By Ted Hicks
How do you compete in a shrinking origination market? How do you keep compliant? LOS marketshare leader Calyx Software shares their ideas.

Beating The Competition

*Beating The Competition*
**By Ted Hicks**

***Let’s think for a moment about Superman. Do any of you believe that simply donning glasses and a suit made Clark Kent completely indistinguishable as Superman? No. He still looked like Superman. Just as this may seem obvious to you, it may still escape your attention that the key to beating your competition is not really a secret. It’s written in the script, too. To win in the mortgage business you need the right tools to be efficient—and you need to use those tools to save yourself time and energy you can use to do other things. Provide better customer service, focus on revenue generating marketing activities, stay in control of your pipeline no matter where you are, spend more time with your family—that’s what you can do when you get your processes automated and efficient. It’s the efficiency that what will set you apart, get you more referrals and allow you to grow your business.

****Because there is a smaller pool of qualified borrowers, it’s a buyer’s market for mortgage loans. Not only do you need to be competitive on price, but you also need to offer consistent, responsive service to all potential borrowers. If your business processes are efficient, that’s easier to do.  Start with your loan origination software. Make sure it does everything you need it to do—easily. The last thing you need is a system that is too complicated to work on and difficult to teach new users as your business grows.

****Your LOS should have built in compliance so you don’t have to keep up with it yourself. Forms, reports, required data fields should all be included. The screens should follow a logical sequence and if data appears on multiple screens, the fields should auto-populate from any direction. If you can order third party documents and services from within your software, you will save even more time since you don’t have to rekey information and risk time-consuming errors. The more time you save in the office and in basic processes, the more time you can spend increasing the level of customer service you can provide for more clients.

****Now that your processes are streamlined, staying on top of your business is easier than ever with the availability of mobile apps. With mobile productivity, you have the information you need at every stage of every loan. Knowledge is power—and you have it. When you can access your pipeline using your phone’s connection service and make changes when necessary, you are free to concentrate on other aspects of your life put on hold by office hours and commute time.

****Additionally, you can ensure service levels to your clients by having the information they need at your fingertips. Don’t want to carry around your laptop all day? It’s no longer necessary. With mobile apps, you can connect to your software and access your loan files wherever you are. Take initial applications, check on loan status for individual loans or your entire pipeline—it’s all possible with mobile apps. When you have you on-the-go productivity, you can offer on-the-go, on-the-rise, customer service while giving yourself the freedom you want with the control you need.

****Making your business more efficient so that you can provide better service is the best known secret in the mortgage industry and you don’t have to run into a phone booth to do it. Build efficiency with the tools you have, or get the tools you need to operate effectively. Technology helps you get the job done faster so you can concentrate on your clients and increasing your bottom line. Integrate your world through mobile technology and you’ll see a difference in your business.

The Evolution Of The Mortgage Banker

*The Evolution Of The Mortgage Banker*
**By Ted Hicks**

***Who is the mortgage banker of the future?  It’s the mortgage broker of today.  The mortgage banking industry is seeing a return to basics. The future is becoming the past on a rocky path to recovery.  It’s cyclical as we’ve seen in the past.  We’re seeing more borrowers having to come to the table with 20% down which makes the number of qualified buyers with adequate funding less than optimal.  Competition for this smaller business pool is fierce, allowing borrowers a choice on a more personal level who they would prefer to do business with.  It’s the basics—customer service—that can make the difference.

****Rates will go back up, the economy will grow, and the cycle will begin again.  The trend is cautionary with a hope for stability.  As the industry cycles upward for mortgage bankers, opportunities for brokers begin to decline.  So what we are seeing now, and what we will continue to see in the next few years, is an increase in the number of brokers moving toward mortgage banking.  We’ll see them joining existing operations or branching out on their own.  We’ll see them shift focus from primary to correspondent and beyond to direct lending.

****With the shift to direct lending, we’ll see more sophisticated products and a move from best efforts to mandatory.  Because of this, they’ll learn how to hedge and how to pool the loan to create mortgage backed securities.  And for each step of the evolution, there will be a new wave of mortgage bankers taking it—one at a time.  Learning the process is the first step.  But what can these new breed of mortgage bankers do to be successful as they keep the evolution going?

****Technology is undoubtedly on the forefront of giving them a competitive edge.  Technology is a necessary tool for business effectiveness.  Being able to market online through websites and social media is a large part of today’s growth strategies.  Having an LOS that helps enforce compliance and allows control and oversight for growing businesses is a must.  Being able to access data and files on-the-go is also very important for evolving lenders.

