Talking True Innovation

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Over 100 mortgage executives came together to attend PROGRESS in Lending Association’s Fifth Annual Innovations Awards Event. We named the top innovations of the past twelve months. After that event, we wondered what would happen if we brought together executives from most of the winning companies to talk about mortgage technology innovation. Where do they see the state of innovation? And what innovation is it going to take to get our industry really going again? To get these and other questions answered, we got the winning group together. In the end, here’s what they said:

Q: Some say innovation has to be sweeping change. Others say innovation can be incremental change. How would you define innovation?

TYLER SHERMAN: Innovation comes from the Latin nova/novus, which simply means “new”. Innovation is a term that can be used anywhere anyone is trying something new. This doesn’t have to be new by global standards. What is new to one organization may not be new to another, but that doesn’t mean that the former isn’t innovating. Whether a firm is undergoing a comprehensive change or trying new things a little at a time, any time an old methodology is discarded in favor of a new one, it’s an innovation.

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MARK HOPKINS: I think innovation could be both, sweeping and incremental. The most successful innovators I know are always aware of the value of iteration. That means they release a tool that’s very useful, but is really only a smaller version of their bigger idea – the seed. Then, they build from there to create innovations that are sweeping. Ideas can be innovative, but to be considered successful innovations, I believe the ideas must also be well-executed, and that often means executed incrementally.

ROB STRICKLAND: Innovation represents a new way of thinking about and solving existing and anticipated industry challenges. Varying degrees of value can be achieved in line with the number of problems solved, ease of integration and use as well as the improved results achieved. Because mortgage origination is an extensive supply chain, the greater the number of dimensions a single solution stack addresses, the more valuable and “sweeping” it will be. Conversely, if a solution addresses a few challenges, but that solution comes with its own limitations, what is the point? For instance, piecing together functional modules based on disparate stone-age technology may represent vendor progress, but its inherent architectural limitations would forever restrict it from being labeled as the “break-through transformation” the industry deserves.

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CHRIS APPIE: The mortgage as a financing tool has been around for hundreds of years, and for much of that time the body of law governing it was largely based on case law. While statutory law has displaced case law as the tool that affects industry change in the last 50 years or so, that does not change the fact that the fundamentals of the mortgage system were built slowly over a long time period. Not surprisingly, changing that system and the processes around it takes tremendous time and commitment. Historically, ours is an industry of incremental innovations that lead to continuous improvement. That said, when there are significant innovations in our space, they are often implemented in response to a major regulatory change; the system is so complex that it literally takes government involvement to cause rapid innovation. I would say that innovations can be both sweeping and incremental but for our industry, the sweeping changes are almost always the result of major regulatory developments. It’s my hope (and the hope of many others) that our industry can somehow harness some of this energy and provide sweeping innovations to other parts of the mortgage system based on market conditions rather than governmental requirements alone.

CHERI BOOTH: Innovation is a new method idea or product to improve productivity, and bottom line profit. Sometimes you have an archaic process that consumes a large amount of labor and by innovating a new process you are able to get more productivity, which lowers costs and improves profit.

LISA BINKLEY: Innovation is identifying a need and creating the solution that fulfills that need. Some companies have solved market needs without identifying the need first. While lucky, that doesn’t count as innovation. Platinum, however, has a history of innovating. We identify marketing needs and produce solutions. We were the first to create an appraisal QC technology, and we’re still the only company to provide not only an AVM suitability testing technology, but also a free appraiser-facing appraisal review tool.

Q: How would you define the state of innovation in the mortgage industry? Is it thriving or in a state of decay?

TYLER SHERMAN: In terms of innovation, the mortgage industry as a whole is in a state of decay. There are some innovations to be found, but by and large, lack of innovation has been harming this industry for decades. While the size and global economic significance of the industry are well known, so are its outdated manual processes. A standard model has yet to emerge that accounts for the operational balance of human and technological resources and the best way to manage them, the hallmark of an industry that has yet to fully mature, even though the industry has existed for two centuries. Although spreadsheets, the chief analytics vehicle of the industry are considered primitive, and in certain cases are being discarded in favor of innovations like business intelligence, there is still a significant contingent that has yet to fully embrace spreadsheets. The degree to which pen and paper, or marker and whiteboard appear as the main record keeping vehicles with no digital counterpart serves to underscore and clarify the pronounced industry-wide reaction to regulatory or procedural changes like TRID. The new TRID rule basically asks mortgage lenders and brokers to be more efficient, essentially finishing loan files at least three days before the loan is scheduled to close. While some lenders are already doing this ahead of the deadline with considerable ease, most of the industry decries the change as insurmountable. This reaction is rooted in a lack of control that is emblematic of any underdeveloped firm or industry.

MARK HOPKINS: I think innovation in our industry is definitely thriving.  As margins shrink and competition heats up, lenders and AMCs are hungry for technology that will solve their new compliance challenges, as well as reduce their overhead and improve operations. When there’s a need like we have in the industry now, smart innovators really thrive. The PROGRESS in Lending Innovation Awards are a great snapshot of what the industry is doing as a whole, and I think it’s clear we’re in a very exciting time for technology innovation.

ROB STRICKLAND: I think the industry is somewhere in the middle. There are many new entrants seeking to address parts of the origination transaction. There does appear to be significant interest in modernizing and improving the user experience, which is clearly warranted. I think the best results will come from firms who have significant industry experience and a knack for using newer technologies to address broader business process challenges.

CHRIS APPIE: I believe innovation is thriving in the mortgage industry both because of market conditions and governmental regulation. It’s an interesting time. Because of the CFPB’s focus on the needs of consumers, the regulatory landscape is evolving based on the perceived needs of consumers rather than a purely market-driven environment. That evolution is not going to stall and companies are going to be forced to keep up with those requirements. In addition, consumers are driving the technology they want to use in all aspects of their lives, including financial transactions. This bifurcation will likely require more innovative development to keep up with demand that is–either directly or indirectly from the CFPB–being driven by consumers. Those in the industry who can’t offer innovative solutions to meet these challenges run the risk of becoming irrelevant and fading into the background.

CHERI BOOTH: It’s all over the board, I think sometimes there is a tendency for innovation to be overwhelming and I think that is why most people don’t implement. I think you need to segment your business into parts and then look to that segment. I would choose the segment that is hurting the most and then move towards the next one, etc.

