The Power Of Artificial Intelligence In The Mortgage Industry

These days, it’s hard to miss the buzz about artificial intelligence (AI) and its impact on industries such as health care, automotive, education, financial services and retail, to name just a few. From the ability to diagnose diseases – to the development of driverless cars – the potential applications of AI are extraordinary. In our daily lives, we already are experiencing the use of AI when we communicate with customer-service chat bots, ask Apple’s Siri for information, perform Google searches, or use navigation apps to help avoid traffic, as a few examples.

Despite all the recent discourse about AI, this technology is certainly not new. There are countless examples of AI use over the past several decades, including the reliance of commercial jet flights on AI to power autopilot, and internet bots that index web pages. But the more recent interest, innovation and investment in AI are due to a combination of factors – including greatly increased computational power, big data, greater infrastructure speed and scale, open source technologies and advancements in machine learning techniques.

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And today, the mortgage industry is able to reap the benefits of this incredible technology. For example, HeavyWater, which was recently acquired by Black Knight, is a provider of AI and machine learning-based capabilities specific to the financial services industry. The company has already built a platform that completes business tasks using synthetic read-and-comprehend analysis and conclusion skills, and applied these capabilities to the loan origination process.

What is Machine Learning?

The terms “machine learning” and “artificial intelligence” are often used interchangeably, however, there is a distinction between the two. Using a very broad definition, artificial intelligence replicates human reasoning through learning, problem-solving and pattern recognition. Machine learning is a subset of AI and is a process by which AI deepens its knowledge through continually performing tasks and processing information.

Let’s consider a simple, industry-specific example. AI-powered machine learning enables technology to “remember” standardized forms. For example, it can review thousands of paystubs and determine exactly where the pertinent income data is located. When the system comes across a paystub that presents an anomaly, it will apply its previously gained understanding to infer the location of the income data needed. Once the technology receives feedback that its inference was correct, it incorporates that information into its knowledge base. The next time it comes across that type of paystub, the system will automatically know where to find the pertinent data.

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Machine learning also leverages big data to gain insights. The more data that is collected and reviewed, the better machine learning solutions become at making predictions.

Applying AI and Machine Learning to Reduce Costs and Turn Times

AI and machine learning already can make a difference in two of the biggest challenges faced today by mortgage originators: costs and cycle times. With the ability to read, comprehend, and draw conclusions based on context, AI and machine learning can perform operational functions more efficiently and at scale.

In fact, machine learning can work on many of the labor-intensive, “stare and compare” tasks performed by humans – such as verifying income, assets and insurance coverage. Machine learning is used to perform these manual activities much faster and more accurately than humans – a task that takes employees hours to complete can be reduced to just seconds with machine learning.

By automating manual routines, machine learning not only expedites the origination process, but also increases volume. While humans can only work a certain number of hours before mistakes begin occurring, machine learning has no limits to the time or energy it can spend performing these tasks. By increasing loan processing volume and reducing mistakes, imagine how machine learning can drive down origination costs – and risk.

AI-powered systems enable processors and underwriters to dedicate more time to addressing exceptions and solving problems, which will improve transaction turn times. Also, AI can help avoid last-minute delays by prompting a lender’s staff to take early action when there is an issue, keeping the origination process moving forward. Additionally, by delegating work to AI-powered technology, a lender’s staff can focus on delivering a more positive and personalized consumer experience.

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As AI and machine learning are used to perform manual, repetitive tasks, allowing mortgage professionals to work on more value-added responsibilities, lenders can increase their focus on their company’s growth strategies. As they scale and reduce the cost per loan by keeping staffing levels flat, lenders can invest more in product development, marketing, infrastructure, and other growth-oriented initiatives.

Additional Applications of AI

AI can also leverage visual recognition to image and index a wide variety of documents that are typically reviewed by processors and underwriters, such as tax returns, W-2s, property titles and appraisals. A lender could even use AI and machine learning to better manage vendors. Based on past performance and cost, AI could provide recommendations on which vendors would be optimal for each loan going through the origination process.

Voice-integrated AI brings further opportunities to create efficiencies. This technology could look at information under review, evaluate results and automatically employ interactive communication bots to advise employees of any issue that may need attention. Additionally, via a conversational interface, processors and underwriters could ask for information they need – just as we use virtual assistants like Apple Siri, Amazon Alexa or Microsoft Cortana to get answers. These capabilities certainly could help move a loan through the origination process faster.

Leveraging AI to Enhance Customer Service

Of course, most of us have experienced first-hand how AI is applied in retail to deliver a more personalized consumer experience. For example, when we shop online, we receive targeted product recommendations the next time we visit that site; or receive faster service though chat bots.

To help personalize and enhance the borrower’s experience, lenders can leverage voice capabilities. A mortgage virtual assistant that engages customers by answering questions, walking them through the application process and even offering advice could be employed using voice-integrated AI.

Impact on Jobs

When the subject of AI in the workplace is discussed, it inevitably raises questions about its impact on jobs. Will jobs be lost as a result of these technological advancements?

There is no perfect answer to this question since the utilization of AI is different from company to company. But, it seems certain that future skill sets will be required to support this shifting technological paradigm. As it applies to the mortgage industry today, however, AI can enable professionals to spend less time on remedial work, becoming knowledge workers instead of task executors, and provide additional value to a company.

The Future Is Limitless

AI and machine learning offer tremendous potential to advance the mortgage industry, and we are just beginning to experience the technology’s capabilities. As AI-powered systems ingest more data and perform an increasing number of tasks though machine learning and other techniques, the possibilities are unlimited.

Imagine the power of AI as it learns to handle the entire point-of-sale process and speaks to an applicant directly through a mobile phone; or as it systematically searches a lender’s portfolio for qualified prospects and offers a customized home equity loan or line of credit, and so on. As we all know, the average cost to originate a mortgage loan is exceptionally high – today it is nearly $8,500 according to the Mortgage Bankers Association’s Quarterly Mortgage Bankers Performance Report, and the typical time to close a loan is 41 days. Any opportunities to reduce costs and increase process efficiencies will add value to lenders and consumes.

What’s more, the transformative power of AI doesn’t stop in the originations space. Servicers will also be able to reap the benefits of this advanced technology. For example, the technology could learn how to detect risk and any compliance issues before they occur, enhance loss mitigation decisioning, provide voice integration capabilities to help staff work faster and smarter, and so on. What’s amazing is that these examples only scratch the surface.

Of course, human interaction will always be needed to originate and service loans, as people will still decide how they want to leverage technology and determine the problems that must be solved. Humans must also still play an active role in loan decisioning, identifying which kind of data to consider and determining risk appetite. Furthermore, research indicates that despite all the advances in point-of-sale technology, consumers still want the comfort of human interaction at some point in the process of purchasing what is most likely their largest and most important investment.

AI and machine learning offer great promise and will likely usher in a new era of production excellence. Lenders that take advantage of this advanced technology will be choosing a bold new way to address origination costs, improve turn times and transform their origination processes to support a brighter, more successful future.

About The Author

Soofi Safavi

Previously CEO of HeavyWater Inc., the mortgage-focused Artificial Intelligence (AI) provider recently acquired by Black Knight, Inc, Soofi Safavi now serves as Managing Director of Black Knight’s Applied AI group, bringing leading-edge AI and computing capabilities to the Black Knight product portfolio. With over 20 years of experience in mortgage and banking technology, and deep expertise in IT strategy, architecture and machine learning, Soofi is uniquely suited to discuss AI’s role in the mortgage industry.

Keeping Turned Down Borrowers In Your Pipeline

The difficulty of establishing and maintaining a reliable pipeline of new business has become readily apparent across the mortgage industry. Low credit scores, subpar credit profiles, and rising cost of lead generation and acquisition have taken their toll on the price per lead and, consequently, the total cost of origination. Furthermore, the shift from a refinance to a purchase market has only made it more difficult to drum up new business, adding to the frustration experienced by many loan officers in this sector.

