Can Mortgage Collaboration Be Safe Again?

Email is everywhere. Everyone uses it, and it’s generally accepted as part of everyday life. If you aren’t accessing email on your desktop, you’re most likely connected instantly through your phone. Whether for business or personal use, this is how almost everything gets done. From meeting invites to news alerts, purchase receipts to run-of-the-mill emails from family, seemingly all major transactions in life are touched by this communication method, including the mortgage process. People spend anywhere from 4-6 hours a day on email – and whether you agree or not that this is a good use of time, email is seemingly here to stay.

Things have arguably become more efficient thanks to email, particularly in financial services, especially the mortgage process. Think about your company’s origination process. To start, borrowers typically receive an email confirmation, letting them know any number of details about their loan application. From there, the title agent will send an email containing details of the property and requesting any required information. Real estate agents will keep their clients informed by emailing status updates and details pertaining to next steps. And just like that, with the exchange of a few emails, possibly never having met with your borrower face-to-face, your origination process is underway. In general, efficiency gains from these changes have been significant and helpful. Companies everywhere are encouraged to go all-digital, to eliminate paper, to respond quickly using technology. Email is an integral part of this strategy today.

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There is sense in exercising caution, however. There are risks, sometimes big ones with our ubiquitous use of this technology. From identity theft, to business email compromise, to wire fraud, you should take a careful approach to email and so should your staff. You should have a plan for educating your staff and responding to attacks and phishing attempts. But with 91% of cyber-attacks starting with email, most importantly, perhaps, is finding an alternative to email. Sure, some companies use old, antiquated systems for communication and document exchange, but these have historically been clunky and less easy to use than email. What if there was a secure strategy in lieu of email, something that not only added peace of mind to the process, but also increased efficiency? Read on to learn more.

Understand The Risk

There is a more secure strategy than email yet before explaining exactly what that is, it’s important to truly understand the risk. Just weeks ago a story hit the news here in Mortgage Cadence’s hometown. It reads like a paperback thriller. You know the kind – the one where you can sense trouble and know that the ill-fated character shouldn’t open that door (or in this case, email). A couple went to buy a house. They were emailed instructions on where to wire their funds – only somewhere along the way, the process was compromised, allowing a hacker to impersonate a title company employee. Money was wired, and by the time the mistake was realized, it was too late. The couple lost their life savings, all because of the hazards of email and the growing presence of hackers looking to capitalize on wire fraud.

According to a 2016 article published by the National Association of Realtors (NAR), nearly one-third of Brokers at an industry event indicated that they, or someone they know, have clients that were victims of wire fraud. In fact, the FBI warns that across the globe, law enforcement officers have received complaints of wire fraud in every U.S. state and nearly 80 additional countries, totaling over $2.3 billion in losses. Clearly, this type of attack is not uncommon. Hackers are acting as trusted sources and robbing anybody that falls into their traps. But how?

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A single failure by any one participant in the mortgage process exposes everyone involved. Think of it this way: whenever one of the parties’ email account is compromised, any email address copied in is also now at-risk to targeted phishing or monitoring for transaction details. Not only is your customers’ funds, identity, and other financial information at risk, but so is your reputation, if you don’t exercise caution. Across the nation, financial institutions are facing law suits due to breaches in security leading to fraudulent wire requests. Picture the headlines now: “(Your Company) Faces Lawsuit for Wire Fraud.” This doesn’t reflect favorably on your institution, and certainly not for prospective homebuyers looking to borrow money from you. So, how are you going to keep their information safe?

Educate Your People

Email isn’t going away. Therefore, you can and should implement processes to identify potentially harmful messages. The National Association of Realtors, FBI, American Land Title Association (ALTA), and others have published tips for keeping financial transactions secure. For example, here is what ALTA recently published:

>>Call instead. Confirm all instructions by phone before transferring funds using the number from the title company’s website or a business card.

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>>Be aware. It’s uncommon for title companies to change wiring instructions and payment info.

>>Confirm everything. Ask your bank to confirm not just the account number, but also the name on the account before sending a wire.

>>Verify. Call the title company or real estate agent to validate that the funds were received. Detecting that you sent the money to the wrong account within 24 hours gives you the best chance of recovering your money.

>>Forward, don’t reply. When responding, hit forward instead of reply and then start typing in the person’s email address. Criminals often use email addresses that are very similar to their real counterparts.

Informing your customers is a crucial first step. By educating them on the dangers or wire fraud and letting them know what kinds of communications they can expect from you, borrowers may be more likely to identify strange or unfamiliar emails as fraud. To that point, it is equally as important to train your staff. Keep them up to date on the latest new stories relating to this type of scam and require trainings on how to identify and prevent a breach by criminals. Awareness is half the battle. In addition to education, a new solution is needed.