LISA BINKLEY: When we compare innovation in the mortgage sector with the level of innovation in the rest of the world, it looks like we’re lagging behind. That said, I wouldn’t go so far as to say that we’re in a state of decay. Sure, innovation can be slow in our industry. But that’s because our industry has traditionally been slow at adopting new technology. Rather than innovating and trying to coax a community of slow adopters, most companies play it safe by copying existing technologies that have successfully created or broken new markets. Being an innovator isn’t easy, but someone’s got to take the lead and move the mortgage industry forward.

Q: Lastly, if there was one innovation that you would say the mortgage industry desperately needs to happen over the next twelve months, what would it be?

TYLER SHERMAN: The best possible course of action for any mortgage lender and/or the industry as a whole would be to learn from every other industry on Earth whose survival has depended upon the adoption of new business tools rooted in data science. Mortgage firms inherently have a treasure trove of transactional and ancillary data that if properly leveraged, can clarify business concerns, processes, and decisions and revolutionize the way they operate. Understanding the nature of corporate data stores and their potential, along with embracing the tools and techniques necessary to leverage that data to its fullest should be the chief concern of every mortgage enterprise in the market today.

MARK HOPKINS: Obviously, all innovation to support lenders in meeting new compliance and investor requirements should be our top priority. There’s a basic level of need that must be met, and those innovations may take up the majority of the next twelve months, leaving very little room for much else. However, stemming from compliance requirements around transparency for borrowers, I’ve seen some exciting progress on innovations that could actually create more mortgage demand by engaging more potential borrowers in the process.

ROB STRICKLAND: I think the industry has been craving an agile integrated origination solution that can simultaneously addresses its core challenges of Processing Efficiency, Customer Satisfaction, Compliance Rules and Lower Costs. Most of today’s well known LOS solutions are grounded in outdated inflexible architecture so their ability to orchestrate automated digital processing is severely constrained.   Newer Cloud solutions that can deliver an improved digital experience will be well received.

CHRIS APPIE: The next year is going to be focused on ensuring compliance with all aspects of Dodd-Frank without exposing lenders to more risk in the process. The industry needs to provide solutions that support business agility while helping lenders avoid the various and evolving risk types to which they’re exposed.

CHERI BOOTH: The loan originator needs to become the educator, not the sales person. The millennial is thirsty for information, but more importantly the right information, in short byte size chunks of video. The other thing that needs to happen is this customer requires a lot more patience on our part. They take a long time to make a decision. This borrower needs to research, absorb, research some more, make a decision. It is ultra-important for the word pipeline to be redefined, maybe even call it pre-pipeline.

LISA BINKLEY: A technology that leverages big data in the valuation sector. Virtually every other segment is using big data to make decisions. The mortgage industry, its components and it processes are at the crux of the American economy. Even so, the mortgage sector still fulfills the majority of the collateral valuation process manually. I’m not saying we need to rely 100% on technology. We need human talent, in the form of trained analysts in this segment. However, those analysts are missing out if they’re not leveraging big data analytics. Any entity that incorporates big data into their evaluations, whether the appraiser, AMC, lender or investor, will make better, safer—not to mention faster—decisions.

Avoiding Death By 1,000 Paper Cuts

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lionel-urbanFor years the mortgage industry has been inundated with paper processes and the shuffling or paper files back and forth to complete a loan file. This has definitely been the case with disclosures causing numerous inefficiencies and not to mention 1,000’s of paper cuts throughout the process.

Historically, mortgage lenders have loosely managed the paper intensive disclosure process without much attention to detail in two steps. For the first step most lenders issued initial disclosures when they had a file ready for processing. Then a second step would be to correct disclosures that were missing, had non-compliant dates, or were incorrectly prepared at closing. Although many regulatory requirements were in place back then, regulators often assumed that the lenders were properly handling these regulations. Today it’s a whole new game and lenders need to implement effective electronic disclosure solutions to stay in business.

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The Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) has required lenders to provide two different disclosure documents to consumers applying for a residential mortgage loan. The goal of these two documents was to present a complete picture of the loan transaction for borrowers in a timely manner to simplify the process of understanding fees, payment terms, and loan program features.

Additionally, there are numerous Federal and State disclosure requirements for locking rates, loan programs, mortgage insurance, appraisal, flood, Change of Circumstance, and of course the new TILA-RESPA Integrated Disclosure (TRID) process. The disclosure process now takes place at application and at multiple times along the way, prior to a loan closing. And, to add stress to a lender’s operation, regulators are stepping-up enforcement to ensure and document how disclosures were completed, delivered, and received by applicants.

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The CFPB has acknowledged that the disclosure process has been a huge pain-point for all parties involved. There are multiple disclosure types and numerous paper documents that are shuffled back and forth, and it is easy to see how those involved in the current disclosure process are experiencing “death by a 1,000 paper cuts”.

To “simplify” the lending process for applicants the CFPB set out to address this issue by integrating the mortgage loan disclosures required under TILA and RESPA to create the TILA-RESPA Integrated Disclosure (TRID). The mortgage industry is now only months away from the CFPB’s August 1, 2015 deadline for the new requirements under TILA-RESPA and the new Integrated Mortgage disclosures. The requirements of TILA-RESPA reform (TRID) as well as other ongoing regulatory updates create a host of challenges for mortgage lenders and their technology providers.

Let’s face it – the disclosure process is extremely complex. While TRID is getting all of the headlines, there have been and continue to be an onslaught of changes, updates, and new requirements for all types of disclosures. These include: Application disclosures, 3-Day Disclosures, Program Disclosures, MI Disclosures, Change of Circumstance Disclosures, Lock Disclosures, Appraisal Disclosures, Closing Disclosures, and even Flood Disclosures when required.

In addition, regulators are much more assertive with monitoring and supervising regulatory practices, putting a heavy burden on lenders trying to comply with the latest rule or regulation. It is not enough to just address the new TILA-RESPA Integrated disclosures. The regulators continue to change, modify, and revise requirements for all of the disclosure types.

TRID requires significant changes to the loan origination process, specifically in how lenders handle closings. The new requirements state that the closing disclosure needs to be at least three days ahead of closing to meet the Closing Disclosure timing requirement. Lenders are now on the hook and liable for closing, and any error could have a significant impact on all parties of the loan transaction. Last minute changes will impact not only the borrower, but also the seller and other related parties involved in the real estate transaction.

This now presents a number of challenges that the lender must be able to address, properly disclose, and track to avoid potential penalties and fines. What is the actual disclosure process for this specific disclosure? Is there just a borrower or is there a co-signor? What is the delivery channel? Internet? Email? SMS address? Has the borrower e-consented or opted out? If opt out, has the printed disclosure met the timing requirements? Who is responsible for re-disclosing? How is all of this being communicated and tracked?

