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Things To Ponder: Artificial Intelligence And Computer Programming

*Artificial Intelligence And Computer Programming*
**By Roger Gudobba**

***Last time I talked about artificial intelligence having an impact on creative computer programming in the early 1960s. Let’s explore that further. In those first years the majority of computer systems were devoted to scientific number crunching, performing accounting functions or some other specific mathematical task. I was attending college and was fortunate to get a part-time job with a psychiatrist analyzing data for a research project. He was using a Bendix (I bet you thought they made brakes) G-15 computer. He was very frustrated with the time and effort required to get results. I had absolutely no idea what to do but looked at this as a great opportunity.

****What does this have to do with artificial intelligence and computer programming?

****One of the first programs I developed was used to guide the psychiatric residents’ thought process in determining the correct diagnosis for a patient. I presented questions and then modifying the sequence of questions based on user responses. I didn’t realize it at the time, but such an application might be considered a “rules-based decision engine” today.

****The program was modeled after ELIZA, a computer program and an early example (by modern standards) of primitive natural language processing. ELIZA was written at MIT by Joseph Weizenbaum sometime between 1964 and 1966.

****ELIZA has almost no intelligence and instead mimics the observable signs of human intelligence with tricks like string substitution and canned responses based on keywords. Nevertheless, when the original ELIZA first appeared in the 60s, some people actually mistook her for human.

****Simply getting a text sequence into a computer is not the same as imparting on it an understanding of natural language, and programming it to parse sentences is not the same as giving it the power to converse. The computer must be provided with a precise understanding of the domain to which the text relates, and this is possible for very limited domains.

****I was working at the Lafayette Clinic, a research and training facility connected to the Wayne State University School of Medicine and the Michigan Department of Mental Health. The clinic was recognized as one of the top three research facilities in the world for the study of schizophrenia. That reputation was gained in part by the fact that we had the largest and most complete collection of published articles on schizophrenia. The psychiatric residents read and cataloged articles and identified keywords. Researchers from around the world would request information based on different criteria and the computer program would read a tape file and list the article number that matched the criteria. We would then copy the articles and distribute them to the researcher making the information request. I developed this application based on a product from IBM called KWIC (Keyword in context). It sounds a little primitive based on what you can do today with online search engines, but remember that every antiquated process was once an innovative step forward.

****I was very passionate about the work and felt we were making strides in identifying the cause, effect, and potential treatments for mental illness. We were making a difference.

****During my 18 years there, however, the environment slowly changed. Technology was rapidly evolving and the public sector struggled to keep pace. Research grants became fewer and scientists fought to get funding. The state hospitals in Michigan were downsizing or closing, in part from cost cutting, in part from the desire to decentralize mental health care. Along the way, public policy shifted to allow psychiatric patients greater rights and responsibilities in determining their own course of treatment. I don’t disagree with that initiative, but the pendulum swung too far in the other direction. Now too many people who need help are on the street. I was discouraged and left to start a computer consulting firm specializing in working with small businesses. Eventually, this led me to the mortgage industry.

****Based on my experiences I came to ask: can computer programming ever replace the human intelligence factor? What do I mean? For example, when you think of a bird you immediately picture the bird flying. But then you think of the Penguin, which is a bird that doesn’t fly. Throughout my career I realized that computer programming was a tool to solve problems. But the key concept as I have always seen it was to understand the problem you were trying to solve before you attempted to develop the solution.

****Next time I will address some specific mortgage solutions.

Market Analysis: A Bright Idea For Servicers

*A Bright Idea For Servicers*
**By Tony Garritano**

***Yesterday I talked about how e-collaboration can benefit servicers. Today, I want to stay on the servicing topic because it’s a huge issue for our industry. Servicers need help. So, when I hear about new innovation happening in the area of servicing, I’m going to bring you that news. PROGRESS in Lending has learned that Wingspan Portfolio Advisors, a special servicer based in the Dallas area, is preparing to launch a new affiliate company, Wingspan Information Technology, LLC, aimed at helping mortgage servicers adapt to new requirements more easily. Here’s the scoop:

****The company makes available the same capabilities that have enabled Wingspan to provide single point of contact (SPOC) access for borrowers since its inception, and brings benefits of its centralized database approach that would otherwise require significant costs for servicers and lenders to achieve. E.J. Kite, Wingspan’s senior vice president of information management, describes the technology as a breakthrough for mid-market servicers and portfolio lenders who are deeply concerned about complying with new regulations. The old way of organizing information among different internal systems and trying to make them work together often creates more problems than it solves, he feels. Wingspan Information Technologies is offering a “single source of truth” approach to information, providing much greater efficiency and real-time transparency for investors and other stakeholders.

