Tackling Industry Change

We are gradually morphing to a more next-generation mortgage process and some say it’s about time. Lenders are notoriously slow to embrace change. So, why are things different this time? There are so many new outside factors that are forcing lenders to evolve. To discuss how change is impacting the mortgage industry we gathered a panel of experts that includes: (left to right) Neil Fraser, Director of US Operations at Paradatec, a mortgage OCR technology; Brandon Perry, President at TTP Enterprises, a leading CRM firm; Michael L. Riddle, the Managing Director at Mortgage Resources Group, LLC.; and Paul Wetzel, EVP, Product at Mortgage Cadence. Here’s how they see the future of mortgage lending:

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Q: How have recent mortgage technology vendor M&As changed the mortgage industry?

NEIL FRASER: It is common, and often a natural progression in many industries that they start out fragmented and consolidate as they mature. The purported advantages to consolidation can include: economies of scale, more resources for research and development, and better marketing and market reach.

Paradatec monitors the M&A activity of companies that we know well. The reality of consolidation, in many cases is very different from expectations. Just like in other verticals.

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The consolidations we see appear to be aimed at allowing the larger mortgage technology providers to become one-stop shops for all things tech and to move that technology further down the food chain to smaller banks and credit unions.

But M&A is a risky approach. Some recent consolidations have led to organizational confusion, and a general loss of focus.

Ultimately they find that the organizations’ cultures have little in common, and the perceived synergies between the two companies are illusive. In fact, in some cases we have seen this mistake repeated multiple times over several short years. Generally, a great deal of marketing hype follows such consolidations. So, the goal of increased marketing reach is often realized, but is only short term. However, the reality is that the loss of focus can be devastating to both their clients and employees.

We believe these risks are common in the case where unique and significant differentiators make a particular technology company’s products and services clearly superior. For a technology vendor in this position, there are many potential disadvantages to consolidation. In the recent past we believe we have been witnessing the negative results of some of these mergers, especially in our niche of advanced OCR technology for the mortgage industry.

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Paradatec has historically made its living by licensing our sophisticated mortgage OCR solutions to some of the largest banks and lenders in the country through OEM relationships with larger partners. Our solutions traditionally were only used in very large lenders. The net effect of the consolidation of the last few years is that our current and future re-sellers are able to leverage very sophisticated OCR technology to smaller organizations that never could support such platforms themselves.

PAUL WETZEL: Leading vendors are looking to add to their product offerings and/or customer base with acquisitions. Where the reason for the acquisition is augmenting the product offering, this can frequently be a faster time to market versus building the functionality natively. Having said this, acquisitions are not always guaranteed to be successful. Considerations like cultural fit of new teams vs. the acquirer, and compatibility of technology stacks are two key considerations among many others.

MICHAEL L. RIDDLE: I think it depends on whom you talk to and which specific companies that you are referring to. In some instances, larger technology providers have acquired smaller providers for a specific technology, market niche or just to gain market share. Traditionally, these types of M&A don’t always work out because there isn’t synergy between the technology platforms, corporate cultures don’t mesh, and customer bases don’t align.

However, when the right companies merge, ones that have a shared vision for the future, corporate cultures that align, technology platforms that easily integrate, and where the sum is greater than its individual parts, there can be significant advantages for industry participants. This type of merger or acquisition has the power to disrupt an industry.

Speaking from experience, the second example is what has transpired with our new merger. MRG has formed a partnership with Asurity Technologies (Asurity) that brings together Treliant Solutions, LLC, Risk Management Solutions, Inc. (RMS) and Mortgage Resources Group, LLC (MRG) into an integrated best-in-class compliance platform.

In addition to delivering legally defensible compliance expertise, in-depth compliance insights with state-of-the-art technology to document mortgage transactions, we can now also provide HMDA, CRA, Fair Lending, and Redlining solutions. This provides our clients with a significantly more comprehensive compliance solution.

BRANDON PERRY: The mortgage technology vendor space seems to be mirroring the mortgage industry in regards to M&A activity. With the mortgage lender M&A activity, the competitive landscape with technology vendors is extremely high. Smaller boutique vendors are strategically acquired by larger well-funded looking to expand or enhance their product offerings.
The current trend is for the larger vendors to serve as one-stop shops for mortgage lenders. This is good news for the mortgage industry as it nicely sets the table for further innovation by start ups or boutique technology vendors looking to plug the holes left by the larger players.

Q: How has new regulation changed the mortgage industry?

NEIL FRASER: Regulation equates to reporting in order to attain measurement and control. As regulation has increased in this market, the need for originators and services to quickly extract meaningful content from their loan files to support such regulatory demands has increased as well.

The Paradatec solution can assist with data gathering for many regulatory events, but one that’s especially burdensome in terms of executive liability is the Fed’s Comprehensive Capital Analysis and Review (CCAR). The CCAR is an assessment of the capital adequacy of thirty-four large U.S. bank holding companies and was introduced as part of the Dodd-Frank Act. The effects of the Dodd-Frank Act in general are widespread and relatively well known. CCAR is focused on, evaluating capital adequacy even under stressful conditions. Reporting for CCAR came through the FR Y-14M forms in June 2012 which support a dictionary of around 250 data fields to be collected and presented to the Fed.

One of the early effects of CCAR 14-M reporting has been that large lenders have taken extra responsibility for the accuracy of data presented to the Fed for their loans. That includes loans originated via the correspondent channel or acquired otherwise. For Paradatec, as a specialist in automatically reading mortgage documents via Optical Character Recognition (OCR), this presented an opportunity to provide automated audit of LOS data vs actual scanned images of original paperwork in order for entities to comply.

For 2017 CFOs of CCAR entities are obliged to attest that, not only is their CCAR 14-M data is “materially correct to the best of their knowledge” but also to “the effectiveness of internal controls and include those practices necessary to provide reasonable assurance as to the accuracy of these data”. In other words “I’ve checked all my data”. This is a big task especially for banks that acquire loans they did not originate. CCAR entities are effectively now required to check all their loan paperwork vs LOS data and attest that they match. That’s a huge undertaking without sophisticated OCR technology.

MICHAEL L. RIDDLE: The regulatory environment for today’s mortgage lender has become exceedingly complex. Compliance becomes more difficult each day, as a cascade of new disclosure and lending requirements are imposed by federal, state and local regulators.

With this avalanche of regulation, it is becoming very difficult for mortgage lenders to gauge whether their internal compliance systems are functioning properly and whether the continuing cost, in both human and financial terms, of adopting and maintaining adequate regulatory controls, can be sustained in a volatile origination market.