The new regulatory requirements and implementation of TRID creates an environment of elevated risk for lenders. Accountability, liability for timing, accuracy, and completeness of disclosures with the ability to track and provide a detailed audit history is putting intense pressure on lenders to comply. This is especially true for small and mid-sized lenders who don’t have endless resources to throw at this issue, but can’t afford to not properly address these changes.

To manage the process lenders should:

  1. Have a system in place that identifies loan applications, For example, do my policies & procedures clearly spell-out when does a “pending application” become a “loan” (recalling that a loan is what triggers disclosure rules)
  2. Have a system in place that uses data from the LOS to identify when disclosures are required and establish workflow to automate the process when possible
  3. Have an operations process that ensure disclosures are accurately prepared and delivered to applicants in a timely manner
  4. Have a system in place that automatically logs and tracks information that identifies what information triggers a disclosure event, how disclosures were delivered and, when possible, an acknowledgement of applicant receipt of the disclosures
  5. Have a system that stores copies of the disclosures that were issued
  6. Have reporting in place to identify disclosure requirements, successful delivery, and disclosure exceptions.

Are you confident your vendor is able to comply with these complex changes while maintaining service levels and operational efficiency? The time to enhance your outdated disclosure process and technology is now. It’s not just about avoiding paper cuts anymore but being able to proactively address the new and mandatory regulations.

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Where Do We Go From Here?

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TME-TGarritanoSTRATMOR Group, a consulting firm that helps mortgage banks build profitable mortgage lending operations, announced that the results of a recent PeerViews Survey on the industry’s readiness to comply with the CFPB’s new TILA/RESPA Integrated Disclosure (TRID) rule confirms that lenders would not have been ready to comply with an August 1 deadline. Survey data indicated that, as of the end of March, many requirements of the new rule had not even been considered by an alarmingly high proportion of lenders.

“Lenders felt like they were ready, but when asked for specifics about how certain TRID-related tasks would be handled internally, they didn’t have good answers,” said Dr. Matt Lind, STRATMOR Group’s Managing Director. “This suggests that many lenders may be missing key elements of TRID compliance, particularly in regard to process change, that would have constituted a significant risk if CFPB had not set back its deadline.”

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CFPB said earlier this month that an administrative error led the Bureau to set back the deadline for compliance with the new TRID rules until October 1, 2015. Given the data STRATMOR uncovered in its survey, this was a fortunate decision for the industry.
STRATMOR’s PeerViews survey revealed an alarmingly high percentage of survey respondents that had not even considered or decided on the following compliance issues at the time of the survey:
>> Who will generate and send out the Closing Disclosure?     13.5%

>> When will the Closing Disclosure be issued?  26.1%

>> Handling of Post Closing review  26.4%

>> Scripting of LOs and fulfillment personnel         41.8%

>> Preparation of initial Loan Estimate (wholesalers)      23.3%

>> Post Closing repair procedures   34.5%

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STRATMOR’s PeerViews program is a fast turnaround, small-survey program that gives senior mortgage executives a unique way to obtain specific qualitative mortgage industry information. All PeerViews surveys are conducted as “blind” surveys, with results aggregated to protect the privacy of participants. PeerViews participation is complimentary during this special introductory period. Full results of the survey are made available only to survey participants.

Regardless, many have prepared long and hard to be ready for the TRID deadline. For example, DocMagic announced that the CFPB’s proposed delay will have no bearing on its plans to be ready to meet the CFPB’s originally planned Aug. 1 due date to implement the TILA-RESPA Integrated Disclosure (TRID) rule.

“The CFPB only stated that they will be issuing a ‘proposed amendment’ to delay the rule to Oct. 1, which means it could possibly finalize a shorter time period,” commented Rich Horn, TRID legal advisor to DocMagic and former senior counsel and special advisor at the CFPB. Mr. Horn led the 1,888 page final TRID rule and the design and consumer testing of the new mortgage disclosures. “Lenders would be wise to keep their foot on the gas and proceed with their TRID implementation work, and DocMagic gets that,” said Horn.

“DocMagic has been working very closely with our clients, LOS partners, industry experts and other mortgage entities to be absolutely 100 percent certain that we are TRID compliant by the original Aug. 1 date,” said Dominic Iannitti, president and CEO of DocMagic. “The CFPB’s announcement about the proposed delay will not change our momentum.  All of our systems will be TRID-compliant come Aug. 1 ranging from loan document production to LOS integrations to our new Collaborative Closing Portal, SmartCLOSE.

Similarly, Mortgage Builder says that its Architect loan origination software product has been updated to assist clients with compliance with the impending TILA-RESPA Integrated Disclosure (TRID) requirements for loan originations, processing and closing. Architect 5.0 addresses compliance with TRID.

“TRID compliance is a subject of great concern for our customers, and while achieving compliance can be complicated and challenging, it is absolutely achievable,” said Lawrence Alston, General Manager at Mortgage Builder. “We’ve devoted substantial time and resources to studying the rules and updating our software, and we’re now working closely with mortgage bankers to help them prepare for the October deadline through a combination of technology and education.”

Surely a lot of industry players are working very hard. Regardless of the deadline I hope that lenders and vendors alike stand up and show the world how great the mortgage industry is.

How do we do that? By being ready on day one for any and all changes that the CFPB or any other regulatory body may cook up.

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The Profitability Crisis

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Brian-GreenbergThere’s been much researched and reported about why businesses don’t turn a profit—some chronically operating “in the red” month after month until failure finally ensues. In fact, reports reveal that a staggering 50% of new small businesses fail in the first year, alone, and only one-third survive 10 years or more. While the litany of business failure postmortems for small businesses and large conglomerates, alike, have asserted viable collective reasoning for said profitability pitfalls and outright failures, including money mismanagement, operational inefficiencies, poor needs analysis and price planning and being out-competed among them, not enough have focused on the all-mighty consumer credibility and trust factor when analyzing a business boon or bust.

And, no industry is more vulnerable to flailing credibility and trust among consumers than retailer. For its part, the retail trade crisis has also been well-established, particularly with respect to dwindling foot traffic to brick-and-mortar stores. Even online, it’s shocking to learn that fully 97% of visitors to eCommerce and other sales-minded sites bail out without purchasing on their first visit. Clearly there’s a severe disconnect between vendors and the marketplaces they hope to serve—a situation resulting in some serious economic opportunity loss. These disparities are also among the biggest misperceptions that both online and offline marketers hold.