****“When everything is in one place, it is far easier to access data and manage it,” Kite explains. “When companies use a centralized approach, everyone stays on the same page, and that includes the borrower interface teams, making single point of contact an integral part of the servicing process.”

****Kite has more than 26 years of experience in mortgage technology, including over two decades at Freddie Mac. Prior to Wingspan, he spent three years at Fannie Mae as Management Information Systems director, working with Dallas area-based technology consultants Miller & Associates, a company specializing in business intelligence and custom software development, to build out the credit performance management reporting infrastructure. A longtime advocate of centralized database structures for mortgage servicing, Kite recommended the strategy to Wingspan founder and CEO Steven Horne while the company was being formed. Using Kite’s “results-oriented approach,” Wingspan created an infrastructure to manage large amounts of complex mortgage information, delivered in a highly useful form for finely directed applications. The approach integrates teams and aligns information and users with great precision.

****“Since day one,” Horne says, “Wingspan Portfolio Advisors has been a single point of contact company, creating very effective relationships with borrowers that have led to our outstanding track record of success.” Kite and Horne are working with Miller & Associates to bring Wingspan Information Technology’s benefits to servicers and lenders with very reasonable costs and implementation timeframes. The technology is highly customizable and leverages web portals for unprecedented access to information by those who need it. “Smaller servicers, including regional banks and credit unions, can achieve a level of servicing sophistication they have not seen before with Wingspan Information Technology’s offering,” says Horne.

****“We are also working with Dedo Interactive, Inc., a Miller & Associates spin-off which specializes in touch/gesture/mobile-based technologies, on a GPS-enabled smart phone application that will prevent or minimize many types of fraud from third parties,” Kite notes. “It authenticates field services providers at property sites, receives their updates and reports instantaneously, and adds transparency to all kinds of property management activities. It even handles location-verified photos from mobile devices to prove that the grass is cut and the hedges are trimmed to specifications.”

****Wingspan Information Technology expects to accept its first clients during the fourth quarter of 2011, with implementations completed in the first quarter of 2012. “We’re excited to be making these technology advancements available to the mortgage community and expect Wingspan Information Technology to provide meaningful assistance to the overall servicing effort,” Kite says. “Wingspan Portfolio Advisors has had great results with the platform, and we look forward to sharing what we have learned.”

Magazine Cover Story

*Innovate to Solve Real Problems*

**Executive Interview**

***Certainly the tidal wave of foreclosures is overwhelming. How do servicers keep up? How do technology vendors keep up? Everyone is forced to keep up. However, in the midst of the deepest chaos, there is opportunity for innovation to take over. As such, companies like IndiSoft were born. IndiSoft is a technology development company that develops, licenses and supports the Software as a Service model for default servicing in the financial services industry. The company’s flagship product, RxOffice Legal is a collaborative platform that helps companies create efficiencies throughout the default life cycle, including loan modifications, short sales, deed-in-lieu, foreclosure, bankruptcy and REO management.

****Sanjeev Dahiwadkar, President and CEO at IndiSoft, is a true entrepreneur. He’s a glass-half-full kind of guy. Going forward he’ll share his ideas on how we as an industry can put this market chaos to an end and move closer to recovery.

****Q: How has the mortgage market evolved over the past two years after the crash?

****SANJEEV DAHIWADKAR: If I can say one thing, it is that there is a need for transparency and a need to measure quality, both internal and among external partners. That is a common theme. We’ve seen an evolution in our space over the past three years. I see three basic needs, connecting in real time, the need to measure the success of your outcome and transparency. Every regulator, investor, servicer, etc. is talking about implementing new processes and policies to know the facts. Trust and confidence has been lost so the last three years have been all about making every step of the process both more transparent and measurable.