In years past, loan officers relied heavily upon in-house generation of leads. Those leads were typically of higher overall quality, and the prior business relationships removed many of the barriers to conversion common to novel sources of business. However, as many in the mortgage industry are now being forced to look outside of their own organizations for new sources of business, they are often stymied by the sheer number of consumers who simply do not qualify for financial products because of their credit profiles.

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According to a report published by the Federal Reserve Bank of New York, more than one-third of all Americans have a FICO score of 620 or below. Furthermore, the Consumer Financial Protection Bureau revealed that over 45 million adults either do not have a credit score or are un-scorable. There are 300 million people in the United States (that number includes children), and 15 percent of them do not have a credit score. All too often, banks simply tell those people who fall outside qualifying parameters that they do not have the necessary credit, and implore them to come back if and when their circumstances change. There are no mechanisms in place to assist these potential clients, and the time and resources spent acquiring and attempting to convert those leads is seemingly wasted.

The question that every lender and loan officer should be asking themselves is: “Is there any way to salvage even a fraction of those rejections by turning them into qualified applicants?” The answer is yes, and the best way to go about doing so is to form strategic partnerships with entities that specialize in credit remediation and rehabilitation. By forming those partnerships, lenders are able to tap into a previously inaccessible market, while broadening the spectrum of customer services that they offer to current and prospective clients and remaining compliant with various federal regulations.

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Some lenders have recognized the need to steer unqualified applicants toward resources that could help them improve their credit, but have reservations about forming these partnerships with third parties. One of the main reasons that loan officers are reluctant to refer a lead to a third party is because they fear relinquishing control over a lead in which they’ve already invested considerable resources. This is why it is imperative to partner only with those organizations that offer a completely transparent rehabilitation process, and which allows the referring lender to maintain its control at every stage of the remediation process.

Ideally, the loan officer should receive assurances from its referral partners that the lead will not sold or referred to any entity other than that which referred the lead. Additionally, lenders should insist upon periodic progress updates when the referral reaches certain milestones. This type of system will allow the lender to decide how interactive it should be throughout the remediation process. Smaller lenders with limited resources may wish to simply monitor progress, while those larger lenders with greater availability of human capital may wish to be very “hands-on” in order to build a stronger rapport with their referrals. Regardless of which tactic lenders decide is best for them, it is imperative that every referring lender receives notification immediately upon the referrals’ completion of the remediation program, so that those lenders can re-capture those leads when they become qualified for the loans for which they initially applied.

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Many lenders are also beginning to toy with the idea providing remediation services, themselves, in an attempt to assuage their own fears associated with referring leads to third party partners. However, many do not realize that if they were to offer these types of services, or even provide advice regarding self-help, they could be reclassified as a “Credit Repair Organization” under federal law. If this were to happen, it could impute unwanted liability. A financial institution that gets reclassified could face fines or other penalties for failing to comply with stringent regulations imposed upon organizations or individuals who provide those types of services or advice. Forming partnerships with reputable companies that routinely provide this type of assistance would ensure that lenders are able to protect and insulate themselves, while still providing a service that many applicants need.

Aside from converting those leads that would have otherwise been unqualified into viable sources of business, strategic partnerships with third party credit remediation companies offer numerous benefits to lenders that are not as obvious. Lenders should be able to outsource the entire credit remediation process without devoting any additional resources, whether pecuniary or otherwise, to those leads that were initially unqualified. Upstanding companies should never charge lenders a fee for their services. When lenders are able to recapture unqualified leads it decreases both, the cost per lead and the average cost of origination, which are two common goals that every lender strives to meet.

Some of the more seasoned lenders may have reservations about working with credit remediation companies or making overarching changes to their business practices and policies. This is understandable, considering that they have enjoyed past success operating as they always have. However, as the industry landscape changes, lenders must adapt in order to maximize the increasingly limited opportunities that present themselves. A strong pipeline to a previously underserved, untapped market will certainly benefit those who have the foresight to access it early to take advantage of the new source of business. Strategic partnerships such as those described herein are one of the best ways to do just that, and will yield a net benefit to lenders, as they do not require the expenditure of precious resources that would be better spent on in other areas of business development. As the marketplace becomes ever more crowded, and the cost of origination continuously narrows profit margins, the adage “adapt or die” has never resonated so clearly.

About The Author

Elizabeth Karwowski

Elizabeth Karwowski is the CEO of Get Credit Healthy, a technology company that has developed a proprietary process and solution, which seamlessly integrates with the lenders’ loan origination software (LOS) and customer relationship management software (CRM) in order to create new loan opportunity and recapture leads. Get Credit Healthy helped their partners create over $200M of new loan opportunities in 2017 alone, and plan on continued growth in 2018. As a recognized credit expert, Elizabeth has been featured on NBC and Fox News, and published in a number of financial industry publications.

3 Belief Systems That Hurt High Achievers

As an Organizational Psychologist and 28 years working with the top three levels in Fortune 100 companies, I’ve noticed some common themes with some of the most successful people in the world. See if you can identify with any of these:

>> I’m not any harder on others than I am on myself.

>> I’m harder on myself than anyone else ever is…and it’s never enough!

>> This is not rocket science. Why is it so difficult to find people to do their job?

>> I wouldn’t have these issues if I were allowed to hire my owb people!

>> You say, perfectionist like it’s a bad thing…

>> I wish everyone were like _____ (the one you are accused of favoritism for).

>> I only want what’s best for everyone.

>> I AM NOT ANGRY!!!!!!

At first glance, these belief systems seem rational and logical, and part of the success formula for the high achiever…or are they? I call them “BS” Belief Systems that hurt leaders because of their unintended consequences in their relationships at work and at home.

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BS #1 A Leader’s Job is to Whip You into Shape

If I can do it anyone else can…and it’s my job to push you to your highest potential. I’ll never forget my first year in my doctoral program…I took an internship on the East Coast with a prominent consulting firm and loved the fact that my nickname was “The Ice Queen of Attila.” I had a reputation for cracking the whip, and I thought that was a good thing. My Partner in charge pulled me into his office one day and asked why I was so tough on people? I answered that I was trying to make them into better people…that it was for their own good. He thoughtfully retorted “Did they ask you to make them better people?” That was an AHA moment! I could be hard on myself to my heart’s discontent, but I had no right to make others miserable. Leadership by dictatorship went out with assembly lines.

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BS #2 Perfectionism is a Noble Endeavor

The majority of leaders I’ve met are recovering perfectionists, and their ability to be effective was highly correlated with the level of recovery. As Steve Farber wrote, I too have the Dis-Ease of Perfectionism which robs me of the joy of accomplishment. On the one hand, the benefit of perfectionism is that I work very hard, I set and meet goals, and I get a lot done. But working 60-80 hours a week will take its toll on health, wealth and relationships which usually throws the perfectionist to try even harder…and it’s NEVER ENOUGH!!

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Picture a horizontal line where the left end is Zero or Start, and the far right is 100% and Finish. High achievers are almost always at 88%…they tackle all goals/jobs/projects with gusto and get to the 88% yard line. The 12% gap between where we are and Finish is where we live. It’s where the tension is…what still has to be done, what isn’t finished, what is still wrong. The good news is that it gives us the impetus to strive forward, the bad news is that it’s where stress lives, and that anxious feeling will take its toll. And then the straw that breaks the overachievers back is that if and when we do hit the 100%, we are off to the races on the next project/goal/activity and right back at the 88% mark. The lesson in this line? We need to stand at the 88% mark and instead of lamenting what still needs to be done, turn around to look at the 88% that has been done/accomplished/completed and smile with a “Wow, that’s great work” to self and others, we would reduce our stress by 88% and give ourselves and others the validation they/we crave.