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Far too many companies are churning out traditional sales lingo laced with fluff and vague, or entirely overinflated, claims, spending paltry little time and energy establishing credibility with prospective customers. And, the mission critical nature of credibility cannot be overstated, as it establishes a company or brand’s integrity, reliability, validity, soundness and a host of other image-including indicators of an entity’s moral and ethical code, and the standards by which it operates. At the most fundamental level, credibility translates into trust, and trust translates into sales.

Today’s consumer is quite savvy, but are often overloaded, over-committed, overdue for a vacation and, thus, easily annoyed. From telemarketer calls coming in at dinnertime or, worse, before the alarm sounds in the morning; an endless stream of SPAM e-mails jamming inboxes; and mailboxes overflowing with white mail that proceeds directly to the recycle trash bin, statistics show that consumers can be bombarded with more than 300,000 messages every day. This overwhelming demand for consumer attention and dollars has created a market filled with cynics, whose defenses are on full alert.

This heightened emotional state is working against commonplace sales tactics that are hyper-focused on getting to the close, rather than getting to know the consumer—and vice versa. Often, brand marketers fail to realize the sale begins and ends with authentic connection on both sides.
Consumers need an advocate. Amid all of the marketplace ‘noise,’ there is an incredibly opportunity right now for customer-centric brands to cut through the clutter. One way to do this is by establishing credibility with consumers. Companies that do this effectively will most certainly amass market share.
What I’ve learned over the years is that shoppers go through different phases, such as interest, awareness and action, before transitioning to the “buying’ stage.” However, the successful marketer offers multiple ways to prove the company and/or the product’s credibility through meaningful and relevant engagements that will carry a consumer through the emotional continuum of interest to final sale…and referrals and recommendations to others beyond.

Below are four proven tactics I’ve learned on the sales and marketing front line, which are critical to building a loyal client base and ultimately boosting revenue in kind:

1. Righteous Reviews

Studies show that, in general, people like to do what others are doing, especially in situations where they feel insecure. That fact can be emphasized by another fairly understandable statistic: Customers are more likely to make a purchase from an entity that can produce favorable reviews about their product, service or company. In fact, according to a newsurveyconducted by Dimensional Research, an overwhelming 90 percent of respondents who recalled reading online reviews claimed that positive online reviews influenced buying decisions, while 86 percent said buying decisions were influenced by negative online reviews.

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This can best be accomplished by deciphering what stage of the buying cycle the visitor is in, and then publishing or offering real and applicable reviews and testimonials allowing potential buyers to align themselves with others who have made purchase decisions. And, given the different stages of the buying process, it’s essential to showcase reviews and testimonials that touch on more than one aspect of a previous buyer’s experience. Prospects want to know that the person who wrote the review really exists so be sure to list real names (with permission of course). And, if you sell to other businesses, also list job titles and the companies they represent. It’s also advisable for marketers and business owners to take proactive steps to encourage buyers to provide written reviews, whether through a dedicated web page, a follow-up email or phone call, or a reminder next time they stop by to shop with you.

2. The Science of Social Proof

Simply put, social proof is influence created when one discovers that others are doing something. While reviews and testimonials are two of the most persuasive forms of social proof as detailed above, there are other important considerations. We now know that—with the rise of Internet sales and social media—potential buyers can amass a great deal of information even before visiting a store or certainly making a purchase. Endorsements from organizations or celebrities with a positive public image and “wisdom of the crowds,” can definitely provide the emotional risk relief needed to close a sale.
Social media also presents tremendous image opportunity. For example, Facebook is considered the “most effective” of the social media sites. “Likes” on Facebook are positive reviews about your products or services and ultimately show potential users that your brand can be trusted. Another highly effective brand-builder is publicity! Being mentioned in the media is extraordinarily effective as having your brand or company featured, or offering expert source “thought leader” commentary, is essentially an implied endorsement from the media outlet in which it runs. Of course, it’s imperative to leverage these public relations “wins” in your sales, marketing and business development efforts.

3. Transparency Translates

The word “sales” has become synonymous with “hype.” Modern consumerism is now based on transparency. This asks that we operate with openness, clear communication and accountability. A marketer that truly cares about the prospect’s perceptions and experience will have nothing to hide. Ensure marketing speak has no hidden agendas or false promises, and that all who come in contact with your business –gain a sense of—or have unencumbered access to—the company’s mission, vision, philosophies, environment, culture and core.

Potential customers consistently rank customer service as the number one factor impacting vendor trust. And, understanding that things sometimes go awry in business, I’ve found that people admire companies more when they readily admit to a mistake and address the issue directly. For me personally, the best way to adhere to full and complete transparency in business is to be mindful that businesses have a responsibility: one that fosters clear, open and meaningful exchanges with both prospects and established customers on any subject they want to explore. It’s definitely a winning path to a lucrative end, but transparency has to also be an “end” in and of itself.

4. Take Direction from your Customers

No matter what business you’re in, your most precious asset is your existing customer base. Why not intensely focus on their behavior and commentary (whether solicited or not), as you do business with them? Ask them for honest feedback. Motivate and compel them to provide it. It’s the only way to gain a deeper insight into their thinking, how they feel about your business, product or approach, and what you can do to make their experience better. This can be informal discussions or “interviews,” or anonymous surveys and polls that provide anonymity and can make subjects more comfortable to express their real thoughts and feelings.

What does your expressed desire to listen to your customers say about a company or brand? It tells them that it cares; that it’s serious about satisfying them; that it wants to succeed; and, most importantly, that you’re open to change. In this same vein, listening to employees can provide great value as well. They are on the front line after all. Ask them what they are hearing, what they feel is going well, and what is not working at all.

Being a credibility-conscious sales operation does not take a large budget. It largely involves not telling people what they want but rather listening to, and otherwise availing, what they need. If you provide valuable information—and uncontested access to it; offer a product or service whereby the care and quality is evident; rally existing customers, partners and other constituents to get on your bandwagon through testimonials, social media and the like; and consistently demonstrate top-notch service over a sustained period of time, your reputation alone may be enough to spur that coveted sales growth.

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Process Compression For TRID

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eletter-jon-maynellWhile just about everyone in the mortgage industry can agree on the hottest topic of 2015 (TRID), there is still widespread disagreement as to the depth of its impact, and the degree of difficulty in complying with it.

I talk to dozens of lenders from coast to coast every week, and find myself genuinely fascinated at the varying reactions to TRID. While most lenders remain unsure about the impact it will have on their business, this contingent also has yet to fully understand if or how their processes need to change to comply. The vocal detractors are the smallest but loudest group, refuting the viability of implementing TRID and expressing their disdain by spelling it backwards. These industry professionals generally assume that there will be a grace period or that the regulation will evaporate somehow.