Find A New Method

What if there was a better, more secure approach? A better, more secure solution is an online portal where all parties to the mortgage transaction collaborate at the same time inside a live mortgage folder. Cyber criminals cannot hack what they cannot see. Email is highly visible. The Mortgage Cadence Collaboration Center is not. Through this private network, critical customer information isn’t exposed to the outside world, thereby enhancing security. This eliminates the potential for human error as the weakest link in the transaction.

By using this new tool, which is one that routes all communications within a private network with no exposure to public servers, and one that automatically recognizes and organizes information through a predefined process, security can be significantly improved. With built-in messaging and real-time chat, this tools enables everyone involved in a transaction (borrowers, loan officers, title agents, real estate agents, other staff) to communicate in a single place, increasing efficiency and reducing cybercrime. With conversations time and date-stamped, everything remains logged and accessible – providing the ability to track and record securely. There are three main reasons this closed system enhances security:

1.) A criminal can’t hack what they cannot see. Behind the virtual walls of a closed system, communications remain secure and effectively invisible to hackers.

2.) Even if they were to somehow know about a transaction in process, the communication of the details are going on behind the wall making it significantly more difficult to compromise software than it is to gain access to an email account.

3.) And finally, by enabling all parties in the process to work together within the closed system, there is no reason for information to ever leave the software. In addition to efficiency gains from all participants having access to the information in a closed space, the whole process becomes more secure.

A closed network can help keep your customers’ money and identity safe, ensuring their trust in you, and keeping your reputation intact. Mortgage Cadence’s newly acquired Collaboration Center manages communications between borrowers, co-borrowers, real estate agents, sellers, attorneys, title agents, and all other parties on mortgage transactions, keeping all confidential data secure.


It is clear: all of us that participate in the mortgage industry face huge challenges when it comes to the potential for wire fraud. This is made far more likely through email. There are solutions available to address the risk for transactions within in the real estate industry, and the entire industry needs to be proactive and work together. By understanding the perils, providing constant education, and relying on closed systems for communication, risks can be reduced, keeping your customers’ data safer.

About The Author

Todd Hougaard

Todd Hougaard is Collaboration Center Product Manager for Mortgage Cadence, an Accenture Company. In this role, Todd is responsible for the strategic direction of Collaboration Center, which is designed to provide true multi-party collaboration for secure communication, document exchange, data transfer, and automation from origination through post-closing. Prior to joining the Mortgage Cadence team, Todd Hougaard spent the last two decades holding leadership positions within the mortgage technology arena, including as founder of BeesPath Inc. and Ingeo Systems and in sales operations at First American. He is an active member of the American Land Title Association, serves on the Technology Committee, and is currently an at-large member of the ALTA Title Action Network. Todd holds a B.S. in Geography from Utah State University.

TRID 2.0: Now What?

Over a year in the making, TRID 2.0 was finally released on July 7, 2017. With an effective date 60 days after the final rule is published in the Federal Register, and a mandatory compliance deadline of October 1, 2018, the industry is sure to have a lot to say about these new regulations.

TRID 2.0 is meant to provide additional clarity to the original TRID rule that went into effect on October 3, 2015. Changes include:

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Cooperative Housing. Loans on cooperative housing are now covered by TRID, having previously been left to state law definitions of real and personal property.

Tolerances. New tolerances have been added and others have been clarified, including total of payments, the “no tolerance” category and good faith, and property taxes.

Rate Locks. A new Loan Estimate, or Closing Disclosure, must be provided upon rate lock, even if nothing has otherwise changed.

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Escrow. The Closing Disclosure Escrow Account Disclosures have been clarified, allowing for 12 months in “Year 1” calculations.

Additional Guidance. The amendment provides additional guidance around disclosure of construction to permanent loans, simultaneous second loans, disclosure of principle reductions, and a reiteration that re-disclosure of the Loan Estimate (LE) or Closing Disclosure (CD) is permitted at any time.

What’s Missing?

The CFPB has not yet finalized proposed changes to resolve the infamous “black hole” issue; instead, they published a new proposal. In case you’re unfamiliar, complications arise due to potential timing conflicts between the Loan Estimate and the Closing Disclosure. If a borrower experiences a change in circumstance after they have received the Closing Disclosure and needs to delay the date of closing, there are concerns that a lender will be unable to comply with both the requirements to provide a revised disclosure to the consumer within 3 business days of the change and simultaneously within 4 business days of consummation in order to reset the tolerance thresholds for the good faith determination. There is even uncertainty of the ability of a re-disclosed Closing Disclosure to reset tolerances at all. Can we expect a final TRID 3.0 to resolve the issue? Only time will tell.

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Similarly, the issue of disclosure of simultaneous title quotes for owner’s and lender’s title premiums remains unchanged and unaddressed. The current, and very complicated, method of calculating lender’s title in the case of a simultaneous quote still stands and is not currently included in the “black hole” proposal.

