Fiserv is dedicated to helping its clients solve complex business challenges. Whether you want to grow deposits, attract and retain customers, fight fraud or meet regulatory compliances, Fiserv provides the expertise, tools and guidance to help you solve problems and meet business demands. Through this column, Fiserv continues this mission.

Life-Cycle Lending: Provide A Competitive Edge

*Provide A Competitive Edge*
**By Joe Dombrowski**

***Technology that separates loans into distinct silos can be a barrier to driving down operational costs. With today’s fierce competition, deploying a more efficient servicing software strategy can mean the difference between growing the portfolio and just surviving. In fact, Fiserv has seen several financial institutions reduce up to 60 percent of their loan servicing-related software by replacing disparate technology with a consolidated servicing solution.

****One very large servicer had a vision several years ago to consolidate its debt utility technology on a system that could support all mortgage and consumer loans. The first step was migrating several million mortgage loans onto LoanServ. After this initial migration, the company purchased and converted additional portfolios consisting of another million-plus mortgage and home equity lines. Today, it supports all mortgage, consumer and outsourced loans on the Fiserv servicing solution.

****Because the system enables one workflow and one workforce for all its retail loan portfolios, the institution was able to reduce its cost of servicing by 37 percent and increased loans serviced per FTE by 36 percent. The integrated default management functionality also enabled the institution to reduce the overall timeline to qualify borrowers and set them up for loan modifications. By using the system’s embedded workflow automation, the servicer is handling 1,200 files a day and has cut the work time per file by 50 percent.

****Consolidated servicing provides a distinct advantage and allows you to do much more than “maintain the current situation.” No matter what loan products look like in the future or how many loans are being serviced, forward-thinking servicers can implement a consolidated model that will reduce costs, increase productivity and create opportunity.

Life-Cycle Lending: The Cost Of Change

*The Cost Of Change*
**By Joe Dombrowski**

***Organizations looking to improve their lending operations essentially have three options:

****1. Do nothing – continue to maintain existing technology with limited ability to add functionality.

****2. Attempt to build an in-house solution with possible staff additions and increased technology costs.

****3. Invest in a platform that provides an efficient, consolidated technology solution for all loan products.

****Many institutions have grown accustomed to supporting outdated technology or a stratified operating environment. But cost and risk pressures prevent others from updating technology, even though the risk of failure increases and the cost to maintain the status quo escalates rapidly. This situation may jeopardize the entire lending infrastructure.

****For example, having to apply regulatory changes to multiple technology systems is laden with risk. Applying regulatory changes to a consolidated platform provides consistent compliance across product lines, with just one source of data to maintain. Financial institutions opting to retain multiple software systems may regret that decision down the road. Policy, process and procedure costs will continue to stress budgets, regulatory compliance initiatives and personnel. On the other hand, proprietary systems developed and supported in-house can be equally expensive and pose the same staff and compliance challenges.

****Regardless of the option, it is important to understand that there is more to consider than the hard costs. One full-service, regional bank with 60 branch offices and loan centers, replaced multiple servicing systems with LoanServ to manage both its mortgage and consumer loans. Prior to the conversion, the bank was handling first-mortgage servicing and secondary market securitization on one system and HELOCs and consumer loans on in-house platforms. Using this combination of software limited which products the bank could offer. For instance, prior to using LoanServ, the bank could not offer rate locks and credit card access on HELOCs. The consumer lending systems just could not provide those capabilities.

****By consolidating its consumer and mortgage loans, the bank was able to redeploy FTEs to other areas of the bank and is laying the groundwork for future growth.