BS #3 I Need Smart people to Execute, I Don’t Have Time for This Touchy-Feely Stuff

Every single one of my executive coaching clients has started with the same vent, “I don’t know why things have to be so difficult…it’s not rocket science, it’s common sense!” My response has not changed, “There is one organization where pure logic, rational thought prevails, where’s there no politics, power plays, peripherally located egos, conflict and miscommunication…the CEMETERY! Where there are no people, there are no problems! Once my clients accept the B.S., they spend less time fighting the illogical, irrational part of organizational life and can allow for the natural human dynamics at work. That takes 88% of the angst out of the situation, and then processes and plans can be made which harness the great part of having humans at work, creativity, inspiration, collaboration, synergy, and joy.

About The Author

Dr. Marissa Pei

Consulting Psychologist Dr. Marissa Pei is author of the newly-released title, “8 Ways to Happiness from Wherever You Are” that outlines eight ways to transition from sadness to being happy 88% of the time. Dr. Marissa has been speaking, coaching and facilitating to hundreds of Fortune 500 companies for nearly three decades. Her popular award-winning syndicated talk radio show “Take My Advice, I’m Not Using It: Get Balanced with Dr. Marissa” is syndicated on CNBC News Radio and iHeart Radio. Find her book online at www.8WaysToHappiness.com.

3 Communications Basics That Build Confidence

Communication is ingrained in every facet of life, yet many struggle with fear, insecurity and general ineffectiveness when they find themselves eye to eye with someone to present ideas, address complicated situations, express feelings, negotiate or just “sell them self”—all whether in a personal or professional context.

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According to Megan Rokosh, a global business communications expert with over 12 years of agency public relations, media and creative strategy experience, “Some people are paralyzed with fear at the very thought of taking an idea and communicating it, both in the workplace and in their everyday life. However, confidence can be significantly bolstered by heeding even a few simple strategies—some basic fundamentals and essentials—that can improve one’s poise and self-assurance…and results of the endeavor at hand.”

Here are three of Rokosh’s confidence-building communications requisites:

1.) Craft situation diffusion dialogue. Create an assortment of “go-to” statements you can have at-the-ready to handle awkward or hard situations and moments. These are assertions and declarations that you know work well and that you can whip out quickly when needed. For example, if you are late to a social outing, rehearse saying “I’m so sorry I kept you waiting, my rule is when I’m late, all the drinks are on me.” Or, when you’re at a loss for words, you can assert, “I could have sworn that I packed my tongue today” and lighten the moment. Having such short statements up your proverbial sleeve helps to avoid stumbling your way through awkward moments.

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2.) Give in to vulnerability. Vulnerability often equals likability and they are indelibly connected—so use that truth to your benefit! There’s not much more off-putting than arrogance, and seeming vulnerable can make you more relatable. If you’re nervous and kicking off a meeting, tell your audience to “be gentle with you” and have a quick laugh to loosen everyone—and yourself—up. Self-effacing humor can be a powerful tool. Or, if you’re having a difficult time understanding something, you can say, “I’m so sorry if I’m holding us up here, but would you mind explaining one more time?” Your contrition will surely endear.

3.) Address adversities head on. You will undoubtedly face times at work and at home that require you to address something difficult. Although challenging and scary, the situation usually must to be addressed to be effectively resolved. Great leaders always speak up and you should, too!  Make clear from the beginning that you intend to hear and consider the other person’s side, stating something like, “Your perspective is valid and really want to hear what you have to say, but first, please allow me to share my thoughts….” followed by a the suitable words. This will give you the floor, hopefully uninterrupted, since the other party has been given the assurance they’ll have a chance to present their side as well. As goes without saying, this discourse should be in person versus via text or email whenever that’s a possibility. There are times when a call or in-person meeting is just the right thing to do and where words, inflections and expressions if face-to-face will be far more impactful and meaningful.

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Rokosh also reminds us that the world’s best communicators are trained. “It’s very that an incredible communicator hasn’t put in extensive work toward their oration skills so they can speak eloquently, pause in powerful silence when appropriate, address very difficult media questions, etc.,” she notes. “It’s important to remember that, while some people are inherently talented communicators, for many (if not most) becoming a confident communicator requires learned skills. It’s one simple strategy like those above built upon each other, and proactively putting them to use, that will get you where you want and need to be.”

As an advice-doling expert, Rokosh doesn’t just talk the talk, she walks the walk. Having worked with many high profile global organizations and consulted with C-suite executives from nearly every industry, she’s created hugely successful platforms founded on effective communications. This includes working directly with top-tier media like Forbes, Wall Street Journal, Fast Company, Ad Age, Adweek and scores more. Rokosh was even invited to partake in the elite “Business of Media, Entertainment and Sports” program at Harvard.

So, if effectively communicating is an area of insecurity for you, if you find yourself being held back by the fear, or if you just want to amp up your existing communications prowess, try Rokosh’s three easy tips above to feel more resilient and controlled—or, at least, exude the image that you are.

About The Author

Merilee Kern

Branding, business and entrepreneurship success pundit, Merilee Kern, MBA, is an influential media voice and lauded Communications Strategist. She also serves as the Executive Editor of “The Luxe List” through which she spotlights noteworthy brand endeavors. Merilee may be reached online at www.TheLuxeList.com. Follow her on Twitter here: http://twitter.com/LuxeListEditor and Facebook here: www.Facebook.com/TheLuxeList

Five Factors To Consider In 2018 That Could Cause Housing To Be Stuck In A Rut

With the roller coaster 2017 housing year behind us, let’s look beyond the numbers and examine some lessons learned and look at areas that if addressed properly could mean even more success for 2018. Looking at the big numbers including purchase volume and prices, you would have to conclude it was a great year from a new purchase perspective. But there are undercurrents that indicate we have perhaps cannibalized today for the future.

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Like the rush of refi’s from the past few years that have steadily fallen in 2017 – currently at the lowest levels in 16 years– we may have reached a peak in new purchases – at least for a while. Why? The housing industry could be facing a bit of a rut. Consumers who can afford today’s homes have likely already locked in and those who have not, may choose to sit it out for a while. Let’s take a deeper look at the issues we might continue to face in 2018.

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1.) Potential home sellers do not want to become homebuyers

Housing inventories have been at a record low for the better part of 2017. We have what’s been dubbed the best sellers’ market ever with 79 percent of the homeowners in America say “now is a good time to sell,” according to the latest ValueInsured Modern Homebuyer Survey. But, with home prices are at a record high; many potential sellers simply do not want to be buyers after they sell their homes. In fact, some homeowners who would want to sell admit to “feeling stuck,” with 63 percent saying now is a good time to sell but not to buy due to those same high home prices and 61 percent of all homeowners who want to sell soon say they are “waiting until prices to buy are better to make a move.” At today’s high home prices – and many overvalued according to other industry data– it is less expensive for many homeowners to just stay put. This is particularly true based on the fact the industry had record high refinance volumes just last year. This points to the fact that many potential sellers have recently refinanced making it unlikely that they will be willing to give up their historically low mortgage rates.

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2.) Renting is no longer an attractive alternative for homeowners

In the not-so-distant past, if home sellers got sticker shock from the home prices, they would consider selling and then renting. This is particularly true in cases of empty nesters who wanted to downsize, and enter retirement or a new phase of their life that included traveling more and being at home less. But rents now are also at a record high, and people lose the flexibility and control of homeownership. Studies have shown once converted to homeowners, Americans rarely go back to renting believing that it is a better lifestyle or financial alternative. It is true that in times when rents are more affordable, homeowners could have the option to sell at a hefty profit and rent for a while until they purchased another home. But at today’s high rent prices, interim renting may no longer seem like a good strategy. After all, according to ValueInsured’s latest survey, 81 percent of all Americans and 89 percent of homeowners say owning is more financially beneficial than renting.

