Don’t Make The Same Mistakes Again

I want to continue the conversation that I started last month. Let’s talk about the most common mistakes that occur when evaluating, implementing, or using mortgage business intelligence (MBI). Today’s article discusses system evaluation and allocating administrative resources.

Hot Button Purchasing 

This tends to happen when people are moving too quickly. Those that are in too much of a hurry to implement MBI often zero in on a single feature without taking the time to thoroughly evaluate a platform before purchasing.

I was talking to a lender at a conference recently who had just undergone an audit. Some of the more pointed feedback had to do with the fact that the lender had no scorecards in place. Guidelines around best practices for quality assurance outline the use of scorecards for each origination channel and branch, as well as scorecards for each and every individual participating in the origination process including loan officers, processors, underwriters, appraisers, closers, and funders. He was doing laps around the exhibit hall asking anyone and everyone occupying a booth if they could do scorecards.

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As I’ve mentioned in previous columns, mortgage business intelligence has become a prominent movement in our industry. In my view, the present market is comprised of two types of mortgage companies: those who have implemented MBI, and those who will. If the industry’s adoption of this technology continues at its current pace, the vast majority of spreadsheets and traditional reports could disappear within the next ten years.

With this long-term outlook, it makes sense to avoid jumping the gun and to take a more thoughtful approach to evaluating MBI platforms. While virtually any platform might succeed in a setting where a single feature or function is the sole focus, it’s a sure bet that this focus will eventually shift, or expand to other areas of the enterprise. A thorough evaluation up front will provide the foresight necessary to take full advantage of this expanded focus when it happens.

Limiting Administrative Resources

Experienced industry professionals understand the pervasive reluctance to dedicate resources toward managing mortgage technology initiatives. Whether it’s a loan origination system or any other system that requires some level of on-site administration, resource constraints are ever-present as employees are constantly multitasking, focusing their efforts where they’re most needed on any given day. Spending time on non-revenue-generating activities seems impossible when an organization is set up to consistently perform at, or just above maximum capacity.

It’s therefore useful to remember that implementing mortgage business intelligence is all about saving time, not spending it. Without exception, every experienced MBI user with whom I’ve had the opportunity to speak has gone through the same transformation in terms of their philosophy on resource allocation. They’re all trying to find ways to spend more time fine tuning their platform, because they have come to understand that the broader the MBI footprint within their organization, the more efficient and profitable they become.

While extending the reach of an MBI system to cover every corner of an enterprise takes time, it is time well spent. For every non-recurring man hour spent rolling out MBI to more users, an organization will realize several hours of recurring time savings with each and every business transaction.

Supplement vs. Replacement

The most successful MBI projects are those which produce the most compelling results for their user communities. When people ask me about the implementations where I’ve seen MBI make the biggest impact, I often think of the smaller boutique firms. Many have yet to fully leverage spreadsheets and traditional reports, instead using a combination of legal pads, calculators, and white boards. Bringing MBI into this type of setting is as revolutionary as it gets, and no one would dream of picking up a calculator, pen, or dry erase marker ever again once they have access to the new system.

So it’s baffling when we see users hang onto their spreadsheets long after they have equivalent functions in an MBI system at their disposal. Sometimes users fixated on data integrity keep running their spreadsheets and traditional reports to compare them to the output of their MBI platform. Other times there is a reluctance to change when time constraints produce skepticism around the feasibility of tackling any learning curve associated with a new system.

Whatever the cause, this practice may be one of the most damaging when it comes to implementing MBI. Mortgage business intelligence isn’t intended to be an adjunct to traditional analytics. It’s intended to replace them. The central idea is taking an antiquated approach to an activity and updating it, thereby saving time, and enhancing the derived results.

If MBI is simply added to a firm’s traditional analytics efforts, not only will things not get better, things can get worse. Instead of paring down the time spent on analytics, it’s expanding, which runs counter to the whole idea of MBI in the first place, which is to dramatically reduce the time that firms spend on analytics, while increasing the value and timeliness of information delivery.

Making it an IT Project: Ignoring Business Users

While business intelligence endeavors are generally thought of as technology projects, I’ve always contended that mortgage business intelligence is more of a business project than a technology undertaking, particularly since the technology behind automatically pulling data from production systems and transforming it into effective visualizers is well established. IT-centric projects are focused on using the newest, cutting-edge tools, and the value of these tools lies in enhancing not only the data processing environment, but also the resumes of the IT staff deploying them.

Technology is clearly important, and while it makes sense to ensure that your MBI provider is using up-to-date technology, it is much more important that they have a deep understanding of the mortgage industry and exactly what it takes to effect process improvements across the board. This expertise can best be leveraged by working directly with business users to understand the current state of their analytics and to help them convert these into MBI functions within the new platform.

Projects that focus solely on IT divisions run the risk of ignoring the business case for MBI and providing little or no benefit to business users. This approach eliminates the possibility of optimizing operational dynamics and setting stage for increased profitability.

Making Decisions Based Solely on Cost

While it’s a familiar and rarely disputed principle that purchasing decisions should never be based solely on price, cost of ownership still appears at the top of most buyers’ criteria lists. A thorough comparison of your options should quickly uncover whether or not significant price differences are warranted and your potential vendors should be able to make this very easy for you. If nothing else, extensive reference checks will give you a good idea of how much implementation support you can expect, and this is where good vendors tend to differentiate themselves.

Another detrimental practice is viewing mortgage business intelligence as a cost center. Think about the well-known attributes and effects of MBI: operational efficiency, expanded volume, improved customer service, and the overall effect of boosting profits and reducing costs. It can certainly be said that unlike the rest of IT, MBI can genuinely be a profit center.

Even a cursory survey of the market reveals the fact that business intelligence is new enough to the mortgage industry to be priced unusually low: well below what users in other industries pay for comparable platforms. Closing an extra couple of loans per month should be enough to offset the cost of a system, and when properly implemented, MBI surely has a much bigger impact than that.

Replicating Current Analytics in MBI

It must be said that it’s not necessarily a mistake, but this approach does tend to keep users from realizing the full value of an MBI platform. The true value of MBI doesn’t lie in merely automating your current analytics; it lies in changing the way you think about your business.

In my present line of work, I have the opportunity to see a great many MBI installations, and I know that replicating and automating current analytics is almost always the first step that lenders take during an implementation. It’s an obvious, reflexive move, and one that can represent enormous time savings. I’ve seen quite a few MBI projects in which lenders take their current spreadsheets and simply make replicas of them in the new system.

This can seem to be a huge advantage: some spreadsheets take days to produce, and when automated within an MBI system, the same information is consistently available without the legwork. But even though a lender might be saving time, they’re ultimately automating an antiquated process. The true goal of mortgage business intelligence is to do away with the vast majority of traditional spreadsheets and reports and focus instead on a small collection of key performance indicators that provide a real time picture of overall business health and performance. Detail should be readily available but drilled into only when these KPIs reveal issues that necessitate intervention.

I see this tendency to replicate traditional analytics as the first wave of industry adoption of MBI. It’s not a bad start, but as mortgage companies build fluency with this technology, and begin to truly understand how it enables them to drive effective and successful behaviors in staff at all levels, they’ll eventually discover that in the wake of MBI, traditional analytics are of little or no value.

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