****Q: How has IndiSoft evolved with the market?

****SANJEEV DAHIWADKAR: IndiSoft has totally changed. If you talked to me the day I opened IndiSoft, I would have told you that we were going to be the greatest technology consulting company in the market. What happened? The market collapsed, so we seized that opportunity to become a great product company. Right now we are totally product based instead of operating as a consulting company.

At the same time though, we have not lost that consulting component entirely, which is why we acquired Microteck. We want to maintain a consulting arm, which was the driver behind that acquisition.

****Q: For those people that don’t know about Microteck or how that adds to your offering, what do you say to them?

****SANJEEV DAHIWADKAR: Microteck is a consulting company that works on specialized applications, such as Oracle, for example. Those specialized tools that our clients need can now be delivered to them. We at IndiSoft offer specific products that talk to specific parts of our customers’ businesses. Our clients have a need for other specialized applications that we at IndiSoft couldn’t deliver, so Microteck fills that need. Now we can enter new markets that we previously ignored because it went out of our realm. Microteck will add complimentary services to allow us to offer talent and technology on demand.

****Q: Are you in acquisition mode? Are there other acquisitions in the works?

****SANJEEV DAHIWADKAR: We are looking at additional companies. We are in acquisition mode. We want to expand our footprint in a strategic way. Initially we relied on organic growth, but now we will also expand through acquisition. However, we want to expand in a smart way that makes our core foundation even stronger.

****Q: Describe to me what a future acquisition might look like? Are you going to buy an LOS, another technology consulting firm, specialty service providers? What are you looking at?

****SANJEEV DAHIWADKAR: Our primary focus will remain on the technology side. We will look at acquisitions that fill any gaps that we have. We want to stay ahead of others. We believe in leading by innovation. Any acquisition that can help us provide efficiency through technology will be our main focus this year and next year.

****Q: You say that you want to lead in terms of innovation. Explain to my readers what you mean by innovation exactly?

****SANJEEV DAHIWADKAR: We want to enable collaboration among all stakeholders. We used technology to enable collaboration even when the stakeholders had conflicting goals. Everybody claims to connect parties, but nobody connects as many parties as we do in real time. We have to all work together toward a common goal even if we have different ideas. We make that happen.

Also, you want to ensure efficiency and transparency. Efficiency and transparency that is measurable is a byproduct of our technology. Centralized case management integrated with documents and workflow is critical. All of that needs to be smooth and delivered from one application. Our integrations are so tight that it is seamless to our clients. Now everybody is talking about how their default platform is collaborative. We started that a couple of years ago.

****Q: From a product perspective, what’s next?

****SANJEEV DAHIWADKAR: We have not made this public, but we launched an auditing tool to allow our clients to do compliance validation and documentation. We are providing a clean way to document every piece of the process. Today you need to document your process and prove that certain steps were taken. Right now that tool is in use at one of our larger clients.

****Q: You also recently started ITShastra. Explain why/

****SANJEEV DAHIWADKAR: That is our development center in India. Any development work for clients that want outsource services goes through ITShastra. We have clients throughout the world that need development on different platforms like Java, .NET, etc. So, we have different groups working on technology in different verticals like health care, we helped launch some Hollywood movies, bioengineering, etc. We’ve done unique work in different verticals through ITShastra.

****Q: You’ve used market conditions to innovate yourself, but what advice do you give servicers and other technology providers that have been burdened by market conditions?

****SANJEEV DAHIWADKAR: From the user’s perspective, it is challenging out there. The market changes daily. One week we hear that home prices are going up and the market is coming back and the next day they say recovery won’t happen until 2014. Servicers have to stay focused. Servicers need to lean on technology to get better control over their process. It’s a new world and servicers have to take charge. They have to use technology to achieve their business goals and at the same time be as efficient and transparent as possible.

For vendors, they have to meet demand. They need to be able to tweak their technology so their users can rely on them. Servicers have to get things done. They can’t afford to go with a technology that’s old or unable to change with the market.

****Q: Shifting to market conditions, many say HAMP has been unsuccessful and the government has to revise its approach to dealing with foreclosures. What’s your take?

****SANJEEV DAHIWADKAR: I wish I knew the answer. What I can say is that the government is trying their level best. Has everything worked with a level of satisfaction? No. However, that doesn’t mean that real effort isn’t being made. There is no silver bullet. Now everyone is trying new things. It’s about trial and error. We have to acknowledge what didn’t work and try something new. There is an openness now and that will lead us out of this chaos.