Lenders, in order to cope with these added regulatory compliance risks, are faced with an immediate and compelling need to re-evaluate and upgrade the capacity of their internal systems to recognize and incorporate mandated regulatory changes. Static document systems and templates simply will not suffice to keep you compliant. To en- sure compliance, mortgage disclosure and documents systems need to be dynamically constructed.

At the same time, the absolute risk of non-compliance has become intolerable. Audits by regulators and investors alike are now commonplace and fines, penalties, and loan repurchase demands are escalating. As tough new regulatory standards increase the scope and absolute number of loans that must be evaluated carefully for compliance, investors have become acutely aware that several regulatory changes impose liability on the purchase of a mortgage loan for compliance errors made by its originator. It is no surprise that investors are increasingly demanding, prior to funding a loan purchase, that originators provide loan specific data in an electronic format complete enough to permit comprehensive automated compliance reviews on each loan to be purchased.

PAUL WETZEL: New regulations and GSE requirements have pushed technology providers to look for creative ways to address both the ongoing release of requirements themselves but also what kind of technology upgrades might be necessary to better accommodate the strong likelihood that this level of change will continue for years to come. While new regulations must always be accommodated as a priority, customers will not tolerate regulation support being the focal point of a technology vendor’s roadmap. Leading vendors always need to be upgrading their technology platforms and better accommodating the ongoing drumbeat of regulation is one key driver for this. The pressure of regulation is also a key driver for ongoing consolidation of mortgage technology vendors as some vendors will look to exit the market by selling their business vs. investing to upgrade their technology per the above.

BRANDON PERRY: With the heightened awareness of compliance with new regulation in the mortgage industry, many lenders have paused delivery and implementation of solutions, which drive new business. I’ve mentioned “compliance doesn’t matter” quite often in the past couple of years and it still holds true today. While compliance can’t be ignored, lenders must not fall into the trap of hypersensitivity to rules and regulations and then completely ignore the basic need to grow your business. The most successful lenders have been able to find a nice balance between regulation and business growth.

Q: How has talk of and interest in the digital mortgage changed the mortgage industry?

NEIL FRASER: In this era where smartphone and tablet usage permeates nearly all of life, it only seems logical that the purchase of a home would eventually move in that direction as well. This certainly creates a situation where the loan package can be moved electronically at no cost, rather than printed (multiple times, most likely) and physically moved between geographies. Therefore, in-transit time and cost can be reduced, which is great for the market.

At the same time, we don’t believe the digital mortgage negates the need for certain underlying technologies, including OCR. While a borrower may be able to upload PDF copies of their paystubs and bank statements, as an example, the data must still be gleaned from those documents as part of the underwriting process. Without the aid of sophisticated OCR such as that provided by Paradatec, that gleaning process remains a manual process, even though the mortgage is “digital”.

Organizations looking to embrace the ‘digital mortgage’ concept should look to not only eliminate the paper that exists in their process today, but also lean-out their business processes with the aid of technology so the per-loan processing costs can be reduced.

BRANDON PERRY: I believe much of the interest and talk of digital mortgage rose from the ashes of the constantly fluctuation regulatory environment. With the birth of compliance as a new cost center in most lenders, the pressure to absorb these new expenses must be released. I previously mentioned the importance of new business growth, but pressure can be released internally by finding ways to more efficiently process loans. Mortgage executives challenging their current processes helped pave the way to embrace technology allowing for digital mortgage.
One of the biggest challenges with digital mortgage is information security. With the ever-growing list of data breaches, cyber security will never be more important to the mortgage industry as we enter the digital mortgage world. The nature of the extremely sensitive information held by mortgage lenders makes them prime targets for cyber attacks.

PAUL WETZEL: Core concepts related to digital mortgages of course are not new but there is certainly growing interest in these topics over the past couple years and that is a very good thing for the mortgage industry. Fintech has been an underinvested segment and lenders’ interest in spending to improve digital outcomes is driving investment into mortgage technology. When executed correctly by a vendor, digital mortgage becomes a menu of options open to each lender that improve borrower experience, speed time to close and staff efficiency, and increase the transparency and security of the transaction. This will help both the lenders top line and bottom line as well as improving their standing in the industry.

MICHAEL L. RIDDLE: The first thing that comes to mind is the user experience. All the talk of the digital mortgage has changed borrower expectations. Since that now famous Super Bowl Ad that launched Rocket Mortgage and borrowers expectations, consumers demand technology that delivers a quick and simple user experience that matches the type of every day experience that they have on the Internet with the likes of Google, Apple and Amazon.

This has forced the industry to focus attention on delivering a dynamic and mobile digital experience. Many companies have invested heavily in technology and on being able to provide the types of tools consumers are look for on the front end. But what lenders must realize is the fact that to truly deliver on the digital experience the entire mortgage process needs to be streamlined not just the point of sale.

This includes compliantly documenting each and every financial transaction digitally. To be able to maintain a competitive edge in the digital age requires an understanding of data-security, technical capability, industry experience, compliance insights, legal expertise, matched with seamlessly integrated systems and robust data interfaces to actually streamline the lending process while delivering on the digital mortgage experience.

Q: Lastly, how do you see the mortgage industry and the mortgage process of the future evolving as a result of these and other big changes?

PAUL WETZEL: It’s an exciting time to be in the mortgage industry with respect to how technology can be used to dramatically improve outcomes. Lenders should be pressing their mortgage technology vendor partners for their view and strategies related to the above. Healthy vendors who plan to not just survive but thrive need to be active in the M&A space, have new a creative ways to accommodate ongoing regulation, and established but growing digital mortgage capabilities. Seismic shifts like the end of paper won’t happen overnight for the industry but they won’t happen at all leading lenders being willing to be front runners and we’re starting to see more lenders being willing to be just that.

MICHAEL L. RIDDLE: As mentioned earlier, the regulatory environment has become exceedingly complex, and I don’t see that changing anytime soon. That will continue to put pressure on lenders to comply, which will highlight the need for an advance compliance ecosystem— One that is comprehensive, can track, monitor and provide real time insights for all of a lenders compliance needs.

In addition, borrower expectations will continue to push the envelope on delivering the digital mortgage experience that today’s borrower demands. That requires the right balance of advanced technology, deep mortgage expertise, legal insights, industry integrations, with the ability to constantly evolve.

BRANDON PERRY: We’ve become a culture accustomed to instant gratification with nearly everything in our daily routine. Rather than heading to the store, how about same day delivery? We’re upset when a website has a two second delay loading. I’ve heard countless radio commercials from car dealers touting how fast they get you in and out when buying a car.   We are kidding ourselves if we believe obtaining a mortgage is the only exception. The next big competitive environment is time. I believe the time to pre-approval, approval and closing in the next few years will be fractional to the current process timeline of today.