****But as important as technology is during the process, getting back to the basics of personal business interaction is even more so.  All the technology in the world would be insignificant if there is no new business coming in.  Tech-savvy professionals cannot focus solely on the benefits of sophisticated technology.  What will become evident is that honing their technique, not their technology, will give them the edge they need.

****Getting back to the basics means building relationships in person rather than just online.  Form business alliances with industry vendors and help each other grow.  Refine your database and find new ways to grow your business.  Building relationships with your borrowers, your builders, realtors, and other vendors or potential clients gives you the edge that depending on technology simply cannot—service that gets you noticed.

****So while technology is indeed relevant to the evolution process of tomorrow’s mortgage banker, it’s customer service that will bubble to the top in the most successful business.  It’s not going to be enough to have the most efficient business technology.  Technology takes care of business but it takes customer service to grow it.  Lenders at any stage of the cycle need to be competitive in both the front end and the back end to maximize revenue and take the next step.

OUR Point Of View: Correspondent And Wholesale Are Alive And Well

*Correspondent And Wholesale Are Alive And Well*
**By Ben Wu**

***It seems like I am always reading headlines about the demise of wholesale and correspondent. I’m here to say that even though the landscape has been visibly altered, it hasn’t been the bad thing many predicted. The correspondent channel is definitely growing, but the wholesale channel has dwindled over the last few years. Nonetheless, both channels have indeed changed. Some of the big players have exited, but that has set the stage for smaller players to step up. The success of this sector actually stems from the exit of the major players like B of A and others all but disappearing for one reason or another.  Here’s how some of our correspondent and wholesale clients have adapted.

****First, the exit of some larger players is leaving a vacuum that mid-tier players can fill. Second, some active lenders that have a retail channel are now looking to add a correspondent channel as a growth mechanism. So, they’re looking to see what it takes to be successful in this area. They need help.

****Just to share our experience here at Calyx Software, we were talking with one such lender and they realized that they needed to offer an automated underwriting system on their website to thrive in this new sector and compete with those already offering instant decisioning. Why? Brokers and other third-party originators need to come to your site and get a decision in seconds. Time is money.

****Today you can do that through DU, but in that case you are picking up the cost. Every time a DU decision is rendered the lender has to pay a fee even if the loan doesn’t close. That adds up and I don’t know of any lender actively looking to add more cost. To the contrary, they want to be more efficient and more competitive.

****However, adding AUS functionality on your website doesn’t have to be a huge roadblock to adding a wholesale or correspondent channel. Actually it’s pretty easy to incorporate this feature within your Web presence if you’re aligned with the right technology provider. For example, we at Calyx can cut the fees associated with AUS decisions in half or more. If the lender uses our LoanScoreCard AUS for FHA loans, the broker or TPO visiting the lender website will receive a comparable result to DU.

****Here’s what I mean: If the lender has a DU integration, they would also have a 1003 on their site so that once the required fields are completed, the system triggers DU to render a decision. From there the lender is charged a DU fee. Lenders now have the option to change their website to trigger a proprietary AUS that will render a comparable decision. The transition is transparent to the end user and it’s cheaper for the lenders—giving them a prime opportunity to enter these new sectors and potentially grow their business. As the tide turns and more wholesale and correspondent lenders enter the market, to be competitive they will need to take advantage of all the cost savings and efficiency their technology can offer.

Our POINT Of View: What’s On The Minds Of Lenders?

*What’s On The Minds Of Lenders?*
**By Ted Hicks**

***As I talk to lenders around the nation, I find consistently that lenders have a lot on their minds. Certainly market conditions are challenging for you and the industry as a whole. But concerns and fears regarding compliance are at the forefront, followed closely by the need to grow your businesses. As a lender, you want and need to control where your business is going and what’s happening in your office. And if you don’t achieve this objective, regulators and investors are ready to step in and take over by mandating practices that ensure both compliance and transparency, making growing your business even harder.

***We know this for a fact because it is already happening, even as I write this. Our industry has become so heavily regulated with rules and new forms that it is becoming difficult to function without assistance. For example, the CFPB will create one form that combines the GFE and the TIL. You constantly need to update your forms database to get through this compliance hurdle in order to move your business forward. So what will help you ease your mind in your quest for compliance and growth?

***There is a way to both keep compliant and get new business all at the same time. Technology can help you be proactive in compliance. The difficulty you experience in keeping up with different agencies and regulatory bodies can hold you up and prevent you from moving forward as a working business. So, you must increasingly depend on your technology vendor. Are you worried that the technology provider is up on everything? Absolutely.