3.) There are other expenses competing for a buyer’s budget

This has always been historically true, but likely more so today and in the months to come with reports of millennials financing everything from bedsheets to concert tickets. And do not forget about those expensive avocado toasts and bachelor parties on top of spending on such items as iPhones and other electronics as well as cable bills to watch Game of Thrones and student loan debt. At the same time, wage growth remains sluggish and nowhere near the growth rate of home prices. Compared to their parents, today’s homebuyers have more essentials and exponentially far more non-essentials competing for their budget. When value for the dollar is not there for new homebuyers, they suffer from buying inertia before committing to a mortgage.

4.) Homebuyers remember

At least some do. There are certainly homebuyers buying at today’s record high prices, but there are also others who have retreated and remember well their own personal experience in 2007/2008 or at least that of a loved one, neighbor or co-worker. The sad truth is it certainly would not take the “six degrees of Kevin Bacon” for any homebuyer today to recall anyone they know who suffered greatly – or even had their entire personal wealth wiped out – in the last housing crisis. In many of the country’s top real estate markets, you do not need to go further back than six years – or in some cases two years – to remember the last market correction. Some people might say a short memory is important for getting back up and trying again after a failure but that may only be true if you do not have your entire life’s savings and your family’s future on the line. Regardless of academic or policy talking heads saying a bubble is unlikely, this more fiscally conservative generation remembers, with nearly 6 in 10 Americans (59 percent) believing another 2008-style housing crisis could happen again in their lifetime and 65 percent of all millennial homebuyers saying they are concerned about buying high. So they wait to buy a home.

5.) Lack of innovation

Now in 2018 – three quarters of a century since most of our grandparents got their first home mortgage – assuming a digital mortgage or slick online portal is innovative for our industry is simply laughable, and a disservice to our customers. It has been at least 17 years since we all expected everything to be simple, digital and quick – it’s the price of entry, already baked in, even if you want to sell groceries. Today’s parents routinely watch their toddler walk up to a poster and attempt to swipe and change the picture, only to be puzzled when the image is not dynamic. Our industry needs to go beyond eye candy to meet the emotional needs of buyers. Homebuyers do not necessarily understand the buying process from all the logistical, technical standpoints – nor should it be their job to do so – but their everyday experience prepares them to expect consumer empowerment, convenience, turn-key gratification and a brand relationship mostly devoid of loyalty. Homebuyers will price shop their home loans, just as they do everything else, until they see real differentiation and consumer empowerment. So glossing over the process is not the answer.

Loan officers and real estate brokers need to bring value-adds to preempt cold feet, calm buyers’ jitters in today’s bubbling market and offer long-term solutions that give buyers greater control of their homeownership experience beyond matching – or shaving – points and rates. This is the first line of opportunity to rebuild trust and confidence in the mortgage industry.

We have our work cut out for us in the coming years. More immediately with the promised regulatory and economic changes, our industry will be tasked with drastically changing the home buying process, interactions with and offerings to consumers. The next generation of homebuyers is looking for trusted advisors who can look out for not only their current transaction but their financial future. And when you can deliver that, expect a repeat serial buyer customer and more referrals to come because the next generation of consumers also relies heavily on reviews and referrals to make their purchase decision. With your phone (likely an iPhone X, not a desk phone) ringing off the hook (or rather, social media notification going off), with innovation and progress in lending, at least your business will not be stuck in a rut.

About The Author

Joe Melendez

Joe Melendez is founder and CEO at ValueInsured. During his career, Melendez has specialized in building substantial relationships and developing strong business alliances that help bring innovation to the financial market. His focus at ValueInsured is to reignite the home purchasing process by focusing on the specific need to protect the homebuyer’s down payment.

It’s The End Of The World As We Know It

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“It’s the end of the world as we know it.” — R.E.M., 1987

How many times has that thought run across the minds of those of us in the mortgage industry since 2008? That line seems to capture how a lot of people feel about the recent presidential election. Whether you’re keeping an open mind or you fear we’re headed for disaster, one thing is for sure: change is upon us. We don’t know what the coming changes will look like, but whether or not they’ll be regarded as positive depends largely on how we handle them. It would be foolish to speculate broadly or too specifically about what the new President will do once in office – just ask the pollsters and pundits who woke up with their heads spinning on November 9th. But both candidates spoke loudly of policies that need to be updated, redesigned or completely dismantled.

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The widespread election of Republicans at the national and state levels signals that the Dodd-Frank Wall Street Reform and Consumer Protection Act will be a target; it’s been on the (now) ruling party’s radar practically since the drafting phase. The mortgage industry may be in for changes TO the changes we’re still mastering and adjusting for. Lawmakers aren’t the only ones the mortgage industry must obey, for the consuming public is our ultimate boss. The industry must brace itself not only for what regulators may do, but what the public is demanding. Change is inevitable in business, but profitability and survival really depend on how those changes evolve.

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It took years to enact aspects of Dodd-Frank, like the TILA-RESPA Integrated Disclosure Rule (TRID), and whatever changes may come are likely far in the distance, meaning that widespread lender relaxation of compliance policy and procedure is not advised for obvious reasons. Companies and originators have been experimenting with all sorts of technology for marketing and compliance with varying degrees of success. The fear of Consumer Finance Protection Bureau wrath has mellowed of late and doesn’t dominate the industry dialogue as it once did. But canvass the nation and you’ll find a veritable mélange of systems and tools in use at different companies and branches to manage compliance and marketing. Companies must take a realistic approach to compliance and the diverse needs, attitudes and willingness of MLOs to adopt mandated technologies. Communication and leadership is as important as the technology choice itself, and implementation won’t be successful without buy-in from those affected.

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The need for new technology to manage business is well understood, however the entrepreneurial nature of the humans who originate loans must be understood as well. Management can’t assume that change – even if necessary – will be embraced. One size doesn’t fit all for top, mid and lower-range producers, and neither does one announcement or approach to getting the rank and file in line with what needs to be done. Dodd-Frank is still on the books for now and regulators have been nipping at our heels for years, but another key to our success and survival is also hard for lawmakers to keep up with: the digital age.

“The digital mortgage” has displaced “compliance” as the top of mind concern in virtually every area of the mortgage industry – and the public is clearly ready for it:

>> 89% used some form of online technology to help them with the homebuying process

>> 76% feel technology made them a smarter homebuyer

>> 69% said technology made them feel more confident

These figures were compiled by Versta Research in a survey of homebuyers commissioned by Discover Home Loans, and the Federal Reserve Bank recently released its 2016 Consumer and Mobile Financial Services report showing that 87% of adults are using mobile technology and 43% are using their devices for banking services.  The public is comfortable managing day-to-day household finances on mobile devices, and those transactions and records tie directly to the larger, more occasional act of getting a home loan. Since big and small lenders alike can execute digital mortgages, the fears that jobs will disappear and that the need for loan officer expertise will diminish are real. But there’s consolation in the Discover survey for the humans working in mortgage:

>> 67% of homebuyers said after using apps and the internet to explore real estate and financing, they still preferred to work with a professional

>> 33% of respondents found the financing process difficult

>> 31% of respondents found the financing process confusing

Feelings of panic over the rise of the digital mortgage are really the result of thinking that it’s “all about us” in the industry versus the borrowers we serve. As bosses go, consumers are tough:

>> Have you ever applied for a job where you were abundantly qualified, aced all the interviews, jumped through every hoop and still didn’t get it – like when you incubate a prospect through credit repair, mortgage planning and pre-approval, but they close with another lender?