Life-Cycle Lending: The Consumer-Centric Perspective

*The Customer-Centric Perspective*
**By Joe Dombrowski**

***Having a customer-centric perspective to mortgage servicing is critical in terms of both profitability and borrower experience and plays out with essential differences, depending on a financial institution’s servicing environment. In the Multi-platform Scenario, a borrower might have a mortgage loan and a boat loan with the financial institution. Because the two loans are serviced on separate platforms, customer data is stored two places. If the platforms do not communicate with each other, customer data-sharing is minimal, if not impossible. Each platform generates its own loan information, and the institution is faced with the time- and resource consuming task of synchronizing and delivering the data in a timely manner. If the customer adds a revolving credit instrument, yet another software application may enter the picture, and that system may not be able to “see” all the borrower’s current loan transactions. This approach doesn’t work. Here’s a better answer:

****The Consolidated Scenario

****In this scenario, the institution utilizes a single platform such as LoanServ from Fiserv to administer the borrower’s mortgage, boat and revolving-credit loans. The customer information is stored on one system, eliminating the need to share data between different platforms. This eliminates data integrity issues, and as cross-sell opportunities materialize, the lender has a holistic snapshot of the borrower’s entire portfolio to assist in making prudent short- and long-term decisions.

****The User Perspective

****Operational efficiency is directly tied to how servicing staff is able to utilize technology resources.

****The Multi-Platform Scenario: For institutions utilizing different platforms for different loan products, there is no common look and feel between systems. The Consumer Loan Department may have to deal with one platform for equity loans and another for mortgage loans. The user experience suffers because staff members must create work-arounds or use manual processes to manage transactions.

****The Consolidated Scenario: Browser-based platforms leverage the Internet as a single point of access to real-time data and enable a lender to access information from virtually any application across full- or self-service channels or from third parties. This flexibility provides the framework to integrate ancillary interfaces and applications so that they work as one interoperable system instead of as inconvenient wrap-arounds. By consolidating all retail loans, an institution derives benefits from process, cost-to-service, and efficiency perspectives. It is able to standardize processes and procedures, and staff is trained once and empowered to work efficiently between lending verticals.

****In one case, a full-service bank with a mortgage banking focus recognized the opportunity to improve efficiency and drive down cost using LoanServ, the Fiserv solution that helps eliminate back-office redundancies. Prior to conversion, the bank supported its first-mortgage servicing operation within a different division from its home equity operation. By converting its second mortgage portfolio to LoanServ, the bank realized not only an 18 percent reduction in loan servicing FTEs, but also a reduction in resources outside of the Loan Servicing department charged with supporting overall operations such as IT and Accounting.

****The consolidation to one servicing platform also paved the way for consolidation of vendors in areas such as billing statement, lockbox, insurance and tax service outsourcing, resulting in a 15 percent reduction in cost to service almost immediately after conversion. In addition, the automation available within the platform’s default management functionality has allowed the bank to dedicate more of its resources to working with customers to find best-option solutions. As a result, the bank recognizes a default rate that ranks consistently below the industry average.

Life-Cycle Lending: Gaining Efficiencies

*Gaining Efficiencies*
**By Joe Dombrowski**

***With current market conditions, it is increasingly important for servicers to change their approach so they can fully understand a customer’s loan relationships. Lending operations that cannot provide a complete and real-time snapshot of the customer are severely limited. They lack the knowledge of that borrower’s total credit exposure to their institution. Without a consolidated servicing back office, they also are unable to effectively manage the loans associated with each portfolio.

****Adopting a consolidated strategy gives servicers a more complete picture than knowing just the current balance of a loan. It also gives the lender an understanding of the status of second liens, how much total debt the customer has, how a delinquent mortgage is affecting credit and what revenue opportunities exist. Servicers certainly need to be nimble when it comes to product and process, but it doesn’t stop there.

****Being transparent will become foundational to how servicers relate to customers as well as to investors and regulators. Transparency not only enables insight into servicing processes and practices, but it also means being able to pass along transactional data to those that request it, when and in the format it is required.

