Our Point Of View: Perception Is Not Reality

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

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

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

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

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

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

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

Our POINT Of View: The Truth About Workflow

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

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

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

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

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

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

Our POINT Of View: Do You Need An iPad?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Market Analysis: What Happens After The Acquisition Closes?

*What Happens After The Acquisition Closes?*
**By Tony Garritano**

***At least twice a year, more so these days, I hear about a big mortgage technology acquisition. Quite frankly I was expecting to hear about more these past few years given market conditions, but I’ll be sure to keep you posted on what I know when I can. As I look at these deals I think some times that deal was great and it made perfect sense. However, some times after the deal is done there’s poor execution in making that acquisition a value add for the industry as a whole. I’m happy to say that this one acquisition done last year made perfect sense to me and I just heard today that the acquiring company’s ability to turn that deal into a win for the industry has now happened as well. Here’s the scoop:

****Following the acquisition of Loan-Score Decisioning, Calyx Software has launched the Calyx Decisioning Systems suite of products. LoanScoreCard provides competitively priced FHA Total Scorecard access directly through the Calyx Point tool as well as through other loan origination systems (LOS). The Calyx Decisioning Systems is a suite of automated underwriting and pricing products designed to help you determine a loan’s eligibility and pricing within investor or FHA guidelines. Fully integrated with Point, the decisioning system saves time, reduces cost, and improves the quality of each loan’s eligibility decision with a complete analysis of borrower’s loan and credit information against multiple standard or custom programs.

****Dennis Boggs, EVP of Business Development for Calyx Software says,”We are proud to announce LoanScoreCard, which provides universal access to FHA TOTAL Scorecard, for everyone in the mortgage industry. The beauty of LoanScoreCard is that it offers improved, user-friendly findings, and saves money on underwriting at the same time. Everyone can access to LoanScoreCard no matter what loan origination system they’re using. And if they are Calyx users they can access LoanScoreCard from inside Point.”

****LoanScoreCard is a HUD-approved automated underwriting system (AUS) that determines a loan’s eligibility for FHA insurance. The tool provides a detailed FHA Findings Report with decision from TOTAL and LoanScoreCard underwriting, along with set of HUD-approved messaging. LoanScoreCard is available via Calyx Point, standalone web access, or web services.

****LoanScoreCard is one of few programs approved by HUD for TOTAL Scorecard and it offers the same user-friendliness with which Calyx products have always been credited. Calyx users can order their low-cost findings directly through Calyx Point and store them in the electronic document management system for transparent access at any time. LoanScoreCard is also easily accessible at and can be exported to any LOS.

Our Point Of View: The Technology Shift

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

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

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

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

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

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

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

Our POINT Of View: Turning Negatives Into Positives

*Turning Negatives Into Positives*
**By Ted Hicks**

***Last week I talked about two hurdles that lenders face today, namely the task of keeping compliant with new rules and also the task of attracting new business in a down market. People in the mortgage industry today have been in the mortgage industry for a long time. The bad players or the part-time players have gone away. Those that were trying to get a quick buck aren’t here anymore. Yes, the market isn’t ideal. Yes, there are still challenges. Those that are left have the experience and know the technology.  You are the survivors and you have the ability to turn those challenges into opportunities by seeking out new business channels.

****How do you do that? There are opportunities in the jumbo market, for starters.  Although there a few investors who are offering these types of loans, it does not mean that you should shy away from them. Also think about the possibilities of focusing on the Baby Boomer generation.  As they enter retirement with minimal or no retirement benefits, they are often cash strapped, so the reverse market might be something else to consider.  The point I’m trying to make is the if you’re only originating certain types of loans, especially since you are a specialist in a particular type, it can’t hurt to explore outside your typical origination stream.

****There are benefits in going outside your comfort zone, whether it is in the type of loan you originate, or how you use your technology.  As you are considering other opportunities, it’s important to realize that tapping into these new avenues might entail learning new skills and using your features of your technology you probably did not know existed. Ultimately, making that leap into new business channels may not be as hard as you think; you just need to look at your technology in a new light. Here’s what I mean:

****If you look at a simple Web browser, there is a ton of functionality there, but you may just use the search feature. There are also a lot of drop boxes with functionality that you may not know exist in your typical Web browser.  Maybe you use Microsoft® Word every day, but if you’re like me, you only use it to type letters or articles.  Did you know that Word can do tables and charts, and even lets you compare two documents side-by-side? Do you read the technical guide on your software? In actuality very few people do. It’s simply human nature to use what is second nature to you and just run with that. We all do it in many aspects of our lives.

****What’s my point? The same is true of your mortgage technology. There may be business opportunities there that you may not know about because you don’t know all that your software offers.  When I visit customers, I am often asked, “Does your software do this because I need this now?” Time and again I can show them that the feature they’re looking for is already there! These conversations are meaningful and they are eye-openers for the lender.  So how do you, as a lender, explore new business opportunities using unexplored features of your technology?

****The answer in part is for vendors to step up their training and client outreach. The overall knowledge level has increased because of attrition. That makes it easier for vendors to talk to lenders about business opportunities that may exist within their technology. So, we need to have those conversations.

****As I said before, it’s typical to just use the parts of the technology that you feel comfortable with and disregard other feature descriptions as sales pitches or unnecessary.   It’s our job as a vendor to be more proactive in teaching what may be the “uncomfortable” parts—the unknown parts. We all have to do our part to ensure that lenders are successful in extending the American Dream of homeownership, even in a struggling market.  Understanding your technology and how it can facilitate new opportunities is a tremendous first step.