>> Have you ever worked for someone who’s tough to please – like a borrower who took personal offense at what’s required to get a mortgage and was convinced their experience would have been different with another lender?

>> Have you ever completed a difficult task only to have the way you approached it dissected and criticized – like getting a loan closed against all odds and getting attitude instead of gratitude from the client?

Consumers don’t always know what they want, but they easily and eagerly opine about what they don’t. And unfortunately, we usually find out what those things are after a transaction is closed. Being the best has always been a challenge, but how do companies and MLOs win in a supercharged regulatory and increasingly digital environment? The Federal Reserve Bank and Discover reports reveal an attachment to the human element in addition to a growing appetite and demand for digital services and 24/7 access. Success in the next era of lending will require an understanding of how to deliver what consumers want – and deploying technology to deliver it when and how they want it. As professionals, companies and MLOs need to self-examine:

Automate. What’s your process from contact to close?  What tasks can be handled by automation – or “digitized” – keeping in mind that quality still counts? For example, a lot of marketing can be set on autopilot, but the messages must be current, relevant and motivate prospects to action.

After taking a thorough, honest inventory, update your process – and your thinking. Next, figure out how much time and manpower you will save by deploying technology when it makes sense. There’s a bright side beyond surviving in this increasingly digital world: we can generate analytics and derive crucial insight on the things consumers need and find important that we previously never dreamed of. Around the clock access to their transaction and the metrics on usage will reveal how often borrowers feel the need to check in on their loan’s progress…they’ll log in a lot more than they would otherwise call. Digital access also means answers will be delivered without MLOs having to take calls or answer emails. Decide how you’ll use your freed-up time to elevate your service.

Elevate. Decide what’s important and be there for it “live.” Whether it’s a call or face-to-face meeting, MLOs can spend the time to do what online mortgage calculators and websites can’t. Things like offering specific, expert advice on what a borrower can afford – not just qualify for, calming nerves over credit dings, reassurance about the benefits of homeownership, and counseling on reserves, household finances and how to manage the massive, multi-year commitment of a mortgage.

Change brings opportunity. We don’t know if a new presidential administration will declaw or dismantle Dodd-Frank, but we do know that innovation and technology are juggernauts that don’t care who the President of the United States is – or what political party is in control. The mortgage industry must never lose touch with the borrowing public, even if it feels like the digital trend is depersonalizing the service we provide or diminishing our importance. Companies and MLOs who embrace this progress will evolve and thrive in the next era of lending. When we acknowledge the things we can’t control, and carefully consider and respond to the signals and needs of the consumers we serve, the concept of “making it up as we go along” manifests as real, positive evolution.

There’s a lot going on in the mortgage industry and our country. With open minds and a connection to why we got into and stay in this business, we just might reach the conclusion that R.E.M. did in the last line of their ’87 hit: “I feel fine.”

About The Author

Sue Woodard

Sue Woodard is president and CEO of Vantage Production, an advanced CRM technology provider based in Red Bank, New Jersey. An award-winning 20-year mortgage originator, Sue is a renowned speaker, trainer and writer for the mortgage origination community.

How Mortgage Tech Innovation Has Evolved

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Clayton Christensen, the Harvard Business School expert who coined the phrase “Disruptive Innovation,” has written what is sure to be one of this year’s hottest business books, “Competing Against Luck.” Christensen postulates the key to successful innovation is understanding the “job” your customers are hiring your product or technology to solve. Over the course of the book, he cites examples of how the “Jobs Theory” (in one form or another) has been applied successfully by leading companies, such as Intuit, Ikea and Airbnb.

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This created pause for me, and I began thinking about the “job” mortgage lenders and bankers are “hiring” loan origination systems (LOSs) and other technology products to perform. The job has always been: increase productivity, prevent errors, and take time and cost out of the origination process – from the 50,000-foot view. Many of us realize the sands have shifted and over the years and the issues customers have used LOSs to resolve have dramatically changed.

The Evolution of LOSs

When CalyxSoftware was launched 25 years ago and Point 1.0 was introduced, the mortgage origination process was completely form-driven. Most loan originators (LOs) were filling out loan applications with typewriters using pre-printed forms and carbon paper. Make a mistake and you could not just use “Wite-Out.” (Remember those little bottles?) You had to retype the entire form. Even if you were careful, aligning the typewriter or word processor with the fields on the pre-printed forms was a painstaking and painful process.

When you stop and think about it, the first job was to simply fill out the forms. The technology matched the need, and made the lives of the LO and processor easier. The software came in a shrink-wrapped box and resided on a floppy disc (it was totally rigid and contained less than 0.0008% of the computing power of today’s average smart phone). Updates came by snail mail, not miraculously from a “cloud.”

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In the early 1990s, our industry saw the first of a series of $1 trillion origination years—milestones that would have been unattainable without technology. The timing for innovation could not have been better.

Over the next two decades, LOSs were hired to do other jobs within the mortgage origination process. These jobs included connecting various parts of the process (production, underwriting, closing, QC, pricing/secondary marketing, etc.) and participants (originators, investors, GSEs, vendors, etc.).

Until the mortgage industry crash, speed and ease of use were the benefits users valued most. Post-crash, the wave of new regulations and fear of “buybacks” and penalties created a new job for LOS and tech vendors: automated compliance.

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The focus on compliance for the past few years has siphoned resources away from innovation—except for enhancements focused on compliance. Rules on ATR, QM, LO Comp, and TRID (which clocked in at 1,888 pages), and the updated HMDA and upcoming TRID 2.0, have highlighted the importance of tracking and retaining data to stay compliant. This has led to the development of data-driven LOSs.

A data-driven LOS allows originators to input all borrower and property information once, in a logical progression; then uses those data fields to populate multiple forms—simplifying the application process, as well as compliance with new regulations. Additionally, when a new form is mandated, a data-driven LOS only needs to add the new data fields and map them to the correct lines on the new form.

The current landscape dictates the LOS to be the system of record. Smart integrations between the LOS and document vendors now serve greater purposes. The integrations not only provide the resource to create the documents, record changes and chronicle why, but also store the documents, so they are easily accessible to lenders and regulators. This is a compliance-centric enhancement.

Going forward, compliance, accuracy, and transparency will still remain the priorities; however, the balance between compliance and innovation will ideally be a 50/50 split.

Jobs for LOSs

The advent of non-traditional FinTech lenders and imagination-capturing products such as Quicken’s Rocket Mortgage, have prompted some observers to question the future of LOSs. These new players and products will create new expectations from consumers, and raise the bar for traditional technology providers to provide enhanced offerings. However, when you look behind the curtain, these innovations handle only a portion of the process in the loan life cycle.

FinTech lenders appeal to Millennials due to ease of use at the beginning life cycle of a loan but the playing field evens up quickly at the underwriting stage. FinTech firms may experiment with new ways to qualify and underwrite loans but loans still need to be funded. At the end of the day, everyone (to and including the FinTech lenders) must still meet GSE underwriting standards.

Early adopters may be willing to give new players unfettered access to their personal accounts in return for less paperwork; however, the vast majority of homebuyers and owners are not there yet. By the time they are, these capabilities will be integrated into LOSs and into the consumer direct channels of traditional lenders.

Despite what the TV and online ads promise, many borrowers, based on their FICO scores and the complexity of their financial situations, will simply not qualify to utilize a Rocket Mortgage-type technology. Juggling early adopters and traditional borrowers will create challenges for FinTech lenders. They will need to offer two separate sales experiences: one for pristine, tech-savvy borrowers and one for everyone else.

Industry surveys continue to show a large percentage of homebuyers are more comfortable working with a LO rather than going alone online. The 2015 National Survey of Mortgage Originations, jointly sponsored by the Federal Housing Finance Agency and the Consumer Financial Protection Bureau, found that 70 percent of mortgage borrowers in 2013 used lenders/brokers “a lot” as a source of information. In addition, 77 percent of borrowers applied for a mortgage with a single lender or broker, instead of completing applications with multiple lenders or brokers.