****Reporting and analyzing customer data is becoming the norm for servicers, regardless of portfolio mix. Immediate access to borrower information, account transactions and investor data is critical to institutions positioning themselves as industry leaders. Customer service personnel will be better trained (and better scripted) to explain fees, loan histories and rate changes. Investor reporting personnel will be versed in technology that pushes data to investors instead of simply sending standard reports. Collectors will become better at counseling borrowers about sustainable loss mitigation agreements.

****In fact, productive default management and loss mitigation efforts begin with good data. Lenders that can access all the data at hand are best prepared to prevent a late payment from snowballing into an unpreventable default and to protect their portfolios and balance sheets against insurmountable loss. By linking the borrower in the back office, lenders have important analytical information in one place and are better positioned to freeze credit lines or lower limits based on changes in the borrower’s financial status and behavior across all loan relationships.

Life-Cylcle Lending: Challenges Posed By Disparate Servicing Verticals

*Challenges Posed By Disparate Servicing Verticals*
**By Joe Dombrowski**

***Many institutions have grown accustomed to having one system for first lien mortgages, another system for second liens, yet another for lines of credit secured by real estate, and possibly even a fourth system to accommodate other installment loan products. A stratified operating environment may also have separate systems to help manage collections and investor accounting.

****Having multiple platforms can challenge executives charged with trying to rein in costs, sustain regulatory compliance, ensure data integrity and drive operational excellence. Since those systems likely use entirely different processes and procedures, the ability to have a collaborative lending strategy on an enterprise scale is severely limited. A multiple-platform approach also impacts the borrower experience because inefficient processing dashes expectations for real-time, right-now updates and customer service. Furthermore, since each system requires maintenance and support, there is significant – and costly – duplication of effort, driving up the cost of servicing and wasting manpower.

****Developing, enhancing and maintaining efficient processes can be severely challenging for organizations using multiple servicing platforms.

****>> Chief Operating Officer – Monitoring compliance metrics and generating the necessary audit reports from multiple software applications is labor intensive and cost prohibitive. The effort required to provide enterprise-level oversight can divert attention away from more beneficial duties, such as fine tuning day-to-day performance that promotes both efficiency and profitability.

****>> Chief Information Officer – Managing data integrity throughout the organization can be problematic. Each servicing system has its own architecture, making the infrastructure and networks extremely difficult to manage and maintain. Disparate systems may not link together, making the validation and certification of customer data exponentially more challenging.

****>> Chief Compliance or Risk Officer – There is heightened risk for the organization when regulatory changes must be duplicated across verticals, making compliance initiatives much more difficult to implement and manage. Identifying potential vulnerability and risk, and developing corrective resolution plans, can put unwarranted stress on staff resources. Maintaining transparency while successfully addressing compliance initiatives can further challenge the organization.

Life-Cycle Lending: A Consolidated Approach To Loan Servicing

*A Consolidated Approach to Loan Servicing*
**By Joe Dombrowski**

***Today’s “survival of the fittest” environment has lenders evaluating ways to refine processes throughout the enterprise. Duplicating effort across multiple products and managing the expense of supporting and/or integrating disparate platforms hurts the organization in terms of profitability, operational efficiency, and compliance and risk mitigation – ultimately jeopardizing borrower relationships.

****In many cases, the technology landscape in the financial services industry includes redundant, inefficient and incompatible systems that are increasingly costly to maintain. Although the servicing system you have today might work, the productivity improvements, potential FTE redeployments and ability to support a more diverse loan portfolio resulting from consolidating loans can dramatically offset the cost of converting to a newer technology.

****Because past focus has been on vertically siloed products and business lines – some with patchwork interfaces – some institutions have not addressed upgrading or integrating their servicing operations. As a result, they are unable to compete with the flexibility, round-the-clock availability and operating efficiency that the “new normal” of the banking industry demands.

****It is time to consider handling mortgage, home equity and other consumer loans on one platform. This approach to managing the back office can help forward thinking organizations reap the full benefit offered by an integrated solution that streamlines processes, allows more complete access to borrower data and enhances the customer experience.