NEIL FRASER: This industry is experiencing an evolution through the aid of technology like many others before. While the regulatory requirements will certainly control what the experience looks like for the consumer, automation within the process will continue to expand…the increasing per-loan processing costs dictate as much. Industry leaders such as Amazon and Orbitz have made the self-service model albeit in other segments, much less daunting, and the speed at which transactions can be completed has decreased significantly through this evolution. While the magnitude of the buying decision for a home is obviously much greater than that of buying an airplane ticket or a box of diapers, the consumer has become comfortable with online transactions to the point that a paper-bound process is viewed as slow and stodgy.

The process will continue to evolve, both due to competitive pressures as well as consumer-driven expectations. But, like a lot of the other ‘digital transformations’ that have occurred, we believe the mortgage market will be “both…and” situation, as in both paper and digital, rather than an exclusively digital model, at least for the foreseeable future. Until the entire consumer community is ready to embrace a digital-only approach, paper will continue to be a part of the process, and therefore vendors that automate paper reading will continue to add value.

Win The Deal

It’s great to close that deal that you’ve been working on, but what happens when you lose the deal? Why does that happen and how can you win the deal more often? In the White Paper entitled “Why Didn’t They Buy?” put together by DiscoverOrg.com, their research concludes “as a data business, we know that solid, accurate, and comprehensive data drives the best decisions, and even seasoned sales professionals can improve their results by diving into the numbers. This objective study explores the multifaceted and complex buyer persona to reveal which sales approaches are effective and which aren’t—all informed by deep insights into human behavior and rationalization.”

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Specifically, this research challenged the reader to put yourself in the position of the experienced buyer who has met with hundreds of salespeople. What percentage of salespeople would you say are excellent, good, average or poor? Overall, study participants rated 12% excellent, 23% good, 38% average, and 27% poor.

Think about those figures: What are the implications of nearly 2/3 of B2B salespeople being considered average or poor? Buyers have been conditioned to be skeptical and not to trust salespeople in general. Therefore many buyers have immense RFPs and laborious spreadsheets that vendors must complete. They require each product feature and operation to be fully documented, and meticulous hands-on evaluation of each product. The goal is risk mitigation: reducing the uncertainty associated with selecting a vendor and making the purchase.

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Buyers go to great lengths to reduce the risk of buying. They may list their needs in documents that are hundreds of pages long; they hire consultants to verify that they are making the right decisions; and they conduct lengthy evaluations to test products, talking to existing users and doing pilot tests—all in an effort to eliminate fear, uncertainty, and risk. The B2B buyer is fixated on risk mitigation—and your reception as a sales professional depends on the department you’re selling to.

Also, whenever a company makes a purchase decision that involves a team of people, self-interest, politics, and group dynamics influence the final decision. Tension, drama, and conflict are normal parts of group dynamics, because purchase decisions are not typically made unanimously.

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One of the most formidable enemies facing salespeople today is no decision. What prevents prospective buyers from making a purchase, even after they have conducted a lengthy evaluation process? Every initiative and its associated expenditure is competing against all the other projects requesting funding.

What is the ability of different departments of a company to push through their purchases and defeat the company’s bureaucratic tendency not to buy? Let’s look at the profiles of the various departments in terms of how they ranked their leadership ability as a predictor of their department’s ability to promote their internal agenda. Here are department responses that strongly agreed with the statement, “I am often a leader in groups.”

Beyond their formal titles and position on organization charts, people take on specific roles when they are part of a selection committee. Some take control of the group and steer the decision toward their preference.

Based on the research results, you might expect Sales, Information Technology, and Engineering to have more internal clout to push through their projects than Marketing or Human Resources. Therefore, they’re better departments to sell into from the salesperson’s perspective. As a president of a company once told me during a win-loss interview, “At the end of the day, a project will or won’t get approved depending upon who is pushing it.”

In most industries, a single company dominates the market. Compared to their competitors, they have a much larger market share, top-of-the-line products, greater marketing budget and reach, and more company caché. For salespeople who have to compete against these industry giants, life can be very intimidating indeed.

However, the study results provide some good news in this regard. Buyers aren’t necessarily fixated on the market leader and are more than willing to select second-tier competitors than one might expect.

In fact, only 33% of participants indicated they prefer the most prestigious, best-known brand with the highest functionality and cost. Conversely, 63% said they would select a fairly well known brand with 85% of the functionality at 80% of the cost. However, only 5% would select a relatively unknown brand with 75% of the functionality at 60% of the cost of the best-known brand.

In some sales situations, it is necessary to align with the buyer’s thought process in order to win; these buyers are experienced and knowledgeable about their business and technical fields. In other situations, the buyer’s thought process must be transformed and gently shaped over the course of the sales cycle. Finally, just as a doctor must sometimes prescribe a painful treatment to heal a patient, in some sales situations you must control prospective buyers in order to help them.

What selling style do prospective buyers prefer? The survey shows 40% of study participants prefer a salesperson who listens, understands, then matches their solution to solve a specific problem. Another 30% prefer a salesperson who earns their trust by making them feel comfortable, like they will take care of the customer’s long-term needs. Another 30% want a salesperson who challenges their thoughts and perceptions, and then prescribes a solution that they may not have known about.

To better understand the impact of human nature on buyers, study participants were asked to recount the last time they experienced significant buyer’s remorse. Buyer’s remorse occurs after the purchase is made when the buyer feels a sense of regret, guilt, or anger, and they second-guess their decision.

Most people mistakenly associate buyer’s remorse with an impulsive purchase, or assume it was caused by the pressure tactics of a salesperson. When each example was laboriously analyzed, a pattern emerged. The source of buyer’s remorse can be categorized into nine different root causes. However, it is the buyer’s action, which actually caused remorse in over 70% of the examples – not the salesperson or the product that was sold.

Within every company, each department has its own “buyers.” For example, Marketing defines product requirements for Engineering; Engineering builds a prototype for Manufacturing; IT provides the systems Manufacturing needs; and Finance provides funds for IT. For the most part, each department’s buyers are internal to the company, both physically and culturally. The Sales department is unique. Sales is focused solely on external buyers who are geographic and cultural outsiders to the organization.

Within many companies, buyer persona profiles are created by Sales Enablement to provide messaging and information on how the salespeople should interact with the various types of prospects they meet. While most of these buyers personas are predicated on the customer being a rational decision maker, in reality, it is human nature that determines how buyers evaluate and who they ultimately select. There is an entirely intangible, human side to the sales process. And it is the mastery of the intuitive human element of the buyer relationship that separates the winner from losers.