***As lenders, you first have to align with the right vendor. Vendors like Calyx are regulatory neutral. It doesn’t impact us in so much as we’re not going to get audited, but we have to keep up with new regulations in order to keep our clients updated. It’s our job to help you get and stay compliant. You also need to get your voices heard before new regulations are passed. The trade associations will help and everyone should be active with various trade associations, but lenders especially need to be involved. You need to be a part of the dialogue by engaging with your members of Congress.

***Technology can also help you grow your business. First, your goal is to get more people into homes. How do you do this? Look at your data, mine it and use it to attract new business as well as get old business back. Looking back, this practice was not something that lenders had to concentrate on in the past. Calls were coming in bringing tons of business to them. As we all know, that has changed for those of us in the business today.

***Real estate is going back to the old way of doing business. The phone used to be ringing off the hook, but now you need to figure out ways to make the phone ring. Take a step further and actually pick up the phone and make the call or send an e-mail. You have a database of contacts, so use your technology to be proactive in how you seek out new business.

***As a technology vendor to lenders, we at Calyx have an in-house compliance staff and we also work with several outside firms. Technology can only take you so far though, you need to do the right thing and use sound business practices. You have to understand your business and your business practices and market to your past clients as well as potential ones. With the right technology and the right overall business approach you can both be compliant and get new business in the door.

Our Point Of View: Perception Is Not Reality

*Perception Is Not Reality*
**By Ted Hicks**

left***Vendors are type-cast. It’s human nature to categorize things that may or may not be grounded in reality.  Often we get a glimpse of something or pick up a piece of information from a magazine or newspaper article, and that’s what sticks in our minds.  Using that information, we compartmentalize and put our vendors into specific niches.  But what we perceive to be true isn’t always the case.  In this market you have to look beyond the perception to get what works best for you.

****For example, many industry professionals still view Calyx as just a broker solution, but that is not the case. Although our initial solution served brokers extremely well over the years, we now work with almost 4,000 mortgage banking accounts and 2,500 financial institutions, including credit unions, community banks, and S&L’s.  Our fastest growing clientele now comes from mortgage banks, and they, as well as the banks and credit unions, have more complex needs that we at Calyx strive to meet.

****Financial institutions are highly concerned with security; they want and require strict compliance. These entities are not as concerned with workflow—but they are concerned about having centralized data, and ensuring absolute control over its privacy to comply with the Gramm-Leach-Bliley Act . Ultimately, these financial institutions want a tool that does not control their data—they want to host their own data and control their compliance to federal regulations.

****On the other hand, mortgage bankers are more focused on flexibility. They want to take their business practices and get a system that conforms to their process. A lot of systems require that users change their business process, but that’s not really what the mortgage banker wants to do. The key is configurability. An LOS should not make business decisions, but they should facilitate the business decisions made by lending management. Mortgage Bankers require a robust business rules engine to support—not dictate— their business processes.

****The point I’m making is that financial institutions and mortgage bankers, with their need to adhere to strict compliance rules and their desire for flexibility, do not actually need separate systems to accomplish both things.  Too often vendors are classified as one or the other when in fact the best vendors have a system that can work for many different constituencies.  That is the difference between perception and reality.

****So, what sound advice can I give these different entities when looking for new technology? I would recommend them to push past preconceived notions and really scrutinize the vendors out there in the market today. And in doing so, don’t limit yourself to just talking with the vendors that you think do what you want, but rather talk with the vendors that can do what you want them to do, and much, much more.  Reality can be much more efficient and profitable if you just get to it.

Our POINT Of View: The Truth About Workflow

*The Truth About Workflow*
**By Ted Hicks**

***The commonly used definition of workflow as one linear process is simply outdated. In a mortgage shop there are multiple processes going on at the same time. Most technology platforms can only handle the main workflow. A loan process goes from point-of-sale, to processing, to underwriting, etc. Many people in the mortgage space think of a loan process as a one-dimensional process, but what about the lock process, the confirmation process, the compliance process, etc? There are several processes going on at the same time as the loan is going through the workflow. So, how do you make everything happen in a streamlined, efficient manner? Here are my thoughts:

First, it’s not just about notifications.  It’s about having the type of intuitive technology that functions transparent to the user but is able to generate necessary information to a specific user at precisely the right moment. As such, the system needs to identify the different loan processes properly. If the system doesn’t understand parallel processes outside of the traditional loan workflow, it simply won’t work. You also need to see what’s going on and what sub-processes need to be done and what triggers those actions.

Lenders know that they have to accomplish all these things, but they don’t think of it as a multi-dimensional process and technology doesn’t help, quite frankly. Today most technology tools track milestones. What’s the problem there? The system looks at things as a serial workflow. In a parallel workflow system several steps can occur at the same time.