****Not addressing IT budgets and technology decisions holistically could adversely affect the borrower experience and could even impact profit margins. Disparate servicing platforms cause operational inefficiencies.

****The industry’s proliferation of different technology systems and standards was the result of an older business model that centered on quasi-autonomous business lines and the absence of enterprise-level oversight. Organizations developed or purchased systems for product-specific purposes, and they were built on a variety of operating systems, data standards and process formats.

****Fast forward from that environment to a point several years ago when lending institutions began to realize that these systems could not share data or functionality and that millions of dollars were being spent on overlapping systems. Lenders that use different loan servicing systems to support different consumer loan products – mortgages, lines of credit and installment loans – are wasting internal resources. Using multiple platforms inhibits the efficient use of data and makes enterprise-wide customer views more difficult and costly. Being able to post a payment quickly and accurately no longer distinguishes an institution. The information associated with the payment has become more important than the payment itself. The loan servicer still processes transactions, but now must also be an information broker to survive.

****How effectively an institution can capture, store, find, associate, analyze and deliver financial data is what will provide its strategic differentiation, and hence its value, to customers. This transformation places enormous demands on an institution’s technology, requiring it to be integrated, customer-focused and enterprise-wide, as opposed to siloed, product-focused and department-based.

Life-Cycle Lending:Technology Advances

*Technology Advances*
**By Harvey Foster**

***There is no question that technology advances such as multi-vertical origination software have enabled financial institutions to implement customer-centric business models. Lenders certainly need to be nimble when it comes to product and process. But it does not stop there. Financial institutions need to add a new word to their lexicon: transparency. This term is becoming foundational to how the loan operation relates to regulators, borrowers and other departments within the institution. Transparency is not only being able to provide insight into origination processes and practices, but it also means being able to pass along transactional data to those who request it, when they request it and in the format they request it.

****Looking back as far as a decade, some astute financial institutions began to realize that their loan origination systems were becoming outdated and were based on technology that was increasingly more difficult to maintain. But the influx of new loans suppressed system upgrade projects. As a result, the current technology landscape is rife with redundant, inefficient, and incompatible systems that are increasingly costly to maintain. The long-term result of this uncoordinated growth was a focus on vertically segregated products and a business-line approach to managing customers.

****Many institutions have grown accustomed to having one system for first-lien mortgages, another system for second liens, a third for lines of credit secured by real estate, and possibly even a fourth system to accommodate other consumer installment products. In such a stratified operating environment you may also find deployment of separate systems to help manage collections and investor accounting in an attempt to bring cohesion to disparate servicing systems. Aging components and a mixed bag of interfaces jeopardize the entire lending infrastructure. The risk of failure increases and the cost to maintain status quo escalates rapidly. Cost and risk pressures prevent some institutions from installing upgrades that are critical to their business.

****The future of origination technology resides with multifunction, multi-vertical solutions. New systems, such as Common Origination Platform from Fiserv, will be used to support multiple loan products, both secured and unsecured. To keep operations nimble, these solutions will have embedded rules and other controls to empower lenders. They will also be real time to ensure immediate awareness of transactions across the enterprise.

****Common Origination Platform and other systems like it combine intelligent processing automation with next-generation, sophisticated technology architecture. With customer data housed in one database, lenders can effectively reduce risk, gain processing efficiencies, take advantage of cross-sell opportunities and use information more effectively across the enterprise.

****Process Automation

****Offering process improvements and greater levels of automation, single platform environments such as Common Origination Platform enable financial institutions to originate all consumer, business and mortgage loans utilizing the same tools (including all processes, workflows and business rules management performed) and skill sets. Defining or modifying actions, behaviors and workflows within this environment is easily accomplished by manipulating the built-in business rules, giving an organization much greater control over its own specific processes. Streamlining in this fashion can open up new avenues for cost management strategies and greater profitability.