Will this change over time? Probably. For the foreseeable future, the job of the LO and the mortgage broker appears to be safe. This is particularly true providing the LO continues to offer a high-level of customer service and differentiates themselves by focusing on non-perfect borrowers and non-vanilla lending programs/products.

As originators focus on these opportunities, this will create new jobs for LOSs and tech providers to complete. For example, they will look to product and pricing engines to source non-agency products allowing them to match these programs with their customers.

New technology for non-agency wholesale lenders already allows brokers to provide conditional approvals to their borrowers without having to send an entire package to the lender. This saves several days in the loan life cycle. Additionally, these loans are often more profitable for both lenders and brokers. Best of all, the LO is providing an opportunity for homeownership for unique borrowers that otherwise would have been denied.

The borrower experience, as we have seen, will take on greater importance. Younger borrowers will want to engage with their lenders throughout the origination process using their device of choice. Technological developments will play a major part in enabling this scenario.

The LO will need to ensure they are utilizing technology such as mobile applications, mobile pricing, and software allowing them to share updates with their borrowers or realtors at any given time. The LO will also want to focus on utilizing LOSs that are fully integrated with instantaneous verifications providers, such as The Work Number or FormFree, allowing reduction of time in the loan life cycle.

As vendors become more closely integrated in the LOSs, data integrity will continue to improve and advance the prospect of movement to truly paperless mortgages. This in turn will further enhance the customer experience, particularly the disclosure and closing processes.

LOSs are and will continue to be the hub of the mortgage origination process—connecting lenders with not just borrowers and vendors, but also regulators. True cloud-based computing (think: Microsoft Azure and Amazon AWS), not just today’s web-based solutions, will significantly expand end-to-end origination capabilities as well as workflow, loan review, and delivery options.

Over the past 25 years, the challenges and jobs within the mortgage industry have transformed dramatically. What has not transformed is our industry’s ability to resolve and respond with innovation to tackle the ever changing landscape of the mortgage industry.

About The Author

Bob Dougherty

Bob Dougherty is Vice President of Business Development at CalyxSoftware, a leading provider of comprehensive mortgage software solutions for banks, credit unions, mortgage bankers, wholesale and correspondent lenders and brokers. He can be reached at dougherty@calyxsoftware.com.

Producing Reliable Results

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I started running again. Again, because I used to run every day and competed in numerous races. Everything from 5Ks, which is a 3.1 mile run, to marathons which are 26 miles, 385 yards. While I certainly don’t run as fast as I used to, or as far, one thing hasn’t changed, the need to track my times in order to find out how to make myself better. If you are a runner or have ever known one, you know that this is one thing we have in common. We know every data point about our running process. We can tell you how many miles we run a day, a week, a month or a year. We can tell you our average minutes per mile, our best times and even how many seconds we took off our time for every race we run. All of this data is important because it helps us get better, as well as, better prepare for the next race. We use our last achievement as the benchmark for the next and we are obsessed with making sure we have a reliable methodology for meeting those times. More than anything we want to know what to expect when we sign up for the next race or focus on beating our own benchmark.

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While those of you who are not runners may think those of us that are as overly focused on this need to develop a high level of reliability in our results. However, we are not alone. More and more companies, especially those that provide direct consumer services have the same passion. Companies that are in the business of providing call center support are a perfect example. These companies, such as the country’s most outstanding global “customer experience management” provider, track numerous data points on an on-going basis. Each of these data points has an acceptable level of performance which must be met on a quarterly basis. These results then become a critical part of their ability to attract new clients. The reliability of the company to continuously provide service at the expected level is what allows them to charge a higher price for their services. In other words, reliability generates profitability.

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Direct customer contact services are not the only entities that profit from the utilization of a “reliable process” approach. This concept is observable in manufacturing as well. In fact, most of the people reading this article have more than likely benefitted from it. Think about the products you buy. Clothes, cars, food and just about every other purchase you make. Most people will buy multiple times from the same manufacturer if they are pleased with the product they originally bought. For example, my daughter bought a Volvo over 10 years ago. The car has over 150,000 miles on it and is still the one she takes on long distance drives because she knows it will get her to wherever she is going and back. If fact, she is planning to give it to her son when he starts to drive so that she has excuse to buy another one. This is where reliability really pays off. Why? Although a new Volvo has not yet proven it can perform the same, the confidence built up from the steady performance of her old one is the determining factor in her decision to get another, regardless of the cost.

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So what brings about this level of reliability? Is it a special plan or a “secret” approach that some companies have developed? The answer of course is no. It is simply the ability of any company to make sure their operations, the processes which produce their product and/or service are performed consistently. How do they do that you may ask. They do it in the same way a runner manages the consistency of his or her performance. By measuring, benchmarking and comparing.

Whether you are originating loans, purchasing them, warehousing them or servicing them, every function within every organization has a process for doing what they do. Much of this process may be technology driven or may depend entirely on human involvement. It doesn’t really matter.  Where there is an operational process there is an expectation of what will occur as a result of that process. Once that output is identified and the results tracked, you can begin to develop operational reliability.

The term “operational reliability” has become well-known to most industries as the foundation of producing quality products. It means that a company whose products repeatedly perform as expected is much more likely to provide a product that meets your expectations the next time you buy it. In other words, it you contract with the call center company mentioned above, you can expect that your customers will receive the level of service that has been promised and is documented through their data results.

All well and good you say, but I have at least two, if not three customers. There is the consumer who expects strong and consistent support from my production staff as well as providing the information necessary to choose the best loan. There is also the investor who expects that the loans they buy will repay based on the credit risk identified in the credit policies. Both the investor and consumer expect that servicing operations will effectively handle payment processing, the associated activities and, if necessary, manage the foreclosure and REO process. Finally, there is the warehouse lender who expects that the loans will be purchased in a timely manner and will not stagnate on the line or have to be repurchased.

Developing operational reliability.

Most companies have more than one customer with different needs and expectations. However, when we drill down into what each of their differing customers want, the answers are all consistent. All of these customers expect to receive what you have committed to provide. In order to do so you must ensure the operational reliability of your entire operation. So based on these expectations, how does one go about The most logical place to begin is with the operations themselves. Start by identifying all the processes that go into “manufacturing” the mortgage loan. Of course the first operation is the contact between the consumer and the loan officer. What is your process for making this happen? When the loan officer meets with a potential customer, what is supposed to be the result? What are the inputs the loan officer provides? What are the expectations from the consumer? What is the final output supposed to be?   What actions and/or activities produce that result? Are these expectations documented and measured for at least a sample of loans originated for each loan officer? Once you have collected the data you can use it to identify where the process is working and where it is not. Unfortunately, many times lenders fall prey to the belief that these activities cannot be measured and use this as excuse for not attempting to monitor this piece of the process. However, this can be done. Other industries, such as call centers have done it.

The next set of operational activities include the decision-making and closing steps. Here, the actions taken are many times reviewed by others, such as QC or senior managers. Unfortunately, these measurements are not focused on whether or not the operations we perform actually support the customers’ expectations. For example, let’s look at the credit underwriting guidelines. Nowhere in these guidelines are there statement regarding how the loans produced using them will perform. We recognize that there are many different standards for underwriting, based on the risk appetite of the organization. The operational reliability of this process is making sure those are guidelines are followed and if an exception to them is warranted, it is properly documented and tracked. Tracking exceptions to guidelines is much more important than just having documented them. Imagine if an exception to a guideline occurred 35% of the time and this exception was tracked and found to have no impact on the performance of the loans. What could that mean to the purchaser of those loans? How could that impact the guidelines and streamline the operations of underwriting loans in the future?