What Happens Next?

Our main concern after dissecting TRID 2.0 is the phased implementation. On the surface this sounds like a great thing for lenders, but what happens when a consumer compares disclosures between lenders? This gets tricky when it comes to the application date. Additionally, you don’t want to change to the new calculations in the Calculating Cash to Close table mid-loan cycle with your consumers. This would result in re-disclosed Loan Estimates, or the Loan Estimate and Closing Disclosure on a single loan may utilizing different logic. This could confuse consumers as well as investors on loan purchase, and examiners down the line.

Regardless of the outcomes our industry will adjust. One thing is for sure, policies, procedures, and technology will continue to play an essential role in mortgage compliance.

About The Author

Amanda Phillips

Amanda Phillips is EVP Legal and Regulatory Compliance for Mortgage Cadence, an Accenture Company. She works closely with Mortgage Cadence Product and Development teams to help interpret compliance requirements and assist in developing risk mitigation strategies and implementing the requisite controls within the Mortgage Cadence platforms. She also communicates with clients regarding Mortgage Cadence compliance interpretations and controls. Phillips joined Mortgage Cadence in January 2014 as its Legal and Compliance Lead, guiding development of the organization’s technologies, including the Enterprise Lending Center, the Loan Fulfillment Center and the Document Center.

Explaining The Mortgage Process Of The Future

As executives discussed the state of mortgage lending at the Seventh Annual ENGAGE Event in Denver, Colo., a lot of hot-button topics came up. For example, the discussion around what the future lending process will look like was very insightful. Here’s what was said:

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“Looking back at my immediate family, my grandparents couldn’t afford to own a home. My parents were the first to buy a home and they worried about how they were going to pay their mortgage, but owning a house meant that they had arrived and could secure a future for their family,” shared Molly Dowdy, Co-Founder of NEXT, the mortgage technology conference for women. Molly has nearly 20 years experience marketing in the mortgage technology space. She is also a member of the PROGRESS in Lending Executive Team.

“My parents still live in that home today. My point in sharing this story is to say that we have the power to create a more inclusive and transparent mortgage process.”

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And most believe that begins at the point-of-sale. “We have to elevate the customer’s experience,” said Pamela Stahl, the Product Manager for VirPack, a leading provider of document management and delivery technology for the mortgage banking and financial services industries. Leveraging 6 years of mortgage lending secondary market management experience, she joined the mortgage technology industry in 2011 as a product manager for a leading Loan Operation System before joining VirPack in late 2016. With almost 12 years combined mortgage and mortgage technology experience, she has a proven history of producing and delivering innovative mortgage lending SaaS technologies.

“We as an industry have done a lot in recent years to embrace mobile technology. We’ve launched mobile apps and we send the consumer mobile alerts, but we don’t use this technology to really explain the process,” Stahl continued. “Improving the customer experience is not just about pushing out automated messages in real time, it’s about helping the consumer truly understand what’s going on at all times.”

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Everyone agrees that the borrower has to be more informed at the frontend, but what happens after that? “We’ve focused a lot on the beginning of the process and how we can make that better for the borrower, but we have forgotten about the backend of the process,” explained Matt Hydrew, SVP, Enterprise Solutions at Mortgage Cadence, an Accenture Company. Matt specializes in the execution of enterprise software solutions with Mortgage Cadence, which focuses on end-to-end, SaaS based residential lending technology in the United States market. Mortgage Cadence solutions manage the workflow process, imaging, document prep, secondary marketing and other important components to a true end to end digital mortgage platform.

“If lenders are not efficient and communicative of everything that goes on in the backend of the process, all that communication and explanation on the frontend amounts to just window dressing,” Hydrew notes. “We have to use technology to genuinely improve the whole mortgage process an fully communicate that to the borrow up to and including the closing of the loan.”

Why is this important? Data shows that 34% of the buying power rests with millennials and they want a better mortgage proces. “We have a lot of very slick applications in this industry, but without borrowers to feed into them we have no business,” explained Brandon Perry, President at TTP Enterprises. 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.

“The mortgage process of the future has to reach people of all ages and backgrounds in a more meaningful way so buying a home doesn’t remain just a very long, complicated and stressful thing to go through,” concluded Perry.

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at

The Importance Of A Smart Services Strategy

Historically, the prime objective of every U.S. mortgage originations operations manager has been to create and maintain a productive operation. Keep the pipeline full, close business, lower the incremental price per loan, remain compliant. The recent “digital explosion” driven both by compliance and consumer demand for a more tangible, technology-driven experience has significantly altered that conversation. It is not enough to be cheaper, quicker, or even necessarily more efficient. To remain competitive and deliver productivity and growth that is sustainable, the modern mortgage operation must provide an elegant, transparent, ever-reliable experience, especially for borrowers, while remaining secure and compliant. To achieve this, lenders must rely on more outside services and service providers than ever before, and engage with them in a way that is, in a word, “smarter.”