****Single System IT Support

****Operational efficiency is built into an integrated platform. Having just one system means that any updates, changes or modifications are applied enterprise-wide, saving resources and money. Systems such as Common Origination Platform that can handle multiple loan types across multiple channels enable the organization to devote IT resources to maintaining and supporting just that system. A common platform also eliminates the need to train separate technical staff or users to handle different technology applications.

Life-Cycle Lending: Talking Operational Efficiency

*Talking Operational Efficiency*
**By Harvey Foster**

***Today I want to discuss operational efficiency from three different but equally important perspectives, each with strong implications for lenders. Fiserv is pleased to offer this information to enable you to be more knowledgeable in your evaluation of adopting a common loan origination platform and the strategy’s potential in terms of the borrower experience, your staff resources and your IT/hardware costs. Here’s what you should think about:

****The Customer Perspective

****In terms of both profitability from cross-sell opportunities and enhancing the borrower experience, lenders must consider the customer-centric perspective as critical for growing the organization’s loan portfolio.

****>> The multi-platform scenario – In this scenario, a borrower currently has a mortgage loan and a boat loan with the financial institution. Because the two original loans were processed on two separate platforms, customer data is stored in two places. More often than not, the platforms do not communicate with each other, so customer data-sharing is minimal, if not impossible. Gathering loan product scenarios from multiple origination systems is extremely complex and time consuming. Each application produces its own loan product information and the lender must then try to synchronize and deliver that data in real time to the consumer for true comparison. This not only curtails the lender’s ability to serve the customer but also inhibits the ability to spot product trends and cross-sell opportunities. If the customer now needs to finance an equipment purchase for a small business, he or she may have to start from the beginning in terms of completing the application, since the system used to originate business loans cannot access data from the previous loan transactions. This results in repetitive data entry, hinders timely and wise credit decisioning and increases the possibility for errors. In addition, it limits cross-sell opportunities because there is not one true snapshot of the borrower’s total relationship with the financial institution.

****>> The single-platform scenario – In this scenario, the lender utilizes a common platform to handle all processing for the borrower’s three loan originations. Borrower information is stored on one system, eliminating the need to share data between different platforms. When the borrower comes to the lender for another loan, virtually all financial information is already available to the lender through a search capability, simplifying the origination process for both borrower and lender. Data integrity issues are eliminated, and the borrower experience is a positive one. And, as cross-sell opportunities come about, the financial institution has a holistic snapshot of the borrower’s entire portfolio so it can make the most prudent – and potentially most profitable – product offers.

****The User Perspective

****Operational efficiency is directly tied to how internal staff is able to utilize technology resources.

****>> The multi-platform scenario – For lenders utilizing different platforms for different loan products, there is no common look and feel between systems. The Consumer Loan Department may have to learn one platform for equity loans and another for mortgage loans. The user experience suffers because staff members must create “work-arounds” or use manual processes to manage all accounts. Production personnel also have to be trained on multiple systems in order to support more than one type of portfolio. Origination volume suffers because of the extra time required to work with different systems and in different departments.

****>> The single-platform scenario – One platform means one look and feel. Multiple loan products are processed from the same system, so staff is trained once and empowered to work efficiently between lending verticals. The financial institution is able to standardize processes and procedures, and staff feels more comfortable and capable of contributing across loan departments. The single-platform approach leverages operational efficiency. Business users can set up processes across channels, users, departments and products with the requisite controls and history tracking to safely implement changes, and individual users can enjoy a streamlined productivity tool. The business rules management incorporated in a common system increases flexibility by letting lenders establish security and processes according to the needs of their business, and deploy capabilities and functions according to user roles and responsibilities.

****The Technology Perspective

****Technology that separates loans into distinct functional silos can be a barrier to driving down operational, implementation and support costs. With the fierce competition in today’s lending markets, implementing an efficient software deployment strategy can mean the difference between growing the portfolio and just surviving.