Servicing, with its multi-faceted process is ripe for reaping the rewards of operational reliability. Since the mortgage crisis they have been inundated with new consumer requirements, especially when it involves interacting with the borrower. These actions, both on a service provider level and a collection process operational standard could use the operational reliability measurements that have been developed by numerous call center operations. In addition, the CFPB has developed a set of standards that are expected to be met by servicers. Yet how often does any specific servicer meet them? We don’t really know because there is no benchmark that covers servicers. Maybe the operational reliability standards set by CFPB are excessive? Maybe with the level that can be reached is lower due to the associated operational processes? How can any servicer demonstrate that the operational reliability of their processes actually meets consumer demand? None of these questions can be answered because unlike other industries, this benchmark is absent.

A recent item in one of the industry trade journals suggested that servicers are at the breaking point; that if they are required to continue to meet all these requirements their operations will implode. The writer of this article basically blamed it on the outdated technology. However, If this is in fact the case, why haven’t servicing managers identified operational practices that are failing, measured the failure rate and looked internally to change the operations. Instead many have implement manual reviews that are too little and way too late. These reviews tend to identify specific loan issues rather than the operational failures that produce unreliable results. The results should also provide more than just a dump of data but instead should provide an in-depth understanding of what a process is supposed to produce and the rate it actually produces that result.

Most lenders pay close attention to their warehouse lines but not to measure operational reliability. Instead they are reviewing the number of loans and the days these loans have been on the line in order to avoid interest penalties. Imagine however, if the origination operation was so reliable that the concern over excessive interest payments was not an issue. If the reliability of the product was such that the loans were always purchased timely. Could that result in lower interest rates from the warehouse lender? Now we will never know because the operational focus on this process is on a lack of reliability rather than on how consistently the operation works.

Managing for reliability

The CFPB requires in its statement of expected organizational management, that every company will have a “CMS” or compliance management system. Too frequently organizations see this as a mandate to ensure compliance with regulatory requirements. What it is really saying is that lending companies must have a system in place to ensure that what they say they are providing is what is actually occurring. This involves having data that updates all operational activities on a regular basis and in a meaningful format. If, because the data is not collected or not collected accurately, the results could lack the reliability necessary to make management decisions.

Unfortunately, most senior managers do not have the information they need to make effective decisions. While they get reports on volume, profit and/or problem areas, they have nothing to allow them to reconcile this issues with the overall operation of the organization. Getting a QC report that says a total of 1% of the loans had a “significant default” does nothing to help them understand the underlying operational process that caused the problem, the severity or impact of the issue and the priority of making management decisions on addressing the problem. Most of the time these reports rather than providing assurance to managers, make “mountains out of molehills” and result in wasted time and energy trying to fix random problems. In the desperate attempt to really understand what is going on in their organizations they demand more and more reviews and reports which only succeed in confusing issues and increasing operational costs. Despite the fact that attorneys at recent conferences pushed the need for companies to know more about their organizations than the regulators do this cannot happen if the data collection is focused on the wrong issues or is not statistically sound.  In particular managers must know not just such things as production counts or the turn times for handling complaints, but how likely they are to have the issues that are seen as a problem reoccur. This information comes from reliability measurements.

At the end of the day, organizations that want to produce reliable products and services, must identify, measure and report all facets of their operations. This means not only including every activity focused on the outcome, but having a means to measure its effectiveness and analyzing these results in a way that not only makes the operation efficient, but also ensures that the products/services produced are worth the highest possible price. This is what operational reliability is all about.

About The Author

Rebecca Walzak

rjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak, a leader in operational risk management programs in all areas of the consumer lending industry. In addition to consulting experience in mortgage banking, student lending and other types of consumer lending, she has hands on practical experience in these organizations as well as having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

Sustained Winds Of Change To Continue

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We’re all conditioned to think about change coming in waves with ample time in between to recover before the next wave hits. This is true in both our personal and our professional lives; we see it within a year and within a lifetime. But what happens when the waves of change become so frequent that it’s hard to tell where one ends and the next begins?

Since 2009, the US mortgage industry has experienced back-to-back changes. Not only have we seen typical purchase/refinance cycles, but we’ve also had countless compliance changes: RESPA, ATR/QM, KBYO, and so on. It’s not just the mortgage industry, either. Across seemingly all aspects of modern life, largely thanks to technology, the pace of change is quickening. For example, the VHS was introduced in the US in 1977, followed by the DVD 20 years later in 1997. However, Blu-ray entered the scene just 6 years later in 2003, and now we have the 4K revolution quickly setting in – something YouTube adopted in 2010. Now, with the election of a new kind of presidential administration, there is no reason (on top of all others) to think that the pace of change in the US mortgage industry will ease. There will be considerable uncertainty around regulation and interest rates. Add in innovations like those for borrower experience now further fueled by Fannie Mae’s Day 1 Certainty program and industry movement towards eClosing and the overall view can be daunting. Our new normal is nearly constant change. The question becomes: How is this constant change impacting your staff, and what can you do to support their needs in order to best serve your customers?

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It’s in our nature as humans to react to, and then absorb, a wave of change. We also expect that the dust will settle before the next wave of disruption hits. However, when change continues unabated, it can be stressful. As managers, it can be equally stressful to help your staff adapt to these times. One way to simplify the impacts change has on us is to think of change similar to the well-known stages of grief: denial, fear, acceptance, commitment:

>>Denial. With change often comes an unwillingness to accept what lies ahead. Fortunately, there are steps you can take to help your staff overcome this make-or-break stage. First, get buy-in from staff early on. By communicating what the change means to each team member long-term, you are more likely to advance through the four stages without as much resistance or push-back.

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>>Fear. Denial and fear often go hand-in-hand. Again, communicating regularly about what this change means for each employee and how you seek to make the transition as smooth as possible for everyone can make all the difference. Most important for this stage is establishing an action plan for addressing the changes. This step can significantly help your staff see the big picture and the “light at the end of the tunnel”.

>>Acceptance. By now, you should have buy-in from your team that the change is happening but is manageable thanks to the plan you’ve put in place. At this stage, you should encourage that acceptance and continue keeping the lines of communication open. Without ongoing communication, staff could very well revert back to the previous stages, thinking the plan established is not, in fact, being acted upon.

>>Commitment. Because the waves of change are sure to be constant going forward, the four steps can become cumbersome and hard to constantly manage. In order to gain true commitment from your staff, ensure you have a nimble “change-enabled” origination process in place. By creating systems and processes that can easily adapt to meet change, you can significantly reduce the impact of future changes on your staff and your customers.

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By better understanding how we, as humans, process change, while also taking our own advice by going through the 4 steps to accept that we now live in constant change, we can begin to best position our organizations for long-term success. The next step in riding the winds of change is to establish the processes and systems that will lead your staff towards long-term commitment.

While as an industry, we can’t avoid or ignore external change like required security or compliance updates, lenders and vendors alike can build vetting and prioritization processes to make sure that only the best changes/improvements are put in place to truly support where your business needs to go. If you have too much “self-introduced” or discretionary change, then you might add unacceptable levels of risk. On the flip side, if you have too little self-introduced change, then you’re sure to be exclusively reactionary and passed by competitors.

So what are common criteria for vetting and prioritizing change in the mortgage industry? Compliance risk, financial risk, impact to borrowers, impact to staff efficiency, level of effort and/or expense all are great starting points. For a given proposed change, many of those categories might be mixed (positive in some areas, negative in others). Some will be easier to quantify than others, but this should not mean that subjective measures can’t be used. For those that might fear bureaucracy, you can introduce a lightweight and flexible process. The point is that you collect additional facts only when appropriate to the size/impact of the decision. Frequently, you will decide based only on readily available information but still will take the time to capture it in a structured way. Having a transparent and fact-based process helps get the right discussions going between the right people and will make difficult decisions easier.