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And then there are those who shrug it off as just another form. These lenders have already made the necessary adjustments to finish their loans and supply final disclosures to their borrowers at least three days prior to the scheduled closing. Some are even aiming for a five day lead time.

Why is there so much disparity in lenders’ reactions to TRID? It’s a clear signal that most lenders are not in control of their business processes. The new disclosure requirements are simply forcing lenders to become more efficient, but without process control, tightening up the loan lifecycle by three or more days seems impossible.

On a recent broadcast of “Lykken on Lending”, Alice Alvey, Senior Vice President of Indecomm Mortgage U at Indecomm Global Services said one department will remain unaffected by TRID: underwriting. “Their role isn’t impacted by this. You give them a clean file; they’ll be able to get it out. You give them a muddy file, and wait for your conditions.” She went on to point out that if you’re trying to peel five days off your production process, you should look for three of those days in the origination phase, one day in processing, and another day in closing.

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Alvey’s assessment clarifies the fact that the overall process will essentially remain the same. Many lenders simply cannot fathom a way to compress their processes to that extent. In talking to lenders who are ready for the August 1st deadline, the vast majority of them are using mortgage business intelligence (MBI) to track and shorten their processes.

MBI can map out and track a loan process working backwards from the estimated closing date to ensure key milestones remain on track, proactively sending email alerts to loan participants if a file is in danger of becoming noncompliant at any point in its lifecycle. MBI can also identify soft spots and friction points within subprocesses to illuminate where pinpointed training or coaching can further streamline production segments.

TRID is likely here to stay, but the good news is that if that there are a number of lenders who have already put themselves in a position to remain compliant, it proves that this challenge is not insurmountable.

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The Cost Of Quality

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TME-Becky-BarbaraHow much should we pay for quality? Is focusing on quality the right choice when the cost exceeds the return? These questions are being asked a lot these days but very few if any answers are forthcoming. Most companies seem to be so concerned about the consequences of any problem that does or might exist in any one loan, they are doubling or even tripling the number of file reviews being done. Is the cost of these additional reviews actually worth it?

Because of the quality failures that were at the very heart of the Great Recession, we are now experiencing the repercussions from Fannie Mae, Freddie Mac and FHA as all have come out with new Quality Control requirements that are designed to produce loans with zero defects. In addition, the new regulations and standards that CFPB have placed on both servicing and production require strict adherence to the standards established for the quality of these operations. To the industry this has meant adding additional reviews, more frequent reviews and more rework on loans. And still the risk of repurchase or consumer action remains. All of these activities result in more costs but so far we haven’t seen any financial benefit for these efforts. Is this normal? Is this what we should expect? Or should we, as one frustrated manager put it, start making buses instead.

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Stefen Heinloth, in the February 2000 edition of The Quality Digest asked a similar question by querying “Are quality related efforts worth their cost?” In answer to this question he described two things that have to exist for the answer to be true. One is that quality has to be measurable. Only then can a company determine if what they are spending to meet standards, theirs or others, is really worth it. The second thing is that there must be a cause and effect relationship between quality and financial results. He goes on to say he sees that “companies are taking a return on quality approach, viewing quality as an investment and holding quality efforts accountable for bottom-line results.”   Of course this was for other industries such as manufacturing, not ours.

The concept of value.

Unfortunately Mr. Heinloth’s statement was focused on the application of quality management techniques and concepts that this industry has yet to learn. Despite the labeling of ideas and dictates as “manufacturing quality’, what we have been directed to do or what we have scared ourselves into doing is not in any way shape or form, Quality Management. In order to better understand what they are and how we, as an industry can implement them in a manner that allows us to value quality improvements several of these concepts need further explanation.

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One mainstay of Quality Management is the ability to gain value by the improvement of the product/service being provided. However, improvement requires measuring the process and finding out what is not working right; what requires rework and what process failures result in products that have to be “scraped”. In order to do that we must be able to measure our processes. Edwards Deming stated that if you can’t measure it, you can’t improve it. So if we are going to identify what parts of our processes are causing us problems we have to measure them. Of course, the quality control process is supposed to be doing that, right? Unfortunately there are numerous flaws in the programs that Fannie Mae, Freddie Mac and FHA require. But more importantly, when lenders are dissatisfied or question the results of their QC programs they fail to make any changes that would be beneficial. One reason is that most don’t know what is wrong or how to fix them. So here’s a quick guide to QC that anyone can follow.

1.) QC should be measuring where you have a risk in your process. For example, if a processor or underwriter doesn’t calculate the borrower’s income correctly, that is a risk to the process. In addition, if they enter the wrong amount of income into an automated underwriting system, that is also a risk. These process variance or “defects” should be measured for every loan yet there are far too few measurements that tell the number of times this type of process failure occurs.

2.) Process variances cannot be labeled by some subjective measure of precision. In other words there are no “critical” defects or “minor” defects. A defect is a defect. Since it is only when this defect has proven to cause a default can it begin to be labeled as a critical issue. As we all know there are very few, if any defects that impact a loan to this degree.

3.) Random events do occur. We seemed to have ignored this concept. Way too many underwriters and production staff spend time defending a defect in a loan when it is simply a ransom mistake. Way too much time and effort is spent on reworking a loan file when QC identifies an error. This is particularly true of “curable” items. Over and over QC reports identify defects rated as curable. What does this even mean? There is no lender in the industry whose process says, generate this document but DON’T put it in the file so that when we discover an error we can “cure” it. It sounds like some type of disease.

In reality failing to put documents in the file is part of the process and if it doesn’t get done when the process says it should, it is a defect. Spending time going back to find the document or creating another one, is plain and simple just unnecessary rework and rework costs money.

4.) Which brings us to another basic issue. How do we know if the defects identified in a review are really worth spending money on to fix? Here is where statistical knowledge is at its best. Since we are not doing a review of all loans, we need to know if the frequency of a defect is really a problem. Identifying this with just one review is probably tough, but if looking at multiple reviews, QC staff should be able to tell management the probability that the defect found is not random.

5.) Since the majority, if not all QC staff do not have the statistical knowledge to achieve this, another way for a lender to determine if something in the process needs fixed, is to look at the industry as a whole. Having a benchmarking tool that can be used to compare rates of occurrence on a specific issue within the industry to your defect rate would immediately tell you if you have some type of systemic problem that is driving this excess number of mistakes. If your percentage of errors is much larger then it would normally be, there is a good bet that something needs to be fixed.