****Q: We’ve also seen the government crack down harder on servicers with sanctions. Is that needed?

****SANJEEV DAHIWADKAR: The issue is very complex and above my pay-scale. Everybody wants accountability. There will be compromise. I’m curious to see where it goes and how it all turns out myself. We’ll have to see.

****Q: Back to innovation. What will be the next great market innovation in your opinion?

****SANJEEV DAHIWADKAR: The less we talk about technology, the better. The more transparent the technology becomes in that it can be easily used by the business user, the better. Going forward, you’ll see more and more people talk about getting control of their business using technology that is easy to use. It’s about crafting what I will call invisible technology.

****INDUSTRY PREDICTIONS:
****Sanjeev Dahiwadkar thinks:

****1. Tighten your belt. We’re on a roller coaster ride that isn’t over yet.

****2. You will see the consolidation and elimination of assistance programs.

****3. Technology will play a larger role in terms of promoting efficiency.

****ABOUT SANJEEV DAHIWADKAR: Sanjeev Dahiwadkar is president and CEO of IndiSoft LLC, a Columbia, Md.-based software development company for the default servicing industry. Dahiwadkar, a true entrepreneur and an expert in the design and delivery of cost-effective, high-performance information technology infrastructures and applications to address complex business problems, has a proven track record in the large default servicing banks, small business e-commerce solutions and work flow efficiencies in several business verticals. Additionally, he has developed three patent-pending products and continues to innovate.

*****http://www.progressinlending.com/TME0711/TME0711-33.pdf*****

******17,34******

Magazine Cover Story

*Discussing True Innovation*

**Executive Interview**

***The minds behind the top innovations of 2010

gathered to talk candidly about the state of

innovation
in the mortgage industry today.

Over
150 mortgage executives came together

to
attend PROGRESS in Lending Association’s

Innovations 2010 Event. We named the top five

innovations
of 2010. After that event, we wondered

what
would happen if

we
brought together

executives
from each winning company to talk about

mortgage
technology innovation. Where do they see

mortgage
recovery? Where do they see the state of

innovation?

****To
get these and other questions answered, we got

the
winning group together. In the end, (left to right)

Tyler
Sherman, CEO at Motivity Solutions; Greg

Alvord,
SVP-Technology at Optimal Blue; Todd

Ebner,
Senior Vice President and Chief Information

Office
at Field Asset Services; Stephen Nation,

President
at NATION Technologies; and Paul Wright,

Senior
Vice President at DRI Management Systems,

talked about what
constitutes true innovation.

****Q:
Some say innovation has to be sweeping

change.
Others say innovation can be incremental

change.
How would you define true innovation?

****TYLER SHERMAN: True
innovation shouldn’t

be
put into either of those categories. We

define
innovation as something that is

transformational,
something that changes

how
the game is played, something that

elevates
an organization and takes an industry

with
it. If we all stay focused on

these
attributes then innovation will be a

byproduct.

****TODD EBNER: I believe
true innovation is

defined
as solving a real problem with a

new
approach. Usually this brings with it

new
opportunities outside of the original

problem
solved and can many times revolutionize

businesses.
However, innovation

can
be an incremental change today, with

unforeseen
benefits that come later.

****STEPHEN NATION: Innovation
comes when

we
take a step back to diagnose the root

problem
or need. You can stumble upon

innovation
by chance, research, experience

but ‘true
innovation’ is only achieved

by
those that have the audacity to take action.

It
is durable, a game changer and

universally
accepted by users. For NATION

Technologies
we went back to the

basics
of trust in business, in other words

the
handshake. Trust for the origination,

apparent
authenticity and transparency

for
our most vulnerable and regulated asset,

information.

****GREG ALVORD: Let’s use a
sports analogy.

Everyone
loves big homerun hitters,

even
non-baseball fans. However, a team

with
a boring process of hitting a single

80%
of the time will beat a team with

three
or four 300 hitters that are the top

homerun
hitters in the league. Big sweeping

innovation
is like homerun hitters.

Boring
process innovations, or innovations

that
change productivity by a few

percentage
points, or technologies that

change
loan cost by a few basis points

are
like that team that always hits singles.