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A Look Into The Future

Let’s consider the future of the mortgage industry. What once was an industry that thrived off paper, is today transforming into a paperless, digital process. The borrower demand for this change is rapidly increasing each day. Technology exists and is as convenient as being in the form of your mobile device. The ease and success of a mortgage company’s adaptation to this forthcoming truth means the transformation of moving forward as an adaptor. It is important for mortgage companies to listen to their borrowers and take the necessary steps to not only producing self-servicing platforms for everyone, but also keeping in mind millennials. The industry needs a determined effort to keep the overall process as accommodating as it can be. This exceeds generations and is an obvious obligation in many features of the mortgage process. Although some generations may not have similar outlooks as Millennials, the incorporation of contributions such as cutting-edge Web designs and skilled call center employees that promote mobile and paperless choices are encouraged by all.

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Some originators have already begun this progression. This innovative technology is key because it provides the consumer a faster and easier approach to the buying and selling experience. The mortgage industry needs a cohesive strategy to back a full-service, online experience. Today, mortgage companies need to appeal to millennials, while still appealing to key borrower markets. This is exciting for an industry that has struggled to go paperless for some time. The Real Estate industry has been close minded and considered it a risk to make such transitions during the credit crisis. Nevertheless, technology has proven that a larger quantity of deals closes at a much faster rate, and there is steady compliance after all.

Putting the need for innovative technology forth is crucial to provide clients a less stressful, more effective home buying and borrowing experience. Today, a self-serving platform for every contract and part of the borrower process has the potential to make a significant impact on the future. This is going to be an obligatory feature to remain relevant in the industry. Often, firms become absorbed in the cost of investing in the technology, but the key is to take a closer look at the consequences of not adapting. Taking a chance on timing the market and pushing significant changes to the side is a hazardous intention for buying and selling a home. The same applies to investing in important technology to remain competitive and up to date.

It is important to make sure you have the right tools for the job. Companies such as Optimal Blue and Nylex provide convenient pricing engines. Others such as Velocify and Velma enable an effective customer relationship management system that is beneficial to the lender and the borrower. The mortgage feature of these systems is just one part of the online real estate experience, and normally comes after all other elements, such as searching for a home. Some are convenient options being presented and others are more necessary, such as enabling access to documents and accepting electronic signatures. Mobile devices are at the core of most technology initiatives. As effective communication and connections improve the need for customer service and compliance, the mobile device is developing as the tool for enabling all contributors in the goal of communicating in a timely manner. The capability to be able to transmit forms at each phase guides the process to become more transparent and submissive.

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Some brokers are hesitant to these methods and look at them as more of a risk than an advantage. There is no question that mortgage brokers have certain rules and guidelines they are required to act on since TRID (TILA-RESPA Integrated Disclosure) came into place. TRID requires the need to accelerate timelines for acting on documents. Therefore, the initiation process needs to be moving at all hours. Online and mobile access to documentation is turning into a crucial and truthfully, the only option to meet these deadlines. There is opportunity to store, access and organize data in a much more accommodating process that could not be done using paper.

There have been firms that have built technology teams separate from creating loans. Every group should integrate a tech professional on their staff. Building the business takes technology skilled individuals, which is not in every case found in a loan officer’s skill set. Lending firms are building technology friendly teams and providing a more tech minded mission. They are not trusting their rank to make technology and vendor partner decisions. The tech team is beneficial and devoted to driving business through using objectives of a loan officer.

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If putting together a tech team is too difficult – the next best option is to establish a focus group of employees and customers. This provides an opportunity to determine the technology that is available for each group. Teams can research topics such as, the information they’d like to obtain from each other.

It seemed that in the past, technology and the mortgage industry lacked any sort of relationship. It became natural that each mortgage entailed hundreds of pieces of paper and that relying on stamps and office visits was the only possibility to complete a transaction. It is clear that over the years, obstacles have been faced and boundaries have been removed. The mortgage industry has become driven to let technology handle more of the responsibility. Because of this, things have improved significantly. The quicker a firm closes on a loan, they quicker they are ready to start the next loan. The client is ready to help, it is up to you to provide them to tools to do so.

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Lenders Can Cash In

It’s not all gloom and doom. Sure, lenders face plummeting profitability levels from falling refinances, rising origination costs and increased competition. However, cost management strategies can be employed to reduce expenses.

“Everybody is trying to reduce hands-on time,” said Jim Pippin, Director of Product Development at National MI. “They are trying to do electronic feeds so there are not as many manual imports. You also need to find specialty vendors to handle certain tasks that they specialize in.

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“In this market, leads falling out of the pipeline is especially costly. There is a lot of money spent there and when the lead doesn’t close because the prospect is always shopping, that costs the lender a lot.”

Jim Pippin is director of product development at National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc. (NASDAQ: NMIH). National MI is a private mortgage insurer based in Emeryville, CA. Pippin is involved in all facets of product development and launch, including design, pricing, operations and sales training. Prior to National MI, Pippin held senior positions at Genworth, Bank of America, Capital One and General Electric, where he earned a Six Sigma Black Belt. He holds a B.S. in Industrial Engineering from North Carolina State and an MBA in Business Administration from Wake Forest University.

He sees Quicken as an example of a lender that does a great job managing cost. “Quicken runs a very tight shop. They don’t have many errors. They use technology to manage their process and all the lenders are trying to compete with them.

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“When lenders introduce technology they just duplicate their existing process instead of changing the process or eliminating steps. Lenders have to be careful to grab technology that will genuinely help their business,” noted Pippin.

So, where are the biggest pockets of inefficiency for lenders and how can they address these areas? “We have a lender that had 5 to 6 different checklists that had to be completed manually. We came in, used technology and automated 90% of that work,” said Matt Woolley, SVP of Sales at LoanLogics.

“The rise in cost is in correlation to the amount of regulation. We are getting close to $10,000 to originate a loan. These rules have brought on new processes that are very manual and cost consuming. Lenders need to trust technology.”

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Woolley leads the National Sales team and is responsible for establishing and executing LoanLogics sales strategies and managing the sales team activities related to the all LoanLogics products, including the mortgage industry’s first Enterprise Loan Quality Management and Performance Analytics platform. He has held a variety of positions in sales and management in the mortgage technology and financial services industries with clients ranging from Government agencies, top 5 lenders, MI companies, as well as lenders, banks, and credit unions of all sizes across the country.

