel completing these reviews are not adequately trained in fraud detection. As we have improved our mortgage quality and defect monitoring, the fraudsters will (if they haven’t already) perfect their manufacturing processes to slide under the radar by dotting the “I’s” and crossing the “T’s” as to not draw attention to a bigger problem that is just below the surface.
Q: Does the industry have a good handle on dealing with fraud?
Phil McCall: I’m not 100% sure we do. Overall, I think the past three years have produced a great book of business. The enhanced guidelines and regulatory oversight have required every lender to step back and properly assess all of their processes.
As we meet these new requirements, I fear a potential form of complacency setting in among the lending personnel. Somewhat along the lines of: With all of the quality control steps we are taking – how could any fraudulent activities be going on? This would be a critical misconception and if anything, lenders should be sharpening their fraud detection skills and become even more proactive in the training and education of all of their personnel.
This also brings up the point of lenders making better use of their own loan data to more accurately assess the risk points associated with their particular lines of business.
Q: On the whole, do you believe the industry is using data correctly? And, at the risk of being too negative, where can the industry improve in its handling of data?
Phil McCall: I believe the industry is at the beginning stages of using data correctly. In the past year, I have seen a noticeable improvement in the acceptance of lenders utilizing data to properly assess risk.
With this said, I think many companies lack the proper tools to adequately extract the relevant data and to properly assess this data within their own book of business. I see most of these deficiencies being tied to antiquated systems and lenders attempting to make use of technology that was never built to fulfil this need.
I believe the time is now for the industry to embrace the technology which provides them the ability to utilize big data as a part of their recurring assessment of risk throughout their organization. It is best to work with a trusted partner whose business is quality control coordination, communication and reporting. The right vendor can help lenders visualize their data, understand it and share it.
Q: What are some of the major projects you will be working on at ARMCO?
Phil McCall: One of the reasons I joined ARMCO is that the company fully embraces a philosophy of using big data to improve loan quality throughout the industry. My current focus is on enhancing the analytics platforms of the company.
In the upcoming weeks, we plan to formally announce an exciting integration through ACES, which gives business executives powerful visual analytical tools such as geographic heat maps and enables data drill down in real time to really understand deviations in quality throughout the manufacturing process.
I am also working on refining the ARMCO industry benchmarking solution – knowing how your organization stacks up against the industry from a quality control standpoint is critical. Yet, the process is very non-standardized across the industry. We are refining our technology to allow for that standardization and normalization. It’s pretty exciting stuff!
ARMCO – Aces Risk Management is online at www.armco.us.