It’s
not exciting, but it contributes to

the
overall success of the organization.

Big
sweeping innovation comes with a lot

of
hype. At the end of the hype it is often

not
as big and as sweeping as people

thought.
It never really “changes everything”.

Rather,
it will end up contributing

to
better processes, or productivity, or a

few
basis points to the bottom line when

incorporated
by a diligent hardworking

organization
prepared to incorporate it

through
boring process improvement.

So,
is the Innovation the product or is it

the
vision to see how to take advantage

of
the product by incorporating it into the

complex
processes that are Real Estate

Finance?
I think it takes both.

****PAUL WRIGHT: Innovation
is rarely about

sweeping
change, particularly in an

industry
that is mature, like mortgage

lending.
It happens when you’re introducing

the
iPad, but not when you’re

making
and servicing mortgages. Innovation

is
very often an incremental

process.
In our case, DRI OFFICE is the

result
of numerous innovations that can

be
regarded as increments.

True
innovation is not just about systems

and
technology. True innovation is

also
about when a company (in this case

a
servicer) looks at their current environment

and
says, “The old safe way is no

longer
safe.” Then and only then are they

open
to implement innovation. Why continue

to
rely on the way everyone else

does
it when state-of-the-art automation

is
available that turns a high-touch environment

into
an exceptions based one,

all
while providing a lower total cost of

ownership?

****Q:
What will innovation look like this year on the

origination
side of the business? What will innovation

look
like this year for the servicing side?

****TYLER SHERMAN: On the
origination side,

because
of shrinking volumes, companies

are going
to have to be innovative in finding

new
ways to create efficiencies and increase

market
share. And, those that do it

the
best will gain a significant competitive

advantage
over their competitors. I know

we are talking
primarily about technology

in
this context, but, conceptually, the innovation

can
be non-technical as much as

it
can be technical. If that is the case, then

we
have to look at how technology can

take
it to the next level.

On
the servicing side, we are seeing a

dramatic
increase in the use of business

intelligence
in order to drive a proactive

culture.
Servicers are looking to business

intelligence
to be more predictive in measuring

and
monitoring the characteristics

of
loans that have performed, are performing,

or
have shown the propensity

to
not perform. This is going to have a

dramatic
impact in the coming years.

****TODD EBNER: We believe
that innovation on

both
the origination and the servicing side

will
be driven by the needs for greater

efficiency
but also by the growing

requirements
for transparency, automation

and
standardization. This innovation

may
involve removing the human element

as
much as possible and instituting

standardized
decision rules. Of course,

the
human element cannot be removed

entirely,
but to the extent that innovation

can
drive standardization and transparency,

both
origination and servicing will

be
better off.

****STEPHEN NATION: Technological
innovation

to
build a better mousetrap in the mortgage

industry
has outpaced risk management

and
regulation for most of the

last
decade. This deficiency has created

unprecedented
leverage, which was too

often
not controlled or managed and ultimately

led
both to the housing boom

and
bust. The next wave of innovation is

more
likely to focus on controls, regulatory

compliance,
safety and soundness

and,
most of all, meaningful and workable

risk
management tools. Enhanced

and
innovative risk management applies

to
both the origination and servicing

sides
of the mortgage business. The need

for
risk management innovation on the

servicing
side is clearly illustrated in last

year’s
breakdown in foreclosure processing

followed
by the enforcement actions

levied
against eight prominent banking

companies.

****GREG ALVORD: 2011 is the
year of implementing

process
improvement to obtain

higher
data quality that is compliant for

both
servicing and origination. It sounds

simple
and boring. However, there are

fundamental
challenges to long standing

assumptions
needed to make this happen.

For
example: Can a form- based

LOS
that assumes a traditional workflow

process
measure up to the needs of getting

all
the loan prices right at the beginning

and
not over days?

Does
the assumption that scale is

required
to make money in servicing

hold
up when the servicing failures were

fundamentally
processes that could not

scale
up to the demand?

Can
the labor-intensive appraisal

process
that traditionally produced reports

for
reading by people scale up to

the
need to be more precise as compared

to
what a long written narrative

can
provide?