He warns that while technology can help lenders reduce cost, they have to be smart about their technology decisions. “Lenders need to avoid the shinny object syndrome. Lenders shouldn’t get caught because not every technology can provide the level of efficiency promised. Second, you have to have the right culture. If you are trying to hold on to old manual processes you won’t succeed. You have to be open to technology and process change.”

The company recently introduced HMDA Audit, a new module for the company’s LoanHD Loan Quality Management platform that helps lenders comply with current and new reporting requirements under the Home Mortgage Disclosure Act (HMDA) taking effect January 2018.

Under HMDA, lenders must collect and report demographic and geolocation data for all mortgage transactions and pre-approvals, whether the loans were funded or not. HMDA Audit helps lenders ensure that all HMDA data associated with originated and non-originated loans is accurate and validated for compliance. It also provides lenders with a comprehensive audit trail, which can be readily accessed for use with regulators.

Patrick Kelly, EVP, National Sales at Informative Research, advises lenders to embrace as many fixed-cost solutions as possible. “There are tools that can drive the beginning process to help you qualify borrowers. You also want fixed pricing strategies for things like 4506-T, etc. You want to move to a fixed cost model so you don’t have wasteful spend.

“For example, there are pricing strategies that can be used. You need to track the borrowers that will stick and not just every borrower. In addition, lenders can form closer relationships with builders and others. Lenders often buy technology that they don’t use or it doesn’t fit into their revenue model,” added Kelly.

With over 45 years of experience in the mortgage industry, Kelly’s expertise covers all aspects of the mortgage industry and process, from appraisal and operations to loan production and support. Having been with Informative Research for over three years, he’s played a critical role in building and managing their current national sales team.

And going forward, Kelly doesn’t see lending getting much more affordable unless lenders do a better job automating. “The Bureaus will continue to raise their price for credit and the other sources will raise their prices, as well. If you can use technology to automate these services you can save some money, but I think you need a lot to happen before you’ll see overall cost go down.”

“If people get more comfortable with the regulation, things will calm down,” added Jim Pippin of National MI. “Some lenders have the checker checking the checker right now. Also, lenders will get more comfortable automating as times goes by. It will happen.”

“Rules-based technology will reduce cost,” concluded Matt Wooley of LoanLogics. “Through automation underwiters can do eight or more loans a day. There is an opportunity for the cost to originate a loan to come down, but there are still a large number of lenders that are not willing to change how they do things and really automate. Some have been burned by failed implementations, but until they embrace automation and process change the cost to originate will increase.”

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Evaluating Your Accounting Firm

When did you last seriously evaluate your accounting firm and ask how well it has served your lending operation? Years come and go and very often this sort of assessment falls by the way side. But it shouldn’t. Like all businesses, accounting firms experience changes in management and personnel that can directly impact their clients in terms of the responsiveness they experience and the expertise they receive.

Previous studies that have analyzed how businesses select accounting firms have found that team experience in an industry and the related skills are a major consideration. Other high ranking factors include fees, personal relationships, shared values, respected industry experts, referrals and a good reputation.

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While these are important considerations, from a tax and audit standpoint, there are several other factors you should consider when making a thorough and accurate assessment of your accounting firm and determining how well it is meeting your financial and tax reporting needs. Here are 8 key questions to ask yourself when evaluating the guidance and service your accounting firm is providing:

1.) Do you have easy access to senior level personnel?

Who are your main contacts at your accounting firm? Is it easy to reach a decision maker within the accounting firm whenever you need their assistance? Are they present at meetings? Do they meet with you at least quarterly for planning and tax purposes? Or, when special transactions arise, such as a merger or acquisition, are they involved in the process? The importance of meeting with seasoned tax and audit CPA professionals early and often cannot be overstated. By having quarterly meetings with you, your accounting firm is better positioned to proactively address any incremental changes as they occur in your lending business, such as changes in regulations, financing arrangements, acquisitions or adding branch locations.

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2.) How much mortgage industry expertise does your accounting firm truly have?

Most accounting firms are well versed in accounting, tax and audit best practices, rules, regulatory considerations, etc. However, not all accounting firms understand the nuances of the mortgage industry and the issues that affect lending operations from a tax and audit standpoint. When you think about your unique needs as a lender relative to financial performance, tax issues, compliance, sales force retention and commercial, legal and intellectual property due diligence, does your accounting firm have what it takes to proactively address them? For example, does your accounting firm understand the proper valuation criteria for interest rate lock commitments, loans held for sale, mortgage servicing rights and loan loss reserves? These are important accounting and tax issues that your accounting firm should understand to assist you with proper financial and tax reporting.

3.) What value do you realize from the cost of your accounting firm’s services?

Cost is always a consideration, but the value you receive for the money you spend is what truly matters. Does your accounting firm go above and beyond in terms of proactively suggesting ideas or do they nickel and dime you for every question they answer? Often, and especially with new engagements, it is common to see cost overruns whereby a price will be quoted up front and then additional costs start piling up. Alternatively, a value-added approach would consider the time and effort spent on a new engagement as an investment. How does your accounting firm stack up?

4.) How well does your accounting firm resolve challenges?

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Did you encounter problems this past tax season, such as selling mortgage service rights and the proper determination of capital gains treatment, or issues with the proper valuation of interest rate lock commitments, and were they resolved quickly and competently? Efficient and effective problem resolution is closely tied to the mortgage industry knowledge your accounting firm has, so you can rest easy if it has this expertise. If not, the resolution to your problems may be slow in coming and poorly crafted.

5.) Were deadlines met and extensions filed on time?

As they say, “timing is everything.” That’s especially true when it comes to tax filings and audits. Were your reporting requirements filed on time? Did you experience unnecessary pressure from your accounting firm as deadlines approached for corporate tax returns, HUD and GNMA filings? The truth is, your lending operation should not be pressured from a timing standpoint. Rather, your accounting firm should be working methodically and deliberately to meet deadlines as they approach.

6.) Were your tax returns drafted and presented correctly?

This is an especially important consideration when it comes to the proper filing of federal and state tax returns. There are very specific guidelines for lenders operating in a single state or in multiple states that must be followed, such as tax rules for mark to market accounting. If you are using a CPA without industry-specific experience, they may not be aware of all of the mortgage banking rules you must adhere to. If this is the case, you are operating at a disadvantage.

7.) Is your accounting firm consistent in terms of their knowledge and service levels?

Was your most recent engagement with your accounting firm a smooth one? Did team members change frequently or did they remain dedicated to your business throughout the audit and tax season? The consistency of your accounting and tax teams is critically important because it directly affects the amount of time and effort you must expend throughout the season. If you found yourself having to repeatedly train your accounting firm’s staff about your business, it may be time to search for a new one.