So a process around vetting and prioritizing change is essential. In addition to that, what aspects of an origination platform will help manage change? True flexibility is required, but what specifically in a technology platform provides flexibility? An open architecture that is extensible means having a developer’s toolkit and an API surface. An exposed rules engine is also important so that you can easily configure workflow, drive efficiency like automatically ordering services, kicking off exception processes, etc. Last but not least, delivering all this in a SaaS product model is critical to stay current on the latest releases. This is no longer optional thanks to regulatory changes and ongoing security enhancements to keep your borrowers’ data secure. Custom or quasi-product models allow for the customer to lag on an out-of-date version. When this happens, you’re not only missing the latest security and compliance updates, but you’re also limiting your ability to effect change because of the friction of moving your enacted change through multiple version upgrades.

As John F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” By working with your staff, updating your processes, and advancing your technology, your daily concern will be less about adapting to change and more about anticipating the change. Let your focus turn towards the future, which is sure to look brighter than ever before.

About The Author

Paul Wetzel

Paul Wetzel has led Product Development and Product Management activities through most of his 20-year enterprise software career – over the last 10 serving the Financial Services industry. In his current role, Paul manages both customer and industry requirements to drive product enhancements while also ensuring Mortgage Cadence leads the way in innovative loan origination technology. Paul began his career with Accenture in software development where he rose to the level of Director, Business Development for an Accenture subsidiary. Before joining Mortgage Cadence in 2009, Paul spent several years with FICO in product marketing and corporate strategy roles.

Not All Marketing Tech Is Equal

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Today’s demanding lending environment challenges lenders to find creative ways to consistently engage potential new borrowers, maximize LO’s efficiency, and drive new business to the point of sale. Marketing automation is a powerful tool in meeting these challenges, but not all-marketing automation is created equal.

Many lenders are fed up with increases in pricing for their marketing automation technology, especially when the technology lacks new features, is deficient in delivering current and relevant mortgage specific content, is difficult to customize, and most importantly has low LO utilization rates.

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Lenders don’t want to pay a per user fee (at increased cost) with continued low LO utilization rates. Centralized Corporate Control differentiates marketing automation solutions by utilizing “Set it and forget it” technology which allows corporate marketing managers to consistently drive high quality business to the LO without the LO having to directly launch marketing campaigns.

In the mortgage industry, where loan officers find themselves operating in an increasingly complex and regulated environment, “set it and forget it” Marketing Automation is more urgently needed than ever. After all, you want your LOs to focus 100% on what they do best: originating and closing loans.

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Raise Productivity To A New Level

Roller coaster interest rates … constantly changing rules and regulations … heightened competition for borrowers … extreme pressure to produce results …

How will your company continue to thrive in such a demanding environment? It wont be by using overpriced and outdated marketing automation.

Beyond CRM & Generic Marketing Automation

The right marketing automation solution delivers lenders a reduction in the cost per lead, increases the ROI from marketing campaigns and significantly improves borrower acquisition rates. In today’s highly competitive and highly regulated lending environment, lenders must not only be able to quickly and effectively generate new business, they must also do it in a compliant manner. This is the promise on which enterprise-level mortgage-specific marketing automation delivers where traditional CRM and many generic marketing automation couldn’t.

Compliance And Control

These days we’re all operating in a stringently regulated environment. Communications with leads, customers and even referral partners – whether driven from the center or by loan originators – must be controlled, but without inhibiting genuine creativity and individual initiative.

One of the most distinctive features from advanced marketing automation is that it establishes a controlled environment in which ingenuity and enterprise are able to flourish. It does this by providing five levels of management control – including outright prohibition, online alerts, real-time oversight and comprehensive reporting. A unique built-in authorization loop ensures that your nominated managers approve all marketing materials – for example: compliance officer, brand supervisor – before being made available for use. When anything is created, copied or changed, these managers are notified by system-generated e-mail. They are free to approve, amend or even delete the item.

Analytics and reporting

Revealing Mission-Critical Metrics.

In the end it’s all about results. That’s why advanced marketing automation delivers a wide-ranging analysis of your company’s and originators’ production and tracks marketing activity driven through the system. The solution intelligently delivers essential information – including the value of your clients, referral partners and other sources of business – and readily reveals opportunities for incremental sales.

Predefined reports include:

>>Production Analysis

>>Mailing Activity

>>Source of Business

>>Branch Productivity

>>Loan Officer Productivity

>>Realtor Referrals

Post-Close Marketing Automation

Foundation For Your Long-Term Success.

Automated Programs maximize the retention of current clients and the revival of past clients. These pre-determined sequences of strategically timed marketing communications typically run for up to three years (or more) and can be extended at any time. Experience over many years has demonstrated that a well-configured Automated Program lays the firmest possible foundation for long-term success – not only by generating a steady flow of referrals, repeat sales and cross-sales from a loyal audience, but also by ensuring maximum response to on-demand Custom Campaigns.

What Is Advanced Marketing Automation? 

According to Gartner: “Marketing Automation will remain the highest growth sales and marketing software sector with a 10.7% CAGR through 2016, thereby reaching just under $4.7 billion market value.” Why this upsurge of interest in Marketing Automation? It’s because, for the first time, there’s robust technology that frees your loan officers to focus on what they do best: originating and closing loans.

Gartner (www.gartner.com) identifies three distinct segments within the broad category of “sales and marketing” software:

>>Marketing Automation

>>Customer service and support

>>Sales (including CRM products)

Marketing Automation is an enterprise-wide application. Driven by central marketing, the system does the work so that your loan officers don’t have to. Outbound communications addressed to new leads, applicant’s in-process, closed customers and referral partners are precisely targeted, highly personalized and compliantly fulfilled via print and electronic media.

Unleash Your Company’s Marketing Genius

It’s time to unleash your company’s marketing genius with a truly unique Marketing Automation platform. Marketing managers are empowered to drive “set it and forget it” programs across the enterprise, while maintaining regulatory compliance and brand consistency. C-level executives are presented with sophisticated and easy to use tools for more effective oversight and management. Loan officers are freed up to originate and close more loans.

Unleash a marketing solution that brings your creative genius to life, one that provides the power to quickly and consistently execute your marketing objectives while compliantly meeting the ever-changing demands of the mortgage industry. Energize your marketing with mortgage specific marketing automation that is both easy for you to use and extremely powerful. Mobilize a partner who delivers you 15 years of experience in driving growth in the mortgage industry, a trusted advisor that is a difference maker in your business.

At TTP, we bring you the mortgage industry’s most advanced marketing automation solutions that compliantly address every aspect of your lending business from prospect, to in-process, applicant, and closed loan marketing programs. Since 1995, TTP has developed an industry leading reputation for setting the pace, and solving the marketing and communication challenges of lenders to consistently deliver results.

TTP’s MACH3 is a proven enterprise-wide marketing automation solution that supports you and your specific initiatives to address these market conditions. Each person in your organization that is involved with driving growth is empowered to focus on what they do best.

For example, Loan Officers are free to close more loans, instead of trying to create marketing materials. C-level executives are presented with sophisticated, yet easy to use tools for more effective oversight and management, while marketing managers can demonstrate their marketing genius and compliantly maintain brand consistency across the organization.

“Set it and forget it” technology drives high-quality business to the point-of-sale and accelerates long-term profitability. Not all marketing automation is created equal.

About The Author

Brandon Perry

Brandon Perry is President at The Turning Point. Brandon oversees all operational and administrative activities of TTP. Brandon brings over 16 years of experience in various financial services industries to TTP which enhances the Company’s ability to maintain it’s position as industry leader in providing customers with an advanced marketing solution.