There
are probably other assumptions

that
need challenging, as well. Organizations

that
look at these assumptions

and
work through their vision of how to

organize
as part of an effort to address

data
quality when these assumptions are

removed
will be crowned one of the winning

innovations
in 2011. Some may be

vendors,
some may be lenders, but they

will
be the winners.

****PAUL WRIGHT: On the
origination side,

we
can expect innovations surrounding

transparency
in their processes that are

consistent
with the Uniform Mortgage

Data
Program (UMDP), as well as new

disclosures
and other regulatory changes

that
come as a result of the Consumer

Financial
Protection Bureau and Dodd-

Frank.
Unfortunately, they will have to

work
as hard to keep up with those ongoing

changes
as servicers did to keep up

with
everything thrown at them by Washington

in
loss mitigation and foreclosure

over
the past 18 months.

As
far as servicing is concerned,

the
clear shift has been away from loss

mitigation
to the area of foreclosure and

bankruptcy
processing. As a result, innovation

will
look like technology platforms designed to insure complete communications

between
departments. If you

look
beyond 2011, the result of proper

foreclosure
and bankruptcy processing

will
ultimately lead toward more REOs.

The
REO market has been waiting with

great
anticipation to get their hands on

all
these properties to sell. As one of my

banker
friends told me, the reason more

have
not been released on the market is

that
if they were all released at the same

time,
the value of those currently available

would
bottom out and throw a very

unstable
real estate market into a complete

tailspin.
I believe that with proper

foreclosure
and bankruptcy processing,

and
with focused REO marketing communications

between
asset managers and

REO
brokers, the inevitable increase in

REO
volume can be addressed professionally

and
effectively if the servicer has

the
right platform in place to handle all

aspects
of the default process.

Innovation,
of course will be making

it
all happen. Contrary to one speaker’s

remarks
at the recent technology show,

almost
everything in the default servicing

area
needs and can be aided by technology

innovation.

****Q:
If there was one innovation that the mortgage

industry
needs to get closer to recovery, what

would
it be?

****TYLER SHERMAN: Using
business intelligence

to
become more proactive. Our

industry
is currently very reactionary,

which
makes it difficult to get ahead

of
the curve, progress, and really focus

on
how we can get better as an industry.

Lenders
should use business intelligence

to
strive to be self-compliant so

they
can absorb new regulation without

dramatically
affecting the business of

originating
loans. Lenders can get ahead

of
the curve by managing to the expectations

of
their stakeholders, on a continual

basis,
using business intelligence

so
they know definitively, at all times,

where
they stand from the compliance

and
operational perspectives.

****TODD EBNER: If there
was a solution that

could
help investors, banks, regulators,

servicers
and service providers all view

the
end-to-end mortgage and servicing

process
through a similar lens, with more

transparency
and predictability of costs

and
timing, then much of the uncertainty

would
be removed from the market.

****STEPHEN NATION: Again,
I go back to risk

management
innovation. Consumers

have
little confidence in the industry and

once
they are convinced that it is safe to

do
business again, we will see more evidence

of
recovery. Of course, effective

risk
management and confidence are

only
two elements of recovery. Actions

are
already underway to enhance consumer

confidence
and improve integrity

in
the mortgage industry. For example,

HUD
Third Party Rules will prohibit

lenders
from accepting documents relating

to
credit, employment or income of

borrowers
that have been handled by, or

transmitted
from or through interested

third
parties (real estate agents, builders,

sellers).

****GREG ALVORD: The biggest
thing we have

lost
over the past few years is trust. Trust

from
the public. Trust from the regulators.

Trust
in the regulators. But most

damaging,
trust in each other. There was

enough
blame for the meltdown to doubt

the
trustworthiness of all the players, including

borrowers.
Ronald Reagan said,

“Trust
but verify.” Fundamentally we

need
to weed out assumptions of trust

and
substitute “trust by verify” in every

process
and system we use. The definition

of
high data quality has changed

to
mean data plus verifications of data

so
that the receiving process, system or

organization
can re-verify it as needed.

****Q:
Lastly, how would you define the state of mortgage

industry
innovation? Is it thriving or in a

state
of decay?

****PAUL WRIGHT: I consider
the state of the

mortgage
industry innovation to be thriving.

Some
of this is being driven by the

federal
compliance changes, some by the

market
conditions, and some by the many

players
who are jumping into the market

to
see if they can capitalize while things

are
hot. I always find it entertaining to see

companies
come and go based on market

conditions.