Every loan has milestones, but lenders need to contort the technology to lock a loan at a certain time or to re-disclose if the need arises. Why? The technology should do that for the lender. So, why doesn’t technology do this today? Vendors realize the complexity of the mortgage process, but the systems are old, which limits how a system can work. If a vendor thinks about parallel workflows they are thinking about creating new technology because their existing technology won’t cut it.

In the end, just as the definition of workflow has changed, technology needs to change as well.

Our POINT Of View: Do You Need An iPad?

*Do You Need An iPad?*
**By Ted Hicks**

***Everyone is talking about the latest iPad. Is it cool? Yes. Is it a technological advance? Yes. Is mobile computing here to stay? Yes. But can this technology really help lenders in the mortgage market today? I can see the practical application for iPads, for sure. I think tablets could be the future of mobile technology. The one issue is content creation. However, for reviewing or viewing content, tablets are what you need. Here’s how mobile will reshape origination in the years to come:

****First, as mortgage applicants grow up in the tablet world, you will see people craft ways to build content on the tablet. However, laptops didn’t kill off the computer, neither will tablets. Nonetheless, if you want to enter basic data like contact info, loan data, etc., you can and should do that on a tablet.

****Second, the iPad can be used as a way to enhance both communication and visibility into the organization. You can look to have a mobile app that allows you to interact with your LOs. It’s one thing to use a Web-based interface, but when you think about it, users don’t want to go to the Web, they want a physical application.

****Why? The application was developed by the vendor that they use regularly and it’s familiar to them. As advanced as HTML 5 is for web-based interfaces, it still lacks the functional flexibility of a real mobile application.  The reality of a web-based interface is decidedly clunky when compared to traditional applications.  What you see right now is a lot of adoption around smart phones because of mobile applications. More people have turned to mobile apps on a tablet or a smart phone for use on the go.

****However, over time tablets won’t just be for people on the go. Everyone will be using them for everything. I have three product managers that have iPads and they bring them to meetings to type notes. As that type of behavior becomes more common, there is little that apps can’t do.

****For example, we already see an appetite for apps from our clients to use our technology to process loans in their pipeline.  So then we would expect the consumer to be able to use mobile technology to initiate the loan request. You’ll see apps for smart phones in particular start popping up in the mortgage space this year and soon afterward, apps for iPads will appear. The bottom line is that the technology is out there and there is demand for it that is only going to grow. Technology vendors have to satisfy that demand.

Our Point Of View: We’ve Been Through This Before

*We’ve Been Through This Before*
**By Ted Hicks**

***Yes, we’re in a downturn. Origination volume is predicted to fall again this year. However, at a time when you have fewer players and industry consolidation, the 15-year low volume prediction makes sense. Nothing I hear would lead me to believe otherwise. Why? Credit is still tight and foreclosures continue to be on the rise because there are still a tremendous number of people underwater on the value of their home now as compared to when they bought it. But with adversity comes opportunity. The good lenders will survive because they are able to offer superior service. How will the good technology vendors survive? Here’s my take:

There are certainly fewer opportunities for technology vendors today. So how do stay viable? Easy, you create new products to sell to existing or new clients. You could also enter a new market vertical. Lastly, you can grow by acquisition. Public companies are under constant pressure from investors to increase profits, even in a depressed market where it is extremely difficult to do. We at Calyx Software are in a good place because we are privately held and we have one owner/shareholder. Public companies are under the gun to grow, and if they don’t the investors exit.

Philosophically, this makes sense. When there are industry pressures and increased competition you will see public companies acquire other companies because that is the fastest way to grow, and if that doesn’t work, they’ll shed that acquisition.  There is a natural process of elimination. So, are we going to see more of these types of deals? Yes and no.  Yes, because we’ll most likely see those types of deals coming from the public sector and no, because private companies may do things a little differently.

Private companies will buckle down and invest in themselves more heavily.  They’ll improve their product line and create new complementary products for their clients.  And, only if it makes business sense, they’ll approach companies looking to get acquired.  Private companies have the luxury of being able to make important business decisions without the pressure of investors to grow fast— sometimes too fast.  Their acquisition process tends to be more strategic and more customer focused, without the urgency public companies experience.

The bottom line is that today’s technology vendor has to be just as creative and innovative as today’s lender in order to thrive. But have no fear, we’ve been here before. The long-term future of the space is cyclical. You see four- to seven-year cycles all the time. This could be a 10-year cycle, but I’m more optimistic. The market is turning and the best companies will survive

Our POINT Of View: Beyond The Buzz

*Beyond The Buzz*
**By Ted Hicks**

***Our industry loves buzzwords. But those buzzwords have created a lot of confusion in the market concerning technology as definitions vary greatly. Two of today’s most common buzzwords are “web-based” and “end-to-end”.  When we consult with lenders, we find that sometimes think that they want one thing but their actual need speaks to a different option.