6.) Finally there has to be an established cause and effect relationship between the defect and the risks inherent in the product. If there is none, then why are you spending time and money testing for it, “curing” it or trying to redo the process? Well of course you say, that only makes sense. So then, what are the defects that cause an unacceptable level of risk in a mortgage loan product or a loan servicing outcome? Unfortunately, we don’t know, or at least most of us don’t know. Sure we say LTV is a risk or DTI. And what about insufficient reserves? But where are the statistics that validate that?

While the industry has lots of data on performance and some of these static elements we attribute to poor performance, we have no way of knowing if the data we have used is accurate. In reality the only work done that is publically available are the results of investors and others whose interest is selling the product not improving the process.

Ultimately we do not have a standardized way to test our processes or relate them to product failures. We have failed to develop any meaningful relationship between process failures and risk and we spend all of our time and money on rework and unproven changes. No wonder recent MBA data identified that total loan production expenses increased to $6,932 per loan in the second quarter of 2014 from $5,818 per loan in the same quarter the previous year. This number is only going to get worse as QC staff increase the number of reviews for TRID and other regulations and agencies changes.

Where is the value?

Based on all the issues identified above, it is hard to comprehend that the industry has any idea of the value of their operational processes. Since we haven’t correlated defects to repurchases or rework let alone done any real work of identifying the causal relationships of these errors, it is impossible to know the difference between the cost of a product produced by a satisfactory process or the value of a consumer/investor that is satisfied with a successful servicing program. However, in order to determine that we do in fact know some of these numbers, let’s discuss the return on investing in quality improvements.

The return on the investment for any process improvement is calculated as the ratio of two financial estimates:

ROI=Net returns from improvement actions/ Investments in improvement actions. The numerator and denominator are defined as follows:

  • Net returns from improvement actions is the financial gains from the implementation of the improved actions, which are generated by new changes in quality, efficiency and utilization of services, or in payment for those services.
  • Investment in improvement actions are the costs of developing and operating the improvement actions.

Looking at an ROI calculation from this perspective it is fairly straightforward as to what the quality, efficiency and utilization of resources are involved in producing loans. If a produced loan does not follow the guidelines or processes in place to ensure a quality loan, then it is defective. This can mean that if the defect(s) are discovered by an investor, the loan may be rejected by the investor. If discovered prior to sending the loan to the investor it may have to be placed in portfolio, may have to be held on a warehouse line for an excessive amount of time increasing costs or sold as a “scratch and dent” loan. If problems are discovered during the process or by QC, the problem will have to be “cured” which involves rework by staff or even asking the consumer to supply additional information or replace documentation that was provided earlier. Again, this is more cost. And we can’t forget to include the time that production resources are dedicated to fixing something that has already been through the process rather than on generating additional income by producing additional loans.

However, we can develop a hypothetical example of how the ROI on quality can be determined. For our purposes let’s say that a review of the defects identified above cost around $2,000 per loan on average. Using the MBA production cost of $6,932 per loan we would add these additional costs of $2,000 per loan which raises the overall average cost production $7435. The cost of producing 100 loans per month is therefore $743,500.

Once we identify the operational controls that failed in the origination process that increased these production costs, we know what we have to fix. For our purposes we hypothesis that a change to the system will prevent the loan from moving to the next stage of production when these errors occur and training of the processors should correct the error.   The cost of these fixes is $25,000. The change is then implemented.

Once implemented, the QC staff measures the results. They find that the problem has been eliminated by these changes. In addition, the efficiency created by the revised process flow has taken an additional $10.00 off the cost of producing a loan.   Therefore we have achieved a net return of $2,010 from these improvement actions.   This change reduces our cost per loan to $5,425. Our monthly production cost, on average for 100 loans is therefore $582,500 or a difference of $ 2,010. Using the ROI formula for quality improvements our return is 6.44%.

While this example is somewhat simplistic in nature, it demonstrates that if individual companies were to understand and apply the concepts of quality management to their organizations, the value would be clear. So instead of complaining about the costs of quality control and the perceived cost of reviewing an excessive number of loans to ensure that they meet investor and regulator QC standards, lenders would be wise to redefine quality and begin to implement these previously validated, achievable returns on the investments they make.

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Change Is Always Messy

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TME-RGudobbaAt the recent MBA Technology Conference a number of sessions were devoted specifically to TILA/RESPA and the looming deadline of August 1st. Rumors were rampant that the deadline would be extended, despite the fact that the CFPB stated unequivocally that the deadline would not change. We know what happened there. Now the industry has until October to be ready. However, at the MBA Technology Conference there seemed to be more questions and confusion than answers and solutions. The realization that we are now 90 days from the August 1st deadline almost seemed like a surprise to some.

American Land Title Association (ALTA) CEO Michelle Korsmo said recently, “Unfortunately, we’re already aware of one major problem with the new CFPB forms. The Bureau’s Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers.” She went on to state that the new forms are misleading for consumers and could create confusion. While she did not address the reality of consumer confusion with the current HUD-1 form that the Closing Disclosure will replace, I can personally attest to the fact that consumers do, in fact, find it confusing. ALTA asked the CFPB to announce a “five-month restrained enforcement period” on the new forms to give businesses time to adjust to the new regulations. Is this the first time this issue has been brought to the CFPB and the industry’s attention?

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The primary objective of the CFPB’s TILA-RESPA Integrated Mortgage Disclosure Rule was to ensure the consumer was not confused and had the opportunity to review and compare loan information from application to closing. I am not privy to all the interactions between the CFPB and the industry, but I will say they have been very open and responsive to Compliance Systems’s requests for clarification and interpretation over the last year and a half. It made me wonder where everyone has been for the last 18 months.

If there ever was a time for the mortgage industry to consider change, it was when the CFPB first announced the Loan Estimate and Closing Disclosures and the focus of those forms on consumer interaction. Some organizations have taken this opportunity to develop and incorporate new workflows, while others tend to automate with little, if any, attempt at process efficiencies or new ways to look at the process.

In the technology world, paving cow paths means automating a business process as is, without thinking too much about whether or not that process is effective or efficient. We tend to automate how we do business today and incorporate little, if any, process efficiencies.