****TYLER SHERMAN: On the
whole I would say

it
is even keeled and reactionary–simply

rushing
to respond to the latest regulation.

What
this means though is that our

industry
is not necessarily looking to

drive
new and innovative ways of solving

problems–meaning
we are currently

lacking
the longer term vision it takes to

be
innovative. I wouldn’t say that we are

in a
state of decay, because there is still

some
cool stuff being introduced, but we

won’t
be able to thrive until we get ahead

of
the curve.

****GREG ALVORD: The
opportunity for innovation

has
never been greater. Traditionally

the
real estate finance community is pretty

slow
to adopt to change. While at the same

time,
there have been leaders in innovation,

both
big sweeping and boring little

innovations,
that work away to improve

their
products and organizations. It takes

a
while for others to catch up. 2011 and

2012
will be a unique time for the thought

leaders to step up and
be heard.

*****http://www.progressinlending.com/TME0511/TME0511-39.pdf*****

******13,40******

Innovation Simplified: Perk Up And Listen

*Perk Up And Listen*
**By Kelly Purcell**

***I always get nostalgic this time of year. September is the back-to-school season. Everyone is eager to learn and meet up with friends that you didn’t see all summer. It’s exciting. Kids are so attentive this time of year. Everything is new and fresh.

****However, that energy soon fades. In a few months parents have to remind their kids to do their homework, get up on time, well you know the drill. I remember growing up, every time my Dad called me by using my middle name, Kelly Ann, I would perk up as I was usually being reminded to do something, or worse yet was in trouble. I knew it was time to listen. Today there’s so much noise in the mortgage industry I’m not sure anyone knows when to perk up and pay attention. But there’s one thing that surely gets everyone’s attention. Want to know what it is? Read on.

****RFP. One event that gets us technology providers perked up is the “Request For Proposal” that we receive from mortgage participants looking for technology solutions. The RFP is the voice of the customer. I don’t need to hear my father calling my full name to perk up and pay attention anymore, an RFP will do just fine.

****It is very encouraging these days to see the volume of RFPs come past our desk. The number of RFPs for eSignature and eVaulting technology has certainly increased in the last 12 to18 months. As a technology provider we get RFPs all the time. We review these documents very carefully as there is usually good business content to give us insight of upcoming trends and confirmation of current business requirements. Others however, are very poorly written and leave us thinking that the potential client may not understand or have a plan for the technology after all the RFP responses are delivered. It is sometimes very frustrating as real time and energy are put into these responses.

****So, what makes for a good RFP? To start with timelines for the various RFP phases for both parties- that being the issuer and the respondent. The first phase is of course receiving the RFP. The respondent (the “v” word–vendor) is in the euphoric stage- must kind of feel like those reality stars- they get the letter from the network to potentially “audition” for the show. A lot of time and effort is put forth in this phase from the respondent reviewing the document and making sure it is a good fit from a requirements standpoint with the vendor’s technology.

****Phase two is of course the “audition.” This is the most important phase. This is where as the vendor you are invited to present for anywhere from four to eight hours to hopefully a group of decision makers. This is where the issuer has a real responsibility to make this as even a playing field as possible for all the vendors and have the decision makers available for the presentations. There is much time and cost put into this phase from both parties and it must be treated as such. The more detail regarding use cases, demo expectations, agenda, etc. the more effective meeting for all parties.

****Assuming you made it to the onsite audition – the phase post audition is where the communication starts to breakdown. At this point there are a couple of scenarios that usually play out. You may be told quickly that you are not advancing- usually with little to no feedback. Why is that? Don’t vendors deserve the respect to at least be told that their functionality wasn’t quite there, or pricing was off or your team wasn’t the right fit? So if you are lucky enough to survive (or you think you have) – then often times it drops into some black hole not to be seen again for weeks or worse yet months. What is that cliché- hurry up and wait. It would be nice if the issuer of the RFP would be held accountable just as the respondent is held accountable throughout the process. I realize many times the RFP issuer is more confused after receiving all the information- and it takes more time than anticipated to weed through the information, but this is where communication is key. Just keep us informed and we won’t have to keep “bothering you” trying to get status. The management of the RFP process is usually a very good indicator as to future deployment and success of the project.