****>> The multi-platform scenario – Using multiple platforms makes managing the enterprise lending operation much more complex. Each distinct platform runs on a different operating system and database. The consumer platform may run a .NET Application, Oracle Database and a Citrix Server configuration, while the commercial system runs an AIX-based Java Application, IBM DB2 Database and an Internet Explorer deployment. The mortgage system may run on a C++ platform. As a result, IT resources must be staffed to support all three hardware platforms and their existing operating system applications. Just maintaining the three diverse systems for updates, compliance/regulatory demands and ongoing integration hampers the lender’s ability to keep up with market changes and conditions. In addition, staffing, training, operational cost, processing efficiency and the overall borrower experience are adversely affected.

****>> The single-platform scenario – Having one platform typically simplifies processing automation by providing tools designed to respond to industry and business changes quickly and efficiently. Usually, system tools allow the lender to establish security and create rules to ensure process consistency. Reducing disparate technology systems and redundant interfaces creates efficiencies because the same processes are applied to all loans. For instance, when compliance initiatives require updates, it is a one-time process. All testing to verify compliance with the new requirements is also performed only once. IT staff supports one platform, one operating system, and one database. Seamless data transfer assures consistent and accurate customer data throughout the origination process, regardless of loan type.

Life-Cycle Lending: Optimizing Technology Across Verticals

*Optimizing Technology Across Verticals*
**By Harvey Foster**

***Lagging technology is a key cause of higher operational costs and organizational inefficiency, which negatively affect both profit margins and the borrower experience. For lenders using numerous lending platforms to manage various loan products, the challenges associated with aging technology are only multiplied. In uncertain markets, IT budgets are quickly eaten up on maintenance and compliance initiatives, with little left over for new products, services and capabilities.

****Maintaining different technology platforms across lending silos also breeds duplication of effort, redundant processing and IT support, and inefficient use of valuable staff resources. Since each platform is unique, there is virtually no standardization of processes, procedures or best practices.

****Disparate Lending Platforms Deliver Operational Inefficiencies

****Lenders that utilize different loan origination systems to support mortgages, business loans and consumer products cannot help but find operational inefficiencies lurking around every corner. Multiple platforms inhibit enterprise-wide customer views and data utilization. As a result, cross-sell opportunities are missed, communication both internally and with the borrower is ineffective, and customer data retrieval and verification are inconsistent.

****Lending platforms often utilize entirely different processes and procedures, severely limiting the ability to have a collaborative lending strategy on an enterprise scale. A multiple-platform approach also triggers inconsistent decisioning, which lengthens the loan origination process and impacts profitability. This approach can even affect the borrower experience, as inefficient processing dashes customer expectations for “right now” loan options, approvals and documentation. Further, since each system requires maintenance and support, there is significant – and costly – duplication of effort, driving up operational costs and wasting manpower.

****Challenges Posed by Inefficient Technology

****In a poll conducted by Fiserv in late 2009, 40 percent of respondents indicated that they have the right business strategy but need to better leverage technology. When asked if their technology enables them to keep pace with the current lending environment, nearly one-third said they wished they were better at leveraging opportunity.

****The figures are telling and suggest some of the circumstances faced in the executive suite relative to lending strategy going forward.

****>> Chief Operating Officer – Developing, enhancing and maintaining efficient organizational processes can be severely challenging for organizations. The reporting and monitoring of operational metrics for multiple lending platforms is labor intensive and cost prohibitive. The effort required to promote best-practice processes across verticals can divert attention away from more beneficial duties, such as fine tuning day-to-day performance to promote company growth, increased profitability and future expansion.

****>> Chief Information Officer – Directing data information and integrity throughout the organization can be problematic. Each lending system has its own technology, making the infrastructure and networks extremely difficult to manage and maintain. Disparate loan systems may not link together, making the validation and certification of customer data exponentially more challenging for the CIO and the organization.