8.) How well do your accounting firm’s values mesh with yours?

When it comes to tax and audit considerations, do you operate somewhat conservatively and cautiously – or do you take a more aggressive approach? Working with an accounting firm that shares your values is an important consideration because only that way can you approach issues as a team, with a similar mindset when it comes to resolving problems and identifying opportunities.

As you look ahead to the fall and the busy months that follow, take some time and evaluate how well your accounting firm has supported your lending operation. If after asking and answering these questions you find that your CPA firm is lacking in some of these areas, it may be time to find a new one – one that is well-versed in the mortgage industry and the unique tax and audit issues that come with it.

About The Author

Hurricanes Harvey, Irma, Etc.

Sunshine, Blue Sky, and Spectacular Sunsets: That’s why I moved to Florida. Oh, lest I forget, I need to mention some other important objectives: unlimited golf and no more snow or wind chills below zero. Then along came Hurricane Irma!

It’s not like my wife Kristy and I weren’t aware of the potential damage from hurricanes. We had just taken possession of a house we had built in Cape Coral when Hurricane Charley ($ 16.3 billion in damages) struck the area in 2004.

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This is my observation of the analysis, preparation, and the response by government agencies, businesses, and the general population to the hurricane threat and what the future holds.

It’s all about the data: Mother Nature can be capricious and even though predicting the path and severity is not an exact science, the U.S. and European models for Hurricane Irma came very close and they were able to make adjustments along the way. The forecasting seems to get better every time and I attribute that to the constant monitoring and analysis of a very complex data model. Every hurricane is different. Harvey, for example, stalled over Houston and dumped an enormous amount of rain. Irma, however, was originally anticipated to head to the east coast of Florida but shifted to the west after touching Cuba as a category 3. It elevated to a Category 5 and hit the west coast at Marco Island and Naples. It then traveled north right up the center of the state. Irma was huge, wider than the state. Along the way it was downgraded to a tropical storm, yet Jacksonville was hit hard with storm surge.

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Hurricane forecaster, Phil Klotzbach, recently commented; “Harvey, as well as the damage that Irma had done in the Caribbean, caused people to take this storm very seriously.” Those that didn’t paid the price.

So, as of 9/12, let’s review what is happening with Hurricane Jose. Two of the most robust computer models meteorologists use to determine the odds of landfall— the GFS, which is the American forecast model, and the ECMWF, the European model—keep Jose over the ocean. But models can have trouble forecasting unusual tracks such as Jose’s expected path. There is generally not a dominant weather feature that is steering the storm, so model forecasts can vary widely between each other and from run to run. The National Hurricane Center recognizes this issue in its early forecasts for Jose, saying “there is a lot of uncertainty in the intensity forecast.” Considering we are just at the peak of the hurricane season, which has been predicted to be a very active season, we have to be diligent and prepared.

The takeaway for the mortgage industry is that it is crucial to have a comprehensive understanding of what data is important to your organization, that this data is well-defined, and you have confidence you are collecting it properly. In addition, your data model must be continuously monitored and you need to be able to adjust it as necessary.

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Proactive, reactive and inactive: Everybody in Florida fits in one of these categories.

Sometimes it is best to consider alternative strategies. Kristy and I were very proactive when looking at our options for Hurricane Irma. This looked like a monster storm and it certainly turned out that way. We closed down the house and left on Wednesday, September 6th. We avoided the I-75 parking lot and took the old way (US-41) north. This took us through lots of little towns, but there was little traffic and gas was readily available. We stopped for two nights in Albany, Georgia, and continued to Columbus, Indiana, where we plan on staying until power is restored. As they did in other areas in Florida, the police went through our neighborhood ordering the few remaining people to leave. They were not going to respond to 911 calls and put their officers in danger.

The reactive ones tried to wait it out because of the earlier forecasts that predicted an East Coast track for Irma. When they finally decided to leave, they encountered problems: finding gas and stop-and-go traffic on I-75. Hotel vacancies were basically nonexistent in northern Florida and across the southern parts of Alabama, Georgia, etc.

The inactive ones decided to bunker down, even as all of southern Florida issued mandatory evacuations. Many in this group did not have the means to leave and some were forced to go to rescue centers.

How would you define your organization, especially, as it pertains to technology? Are you ahead of the herd? Remember, if you are not the lead dog, the view never changes. Are you just a follower? Maybe you are waiting for other organizations to blaze the trail so you can follow their lead. Or are you just maintaining the status quo? If so, you may wake up one day and wonder what happened to your business.

At this point, I can’t say enough about the unbelievable effort and collaboration of the federal, state, and local authorities in managing the preparation for Hurricanes Harvey and Irma and their aftermath. They are getting better with each hurricane. Texas and Florida were the latest benefactors. The aid from other states sending in personnel to get power back and debris cleared enables people to get back to their homes to assess the damage and begin the task of getting back to normal.

“The number of people killed in hurricanes halves about every 25 years, in spite of the fact that coastal populations have been increasing, because of what we’re doing with forecasting,” said Hugh Willoughby, a professor of meteorology at Florida International University in Miami. The modern science of hurricane monitoring and preparation, which has saved countless lives through forecasting, satellite monitoring, and government planning, has dramatically improved in recent decades.

The coverage from the major media stations was extraordinary and allowed the evacuees to monitor the storm from afar. The use of social media like Facebook, Twitter, and Instagram let everyone stay in touch with families and friends.

With estimates of 70 deaths and $180 billion in damage from Harvey, 68 deaths and billions of damage from Irma, two thirds of 21 million Florida residents without power, the road back to recovery will be challenging, but manageable.

The focus on data, the absolute necessity to be proactive, and the need to work collaboratively with customers, partners, and vendors should be top of mind for every mortgage lender today. Integrated technology is a necessity. Think differently.

I will leave you with one final thought. It might be time to go to the moon, retrieve the golf balls, and return the rocks. We have upset the whole balance of nature.

About The Author

What Happens When Disaster Strikes?

Has your community been effected by a natural disaster? If not, it may only be a matter of time. When it happens, will your institution be ready?

This issue has always faced institutions but was made a regulatory issue for Y2K. Remember 1999 when we were all being told that computer systems all over the world were going to fail? We all worked diligently to insure that when (or more correctly, if) we had a massive computer meltdown, our institutions would all be able to operate and service our customers. January 1, 2000 came and went without so much as a burp in most computer systems and has gone down in history as one of the biggest non-events of all times. Conversely, the natural disasters of the past several weeks have recorded the highest levels of destruction in history.