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Paving the Cow Path Where did this phrase originate? As the apocryphal story goes, the original winding streets in the city of Boston were built on the paths worn by cattle. Rather than lay out the type of gridded street plan that most urban dwellers are familiar with today, those city fathers supposedly elected to pave the meandering paths that the animals had already established. Those routes may have suited the cows perfectly, but were not designed for efficient human travel. The cattle’s “path of least resistance,” for better or worse, was already there, and an ineffective existing solution is easier to implement than an effective new solution that requires analysis, planning, and more development time. The admonition not to “pave the cow path” is intended to remind us of the hazards of standardizing makeshift solutions that were not intended to address the problem at hand. Like so much good advice—eating your vegetables, exercising daily—paving the proper solution path is easier said than done. Poor solutions are still solutions, after all, and change requires both force of will and a willingness to engage resources in processes that often do not yield immediate results. Jonathan Byrnes, Senior Lecturer at MIT, describes change management is one of the most difficult problems facing managers at all levels. All too often, managers focus primarily on defining the best end-state and deal with the change process almost as an afterthought. As the old change management saying goes:

Old Organization + New Technology = Expensive Old Organization

Embracing change can be intimidating, either in your personal or your professional life. As a person or business gets older, they can sometimes become more risk adverse—not willing to make changes. I like to say that not taking a risk is, in itself, a risk.

Why are we so resistant to change, and what is wrong with how we do business today? If I had to identify only one problem with our collective business practices, I would point to the invisible problem that is so often the root of other, more obvious troubles: we don’t have time to look at improving the process. One of my favorite sayings is, “we don’t have time to do it right, but we always have time to do it over.” Don’t look at how we do business today but instead look at how we want to do business tomorrow. Think about the current problems and business trends and design a system for the future—don’t just pave the cow path.

In a recent issue of Fast Company, editor-in-chief Robert Safian related that the most fully evolved portrait of the essential messiness of innovation was Disney World’s MyMagic+. This five-year digital upgrade cost close to $1 billion and involved completely refitting the 25,000 acre central Florida facility. As Safian states, this included “intense infighting and not a small amount of denial on the parts of top executives about the project’s limitations, fallout, and inefficiency. But for all that disarray, the project also succeeded in reversing declining customer satisfaction, helping propel Disney Parks to a 20% profit gains in its most recent quarter.” Safian points out that Disney would likely spin the story to emphasize collaboration rather the infighting, but that would be glossing over the messiness that is necessary for real innovation.

Safian goes on to say, “Meaningful change is never easy. Most often, it only comes after tortured conflicts and excruciating decisions. Only when we embrace the idea that messiness is to be accepted, even cheered, will we be ready to tackle our own impossible tasks… Things rarely go as planned, and that’s just the way it is. Rolling with the changes will often take you to a better place that you could have predicted.”

The well-known inventor and entrepreneur Ray Kurzweil notes, “About thirty years ago, I realized that timing was the key to success.” Many inventions and predictions tend to fail because timing is wrong. Kurzweil has found that the challenge isn’t just inventing something new, but doing so at just the right moment that both technology and the marketplace are ready to support it.

In the mortgage industry, the technology is available to support innovative process change and the marketplace, both consumers and regulators, are demanding it. Your TILA-RESPA solution doesn’t have to follow the cow path.

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Assessing Content

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You’ve created the content. Now, you need to measure its effectiveness to know whether your content is hitting its mark.

The following infographic by Curata offers 29 content marketing metrics, such as consumption, retention metrics, sharing metrics, engagement metrics, lead metrics, sales metrics, and production/cost metrics.

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For example, “you can track retention of existing email list subscribers by keeping an eye on unsubscribes and opt-outs,” states Curata.

“Similarly, you’ll want to track new subscribers to see if you can grow your list at the same time.”

Retention refers to “receiving a ‘follow’ from them, so they can continue to get updates and hopefully come back to your site,” explains Curata.

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To get the inside scoop on the 29 content marketing metrics, check this out:

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Is Your Service Provider A Partner Or A Vendor?

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Brad-ThompsonOver the past decade, I have been directly or indirectly involved in thousands of software implementations and IT projects. Most succeed; some fail. While any number of circumstances can lead to an unsuccessful project, one theme runs throughout: a lack of partnership between the organization and its provider. With 2015 IT spending on enterprise software up 5.5% over 2014, according to Gartner, there is much at stake from the very beginning. New technologies are emerging, promising differentiation, efficiency and better customer service. The big question becomes, how do you know you’re signing up with a true partner who will help you succeed?

Platform replacement is expensive. In my experience, 90% of project failures occur when the software provider is seen as nothing more than a vendor. When this happens, things are bound to fail. The next step organizations take, logically, is to begin looking for their next vendor. “Are we looking for a partner or a vendor?” ought to be the first question asked at the beginning of every search. The answer often determines the project’s destiny. This might seem simple, but the partner/vendor distinction is a multi-layered issue that should be discussed with, and agreed upon by, every member of the team. Deciding that a partner is needed means getting far more from your software provider.

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There are several ways to work through an implementation project with a software provider. One takes the purchasing organization’s approach: Do it our way. On the other end of the spectrum is to completely abandon all existing practices in favor of vendor-designed processes. Neither approach produces satisfactory results; in fact, both approaches are likely to lead to failed implementations. That’s because both of these scenarios approach the project without regard to best practices both the organization and the software firm bring to the table. Neither approach accepts the fact that both bring essential ideas to the project. The result, all too often, is mutual frustration.

I recommend embracing the partnership approach. This approach has both the organization – in our case, lenders – and its chosen provider working together to maximize platform investment. Implementing new technologies to support nothing but old practices minimizes investment return. The same can be said for attempting to go live with all new processes.

Meeting in the middle produces the best result because it recognizes that both parties bring great ideas to the project. The lender knows its own business better than anyone. The software provider knows its software best, and the best technology experts know the industry extremely well, too. We meet with lenders constantly, implement systems daily and study lending performance regularly. True partnership implementations and subsequent go-lives are an amalgam of experience. They also help lenders realize value from their technology investment, with such value including customer experience, efficiency and compliance improvement.

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Are you ready to partner? Is your provider?

I’ve made the case for partnership; it’s the way our firm works with our clients. We see it as a win/win approach, especially for the client. How do you look at your vendor relationships? Here are some key questions to ask:

Are your providers treating you like you treat your customers?

Great partnerships continue long past implementation and long past go-live. Great customer service, for example, seems simple, but is often overlooked. Handling the simple things like returning phone calls, providing quick answers and sending follow-up emails make all the difference. Going above and beyond for customers should be standard operating procedure in a true partnership.

Lenders should expect to be treated by their providers the same way the lenders themselves treat their borrowers – meeting each individual’s unique needs, while having open lines of communication throughout the process. Assuming that’s true, then you already have a great foundation and should start leveraging that right away to build on the partnership.