****We hear a lot about the need to be “web based.” What does that really mean? Our lenders typically ask for web-based technology to have anytime, anywhere access and easier deployment without the need for resource-intensive applications.   But what they don’t realize is what they are asking for is already available—through the use of their current client-server model or even mobile applications.

****The term client server is lumped in with terms like antiquated and rigid. That’s just not the case. The client-server model has become flexible enough that client server can now be deployed over the Web as an ASP.   Client servers can enable off-line activity and automatic uploads of off-line files to the server upon the next login.

****Mobile applications, although not widely accepted or used in the mortgage industry right now, provide global 24hour access without unwieldy installations.  Mobile applications are, in essence, client server applications, not web applications viewable on a mobile screen.  These “mobile servers” are designed to keep us plugged in wherever we are without the performance, control and security issues that they can sometimes experience with a true web-based system.

****Our second buzzword du jour, “end-to-end” has also created a stir among our clients.  Let’s talk a bit about what end-to-end really means. End-to-end is different as compared to all-in-one. When you are talking end-to-end you need to define the starting point and the stopping point. You can be end-to-end when it comes to processing only, for example, or you can stipulate the starting point as the 1003 and the stopping point as the 1st payment after closing.  “All-in-one” is a complete package that includes all forms, documents, services, and servicing.

****That means a system where just one vendor provides every single one of the services for which you would normally use best-of-breed third-party vendors.  Look at it this way:  you would typically expect an LOS to offer expertise in mortgage origination software.  If you see one that also claims to be a document services company or a flood certification company, what is the likelihood that it is going to be able to provide excellence in all business models at the same time? More often than not, quality will suffer in one or more of the “businesses.”  If you find a system touted as “all-in-one” and look closely at its capabilities and functionality, you’ll find that they just don’t have what it takes to be “all-in-one.”

****What does all this really mean to you?  It means that there are options for you.  Rather than immediately jumping on the buzzword bandwagon, truly analyze your functional needs in a platform.  You may find that you already have what you want and need.   But you won’t know until you move beyond the buzz and get to the facts.

Our Point Of View: The Technology Shift

*The Technology Shift*
**By Ted Hicks**

***Let’s face it, there’s a lot of bad news circulating, the least of which is a 20% decline in origination volume predicted for next year. However, I choose to be an optimist. Surely we’re still waiting for the new “normal.” Nonetheless, with transaction volumes dropping, more of our accounts are focusing on technology in what I call the “technology shift.” Lenders simply need technology more than ever and they’re looking to technology vendors to help them automate their entire gamut of processes.

****As lenders realize the need for more streamlined automation, it’s only natural they start looking beyond their current technology to the “new and different.” That’s not always the best or the most cost-effective way to go. What we’ve been able to do with many of our lenders is introduce them fully to software they already use. We get shoulder to shoulder with them to help them define their processes and we find new ways for them to use their current technology to gain the efficiencies they’ve been looking for.

****We encourage our clients to talk openly with us so that we can evaluate their processes and technology usage. We can show them they don’t need new technology; they just need to optimize how they use what they have. By teaching them more effective ways of using their software, we help them solve business problems.

****For instance, sometimes there are internal disconnects that exist within a lender shop that can be resolved by implementing business rules or enforcing standards through template sets. There also may be departments that don’t “talk” to each other and the biggest culprit of all—technology systems that don’t “talk” to each other. With the difficulty level in the regulatory environment, it is unreasonable to have two systems of record that can result in inaccurate data and reporting. We help by identifying the disparities and showing them how to ensure data integrity by consolidating systems.

****Clients who adopt more streamlined operations realize greater efficiencies in overall workflow very quickly. A lot of it is about internal buy in. Also, there’s a lot of shock when they realize that it doesn’t cost anything because they already have the software; they’re just not using it to the fullest. So, the transition is effective, efficient and considerably less costly.

****To our lender clients, I advise you to take advantage of time. Make sure that you understand what technology you have and discover how best to use it. Be diligent in making these decisions and always look at return on investment. In most cases you don’t have to spend more money to solve problems so don’t be swayed by a flashy demo when you can get even better results by maximizing your existing technology. With origination volume on the decline, now is the time to heighten your business efficiencies with all the potential your technology offers—without spending millions in dollars or valuable resource hours.