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Disaster recovery plans have been put on the shelf to collect dust, given a cursory annual review, and are not put back up until an auditor or examiner asks to see it. Does it meet the regulatory requirements? Probably. Does it protect your institution and customers in today’s environments in the best possible way? Maybe that deserves another look.

During the 9/11 crisis, one of the largest areas of financial institutional markets was shut down for days and in some cases weeks. The New York Stock Exchange, the New York Federal Reserve, and the corporate offices of the biggest banks in the world were all affected. The disruption of these businesses could have had a devastating effect on not only the United States, but on world markets as well. The disaster recovery plans utilized by these institutions worked, but it also provided a real test that uncovered weaknesses and flaws.

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Disaster recovery is an all-encompassing concept. To be effective it needs to be broken down into subsections:

>>Business continuity

>>Incident response

>>Notification alerts

Business continuity is an institution-wide plan that incorporates all critical elements of your business. A meaningful business continuity plan (BCP) incorporates all institutional resources, employees, locations, vendors and processes and addresses how each will react to a disaster. It is important to keep in mind that a critical vendor or process may not be occurring in your part of the country but may still affect your business. The interdependency of your institution with other businesses is a risk that needs to be assessed, analyzed, and considered. The collection and correlation of data and resources is an integral part of your BCP.

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In order to have a coherent BCP the institution first needs to conduct a business impact analysis and a risk assessment. What is the consequence on your business if your core provider in unable to function as opposed to the impact of the Internet being down. Both are important functions in today’s financial institutional environment but may impact your ability to service your customers differently. Next the institution must develop a strategy of what will happen if a disaster occurs. Is there a secondary provider? Can the institution function for a period of time without a specific service? The answers to these types of questions provides a solution strategy which will then need to be tested, accepted and disseminated throughout your institution. The last issue to be addressed is maintenance of the BCP. An annual review is mandatory, more frequent reviews are advisable, and reviews after an incident are a must. Tools are available to assist your organization in compiling this information, keeping it current, and making sure it is in a safe and accessible environment should your institution need it.

Incident response, as alluded to above, is how your institution reacts to a problem. An incident response plan allows your institution to systematically respond to problems. This type of plan ensures that all incidents are handled by appropriate personnel in a professional and consistent manner. It also provides your institution with ways to improve and prepare for future issues. We are all conscious of the potential financial or regulatory risks this type of plan may mitigate, but consider how this plan may reduce the huge impact on your institution’s reputation if misinformation is made public. Knowing who is going to speak to law enforcement, the press and customers, and what is to be said, is just as important as protecting the financial assets of your organization. The aftermath of an incident should also be addressed. What went right and what went wrong. Documenting this information in a central location is imperative.

Lastly, consider how are you going to let your personnel know what is going on. The days of having a phone tree are obsolete as our organizations grow larger and people are more spread out. Maintaining a system that knows ahead of time who should be notified for particular incident message and knowing that the message is received, is not only efficient but may be life saving. Say a fire occurs in the early morning at one of your branches. The branch manager is alerted by the fire department of the alarm. The branch manager is able to send an immediate notification to his staff. One employee, that sometimes goes in early, does not reply. The manager is then able to advise the fire department that there is a chance someone may be inside. Or conversely, all reply and the fire department does not have to risk personnel conducting a search of a burning building.

This article started off with a list of natural disasters that have been in the news recently. Also consider the un-natural disasters. Security leaks, hacking, cyber-theft to name a few. Our society has become enmeshed in the Internet, social media, and online banking. There was a danger to consider in 1999 when we started to contemplate a disaster recovery program, but the risk has escalated so dramatically since then that this is now one of our country’s biggest threats. There are reports almost daily on large databases of information being compromised, yet the use of computer-aided programs to assist us in our daily lives continues to grow. It may be an impossible task to plan for every type of disaster but keep in mind that your institution’s disaster recovery plan should not be a stagnant document.

About The Author

Charting Hazard Risk

ATTOM Data Solutions found that median home prices in U.S. cities in the 80th percentile for natural hazard risk (top 20 percent with highest risk) have increased more than twice as fast over the past five years and over the past 10 years than median home prices in U.S cities in the 20th percentile for natural hazard risk (bottom 20 percent with lowest risk).

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For the report ATTOM indexed natural hazard risk in more than 3,000 counties and more than 22,000 U.S. cities based on the risk of six natural disasters: earthquakes, floods, hail, hurricane storm surge, tornadoes, and wildfires. ATTOM also analyzed housing trends in 3,441 cities and 735 counties — containing more than 71 million single family homes and condos — broken into five equal quintiles of natural hazard housing risk.

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Median home prices in cities in the top 20 percent (Very High) for natural hazard risk have appreciated 65 percent on average over the past five years and 9 percent on average over the past 10 years while median home prices cities in the bottom 20 percent (Very Low) for natural hazard risk have appreciated 32 percent on average over the past five years and 3 percent on average over the past 10 years.

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“Strong demand for homes in high-risk natural hazard areas has helped to accelerate price appreciation in those areas over the past decade despite the potential for devastating damage to homes that can be caused by a natural disaster — as evidenced by the recent hurricanes that made landfall in Texas and Florida,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “That strong demand is driven largely by economic fundamentals, primarily the presence of good-paying jobs, although the natural beauty that often comes hand-in-hand with high natural hazard risk in these areas is also attractive to many homebuyers.

“There is some evidence in the data that real estate consumers in certain areas are beginning to more heavily factor natural hazard risk into their decisions, particularly when it comes to flood risk,” Blomquist added. “Counter to the national trend, home price appreciation is slower in Florida and Louisiana cities with the highest flood risk than in cities with the lowest flood risk.”

In the state of Florida, median home prices in cities with the highest flood risk were up 8 percent on average from a year ago and up 66 percent from five years ago while median prices in cities with the lowest flood risk were up 10 percent from a year ago and 70 percent from five years ago.

Median home prices in Florida cities with the highest hurricane storm surge risk were up 8 percent from a year ago and 47 percent from five years ago, while median prices in cities with the lowest hurricane storm surge risk were up 11 percent from a year ago and up 67 percent from five years ago.

There was a similar trend in relation to flood risk in the state of Louisiana, which experienced damaging floods in August 2016. Median home prices in Louisiana cities with the highest flood risk were down 20 percent from a year ago and up 2 percent from five years ago while median home prices in the lowest risk cities increased 5 percent over the past year and increased 37 percent over the past five years.

Robots In Mortgages

When you think of robots, what comes to mind? Many of us picture human-like machines such as Robby the Robot, C-3PO and R2D2, or even the robotic vacuum cleaners that are prevalent today. But not many of us are quite as aware of software robotics that are emerging, helping to automate business processes. It has been said that robots are the future of mortgage automation. Specifically, robotic process automation (RPA) software tools are helping with efficiency throughout the lending lifecycle.