Is your provider offering you solutions or just products and services?

Offering products is the easy part. Transitioning to services is the next, slightly more difficult step. Providing solutions is the giant leap, one that can truly transform a business. Not many providers have the ability or the desire to do this. Many providers are quite satisfied with a client that is on auto-pilot. They know the relationship can’t last forever, but will do just enough to keep the status quo for as long as possible or until they are no longer addressing business needs. Are you on auto-pilot? The quick test is anticipation: when your provider is keeping you ahead of the market and regularly coming to you with new ideas, you’ve got a forward-looking partnership.

Providers can truly enhance your business and make it better by working with you as partners. True partners will continue to improve, not only for your business but for all the businesses they serve. When leveraged correctly, partners can, and should, become an extension of your business, working as trusted advisors focused on making your business better.

I was recently a part of one of the most successful client partnerships in the history of our organization. Accenture Mortgage Cadence successfully completed a massive software implementation for a top retail lender just last month. Choosing to purchase and implement a commercial application, instead of enhancing and upgrading their internal proprietary application, was a difficult and risky decision for them.

This client had held complete source code control of their internal application for many years, so the prospect of giving up that control and moving to a commercial application was daunting, to say the least. They also needed this implementation done in time for TRID, a massive undertaking for any lender, let alone for one of this size. In under 10 months, we were able to deploy our core application, with multiple internal integrations; train and on-board more than 2800 users nationwide; and, as of last month, roll 100% of their volume onto the platform.

In describing this assignment, I use the words “we” and “our” on purpose, and not simply as a reference to my organization. The client and Accenture did the work together, as partners. Was it easy? Of course not. There were some very challenging hurdles along the way, and many times we both thought we were trying to accomplish the impossible, but we were successful through our partnership. Together, we overcame all of the reasons why this project should not have worked.

How did we deliver this monumental project in such a short amount of time? We did it by starting off on the right foot. Before we even signed contracts, we did something that I have rarely seen happen: We talked about our partnership. We talked about it a lot. I had many different people from the client tell me, “We want to be your partner” and “We want to help make your business and product better.”

We discussed and agreed upon communication methods, project methodologies, change management and escalation processes. I know that many of these things seem like standard discussions in any project, but what was not standard was that the discussion focused on both the client and on us. The client gave Accenture as much say and input in each of these areas as they had.

We even went so far as to discuss travel and the impact that it would have on the personal lives of those working on the project. Much to my surprise, the client suggested that they travel to our offices to work on this project as much as they expected us to travel to theirs. Their reasoning? It was only fair that they ask their people to be on the road and away from their personal lives as much as they were expecting us to be.

We (Accenture, that is) had the ability to escalate and change as often as needed to keep things on track and be successful. We were not relegated to being simply a vendor. We were a trusted advisor, and this client truly embraced the partnership approach. We had — and still have — a seat at the table. Because of all of these things, this partnership continues to thrive and grow.

Business is hard enough without the additional stress of using service providers that don’t share your same vision and desire to succeed and exceed. If you find yourself struggling with your current providers or constantly find yourself in the process of looking for the next vendor, take the time to evaluate what you have today. Do you relegate these providers to vendor status? Maybe it’s time to reflect on how you approach these relationships. Do you have providers that could care less and only work to keep the work minimal? Maybe it’s time to make a change. If you find yourself somewhere in between, you have an opportunity to start out the right way with new providers and an even bigger opportunity to cultivate your current relationships into true partnerships. Your business will reap tremendous rewards, I promise.

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Oh, Those Naughty Cyber Attackers!

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TME-PHhallYou may not realize this, but I am so sexy that lascivious beauties from across the Internet go out of their way to make my acquaintance. Or at least people are trying to get me to believe that fantasy.

The other day, an email turned up in my in-box with the subject “Krystle BOOBS Norcross sent you a WINK.” And the message read: “Hi sweety, I saw your photo in the social network and realized that we live in the same town. How about spending a couple of hot weekends together and having fun without any needless questions?”

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Now this is interesting, since I live in a small town and I don’t know anyone here with the name (either self-proclaimed or ordained via baptism) of “BOOBS.” And I am not certain what social network she saw me on – it might have been LinkedIn, where a lot of people seem to enjoy my articles on the housing market. But being a journalist, I try to avoid “needless questions” when doing interviews – so I was a little peeved with that particular request from this intriguing lady.

In any event, Ms. Norcross included a link in her email and the invitation to click it so I can learn more about her. Hmmm, do you think Ms. Norcross was sincere in her desire that I join her for a couple of hot weekends together?

Actually, Eric Robichaud, the CEO at 401 Consulting in Woonsocket, R.I., deflated my sense of romantic self-delusion by informing me that Ms. Norcross has no carnal interest in me. In fact, there is no Ms. Norcross.

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“It is a Russian crime syndicate,” said Robichaud about my email. “They are trying to bait you to click the link so they can install spyware on your system to steal your identity and bank info. It’s not real at all. It’s link baiting.”

Why would the Russian criminals do this? And why me? Well, it is seems that this type of mischief is not personally directed at me.

“They build bot networks of millions and millions of computers this way,” Robichaud explained.

Admittedly, this anecdote involving Ms. Norcross represents one of the more ridiculous corners of the cybersecurity sphere. But it should be noted that the cyber miscreants are leaving no digital stone unturned. From trying to hack into the major financial institutions and federal agencies to tempting an obscure soul like me with a hot and steamy email from the supposedly delicious Ms. Norcross, they are working 24/7 to create damage.

So, where is our government in all of this? Every now and then, there is some blip of activity and a bold promise to do something, but it often seems that this hiccup of enthusiasm subsides when a new crisis ascends. But maybe there is finally hope that some aspect of this problem will be addressed.

One of the more intriguing developments here is a new bipartisan effort in Congress to establish a national data security and breach notification standard for financial institutions and retailers. Reps. Randy Neugebauer (R-Texas) and John Carney (D-Del.) introduced the Data Security Act in the House, while a similar Senate bill was introduced by Roy Blunt (R-Mo.) and Tom Carper (D-Del.). The legislation would replace the numerous state laws with a single slate of national data security requirements that would require a company experiencing a breach to notify all impacted customers, as well as federal and consumer credit agencies and law enforcement, if the breach affects more than 5,000 individuals. At long last, there is something that both parties in Congress can agree on.

The cybersecurity struggle often seems like a losing war, with the bad guys always finding new ways to wreak havoc. Let’s hope that the alleged Ms. Norcross and her comrades finally get unplugged and that Net-based security can become more of a reality.

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