****A couple of other brief points. It always makes me a bit nervous when an RFP is seeking responses for both business models- outsourced and on-premise software. Most companies know well before the RFP which avenue they are seeking. So I have to ask myself- are they seeking both bids to justify the real model of choice- and if that is the case who’s time is being wasted, mine or my competitors? Then of course there is the RFP that doesn’t clearly specify the business model- well let’s just say those are a challenge.

****Overall, the business requirements are usually well thought out and articulated in most RFPs. Any workflow documentation that can be included is always helpful, though. We want to know the current volume and cycle time of the existing workflow. It’s important to know your current process if you hope to improve it.

****As vendors we welcome RFPs. We realize that the RFP is the voice of you-the client. We perk up when we get one and we pay attention to the details, so please share what you can and remember communication and respect are critical to any successful project.

Things To Ponder: Does Innovation Ever Happen Anymore?

*Does Innovation Ever Happen Anymore?*
**By Roger Gudobba**

***I remember back in the late 90s when everyone was saying the e-mortgage is only three to five years out. Here we are 20 years later and e-mortgages are still a very small part of the market. As I was thinking about this topic of innovation, I thought I’d do some research to see where we were in the 1990s as compared to where we are today. To this end, I uncovered the Mortgage Banking magazine, March 1991 issue. The cover story was “Technology: More systems, less paper”. One article stated, “There is still a lot of paper out there—no threat to Federal Express is emerging yet from this industry. But then again, change is rarely delivered overnight.” What do you think of the progress in the industry in the 20 years since this issue was published?

****As I am told, the definition of innovation is the process of improving an existing product or service and not, as is commonly assumed, the introduction of something better. Personally, I disagree and believe that innovation is about the introduction of new or different tools or methods, especially as it relates to the mortgage industry. This may be a matter of personal perspective, but when I look back at the significant changes in the industry, like the development of loan origination systems, automated underwriting systems, converting from paper to electronic (more on that later), product and pricing engines; all amount to the introduction of something better rather than just an improvement of an existing product. What was the common thread?

****Each of these innovations took a subset of the overall mortgage loan process and thought “how can we do this better?” They began by looking at the start and the end of the process. You need to determine what the objective is, and what the end result is that you want to achieve. From there, you brainstorm on different ways to achieve those results and ignore how it has always been done in the past. It was thinking outside the box that lead to these innovations.

****Michael Fruhling, Founder and CEO of bfs innovations, Inc., in his article Bridging the Innovation Gap published 3/8/2011 stated:

****“In a 2010 McKinsey survey of over 2,000 corporate executives, 84% said that innovation was very or extremely important to their company’s future growth. However, 40% claimed that they select their new ideas on an ad hoc basis. Further, 57% agreed that while they execute well against the few new ideas that they had… they needed more big ideas.

****Net: most corporate executives believe that innovation is important, but a good number of them don’t appear to dedicate sufficient time, attention and resources to building and maintaining their innovation pipeline. The result of this would appear to be an Innovation Planning Gap.

****The McKinsey survey highlights overall, what Michael sees on a more micro scale. A good number of his R&D colleagues lament their inability to carve out adequate time away from the current business to pursue and develop new opportunities. They are similarly frustrated that they lack a proper forum to serve up their inspirations to their marketing peers to build their interest sufficiently to pursue some of these ideas.

****Many marketing managers have new product development responsibilities in addition to their current business obligations. Time restrictions can cause some to feel pressured to pursue more conservative, expedient opportunities, as opposed to more ambitious concepts with greater potential (but also with greater risk).”

****What does all this mean? For “an innovation, to be effective, it has to be simple and it has to be focused. It should do only one thing, otherwise it confuses. If it is not simple, it won’t work. Everything new runs into trouble; if complicated, it cannot be repaired or fixed. All effective innovations are breathtakingly simple. Indeed, the greatest praise an innovation can receive is for people to say: ‘This is obvious. Why didn’t I think of it?’” —Peter Drucker

****What will 2011 bring? PROGRESS in Lending honored five top innovations in 2010. I am honored to be a judge for the competition. Some of the entries were very impressive. I hope to see even more impressive entries as we work toward Innovations 2011. I’m waiting…