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Robots were created to eliminate the human operator, saving on labor costs. Another benefit is the speed at which systems can be deployed. In some cases, these “bots”, as they are known, can be deployed via configuration tools without any additional programming. This decreases overall time to market for new automation and it becomes more of a business-enabled event to make changes versus an IT-event that goes through rigorous change processes and deployment cycles. A number of players in the market offer chatbots and virtual agents to interact with humans.

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And what if we could accurately predict when a specific loan needed an additional fraud check based on certain parameters? With newer RPA tools, specific, repeatable processes like QC and appraisal ordering can be automated even further than they are today. Many systems have had rules engines and automated service orders for quite some time. RPA can leverage disparate and unstructured data sources to determine proactive process changes for a specific loan scenario. Ultimately, overall error rates can be brought to zero with any task that would leverage RPA.

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Machine learning techniques in conjunction with RPA, workflow management and load balancing can all become much more sophisticated as well. SLAs can be monitored in real time and adjusted accordingly for a given situation, thereby reflecting the complexity and size of any given task. Today, in most cases, a person has to change the SLA for a given work item manually. Using RPA, your knowledge workers can focus on more strategic items and only deal with the loan cases that require exception handling according to the loan parameters.

Another key area that RPA can be used for is the whole concept of RegTech. With constant changes to laws, guidelines, and rulings, and data that exists across multiple, disparate systems, RPA can ensure that customer, property, and other key data is available at the right place at the right time. In fact, data from origination, servicing, and core banking platforms along with data from other non-traditional sources like social platforms can help refine risk models to apply in a given situation and ensure full compliance with all applicable laws.

I’ll leave you with one final thought. PWC estimates that up to 38% of existing U.S. jobs are susceptible to AI and RPA by the early 2030s, but the nature of what humans do will change versus their roles disappearing altogether. RPA provides a level of automation that few companies have experienced as of yet. It allows lenders to become much more predictive and proactive to customers’ needs and wants via anticipatory models versus reactive as is the case in a number of operations today. Instead of replacing humans, RPA allows more focus on customer experience enhancements and strategic changes, improving the overall lending experience while gaining huge efficiencies and cost savings.

About The Author

5 Ways To Build A High-Performing Team

Meshing diverse working styles and personalities harmoniously on a team can be tricky. It takes time to build the right team for the job. But it isn’t just about picking the right people. Building an interdependent team means relying on each other’s specialties. Trust-building activities enhance the likelihood of your team relying on one another for their strengths—instead of insisting on doing things themselves.

Leaders need to be proactive in building trust within their teams. It isn’t just about having regular check-in meetings or asking for feedback, but paying attention to the subtle nuances of how team members communicate or the environments that set them up for success.

1.) Emotions are allowed

A special report on emotional intelligence from the Harvard Business Review shares the importance of being emotionally in sync with one another. The report explains: “Personal competence […] comes from being aware of and regulating one’s own emotions. Social competence is awareness and regulation of others’ emotions.”

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Reading the signs of frustration on your coworker’s face and asking about it is one example. Or providing a coworker space to vent, knowing they can trust you with the information they are sharing. Along with empathy, emotional intelligence also requires harder tasks, like calling a team member out when they’re late or providing honest feedback when a piece of work isn’t quite up to par.

A team comfortable enough to let one another know when their behavior is affecting the group has healthy emotional intelligence. The report reinforces why these small behaviors engender trust among teammates.

“Trust, a sense of identity, and a feeling of efficacy arise in environments where emotion is well handled, so groups stand to benefit by building their emotional intelligence.”

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Not all emotions are positive ones, but they still have a place for expression in the workplace. Teams who look out for one another’s emotional states create a collaborative work environment that quashes negativity.

2.) Encourage face-to-face interaction

The human face has over 20 expressions which is why face-to-face interactions are the gold standard for meetings. But it’s not always possible. Managing remote staff is more common than ever. Some companies operate entirely from a workforce of telecommuters making in-person interactions infrequent.

Management consultant Peter Drucker once said:

“There is nothing so useless as doing efficiently that which shouldn’t not be done at all.”

We could apply this statement to sending messages in an office when we’re sitting two feet away from the person we need to speak with. Speed doesn’t always equal impact, especially when it comes to important conversations. Save those for face-to-face interactions if possible.

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How something is conveyed is the difference between a smile or a surprised look. Without context, things get easily misconstrued. And while it’s not always feasible for on-site conversations, take it as the first option if presented to you. Phone calls, messaging apps, and video conferencing are second-best.

3.) Cultivate environments that lead to success

People do their best work when their environments help them get work done. But the modern workplace hasn’t come that far in helping us be productive. Author James Clear has tips on designing an environment that makes the choice to work easier.

“Life is a game and if you want to guarantee better results over a sustained period of time, the best approach is to play the game in an environment that favors you. Winners often win because their environment makes winning easier.”

Designing collaboration into the workplace is the goal. Sit people next to one another who work well together or have similar roles. This allows for organic problem-solving conversations. Limit distractions for your team by encouraging them to use software that blocks social media sites or challenging them to limit time spent checking emails when they need to intensely focus on a project.

If the office proves more of a distraction than a help, encourage them to find a place offsite that they enjoy and give them time to complete a project there.

4.) Encourage team members to admire (and leverage) each other’s strengths

Praise and encouragement from leadership, while important, is expected. What’s less expected and often more meaningful, is praise from your peers. Many companies have peer recognition programs for this reason. When team members express appreciation for another coworker’s talents or accomplishments, they build rapport with one another. Leadership expert Dale Carnegie said, “Appreciation is the legal tender that all souls enjoy.” Help your team put this into practice.

Use the time during group meetings for peers to come forward and mention “above and beyond” effort of their peers. Compliments have an expiration date, though; use it before the power is gone.

5.) Sponsor creative outings for higher energy levels

Sometimes the perfect place to inspire new connections is outside the office. It could be a trip to the local art museum or an outdoor trail or garden. Maybe it’s on a boardwalk along the river. Anything that gets your team enjoying each other’s company in a dynamic setting. Take a day to complete a community service project. Anything that gathers your team and prompts them to start thinking differently. Hitting the reset button on the daily work grind can do wonders for your team. Encourage them to participate in group opportunities outside of work.

True collaboration is more than just an open office plan or gathering team feedback. It requires an inherent trust that is proven over time through the right interactions. Use these strategies to encourage your team toward a more cohesive workflow.

About The Author