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Smart means many things to many people, but for the purposes of services it means you must have a secure, efficient and scalable way to collect, order, receive, examine, present, deliver and archive the data and documentation you need within the system of record, no matter the source, format of the content, type of transaction, or investor requirements. The interface and experience of your services hub needs to work hand in hand in an automated way with the user and your core processing software, and be able to consider and qualify that content in real time within the context of your entire mortgage ecosystem. In short, it pretty much needs to walk on water.   Simple, right?

Fortunately, with the right infrastructure, the right delivery partnerships, and perhaps most importantly the right mindset, it becomes much easier. Here are a couple of areas for focus:

1.) You and your Platform Partners must create a development and support infrastructure that embraces and supports new services and outside innovation.  

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Let’s all admit it: innovation is often really, really hard to manage. We are often saddled with fifteen-year-old architecture that requires a lot of attention and TLC just to keep up with the demands of our current capabilities. Our development teams became engineers to design and build things. But the hard truth is that we have tough day jobs. The road to operational excellence begins with accepting that it is better to do a few things very well and cultivate a culture that is great at partnering with others, such as:

Get your LOS provider and other key partners deeply involved in your roadmap with regular benchmarking efforts.   Your provider sees ten new companies for every one that you do and deals with hundreds of your peers who are solving problems like yours. You can gain key insights into market innovation and better align development roadmaps and priorities to support one another. More importantly, you can ensure the services you need are integrated with the functionality you require to drive your business.

>>Know your investor program requirements and develop strong standards – both business and technical – for others to follow.   Clearly, your partners need a strong base understanding of MISMO, UCD, UCDP, Day1 Certainty and other regulatory requirements, but often it is the lender’s discovery process for the way they interact with critical components of its own loan programs and workflow navigation that encumbers projects and causes them to lose momentum. The easier you make it for others to address your unique needs, the higher your probability of success. Maintain strong SOPs, build a “B-Guide” alongside your “I-Guide” and make knowledgeable and informed personnel available during the vendor dating process.

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>>Change management is especially important in optimizing services strategies. Your development team must be disciplined and engage in strong configuration quality control and employ implementation practices that engage both technical and operational aspects of your business. Work closely with your LOS and third-party service providers and ensure your practices are scalable, well architected, and thoroughly tested, and once implemented, be meticulous in requiring your production teams to adopt new practices. Dual tracking breeds inefficiency.

>>Get active with innovators in your local markets. All over the country, cities have recognized the value of supporting and keeping talent close to home and have given birth to some amazing incubators like the one I worked with, EvoNexus out of San Diego. The pace of innovation is relentless and accelerating. However, the financial services industry remains a bit of an enigma and can be difficult to fully understand. Get involved early and help educate the FinTech market on how better to do business with you and your peers. Offer internships, where practical. My company, Mortgage Cadence, is piloting an emerging talent program that will provide mentorship to startups and near to recent graduates so they can hit the ground running.

2.) You must create an effective vehicle to select the services and providers that offer the most lift for your business

>>Know, size and prioritize the business problems your business needs to solve. For all the importance of innovation, one of the worst enemies of productivity is novelty. It seems obvious, but all of us are distracted by shiny new objects. It is no easy task to stay on track and keep to your business imperatives, especially when pressure comes from your Board or even executive management. Systematic, agnostic diagnosis and prescription and organizational governance is essential.  Build and use reliable assumptions and use them evenly across the decision-making process. Here again, engaging in disciplined roadmap reviews with your technology partners can pay enormous dividends.

>>Know your approval team and process. Get a very strong cross-functional, action-oriented team and give them specific roles, responsibilities, marching orders, and timelines. This is an extension of the concepts espoused above, but it is not necessarily the same team. Having (and following) defined practices isn’t just practical, it is often critical for keeping the focus from wandering too far off the task at hand. The time to pull this team together is before, not after, innovators come knocking.

>>Exercise control in partner selection, particularly if you have larger regional or national operations. Bigger isn’t necessarily better. Having too many partners to manage adds overhead without creating anything unique to your organization. Use your internal vetting experts to look beyond the technology and stringently review how they will support all the other facets of your client relationships, such as trouble resolution, documentation, reporting, and marketing.

3.) You and your Platform Partners must engage in smart, scalable integrations

Finally, the rubber meets the road in delivery. How the services are served up for consumption is as, if not more, important than that they are available for consumption. It is extremely important to ensure your partner understands and is actively expanding its ability to deliver on a next-generation philosophy. Topics for discussion should include:

Integrations should be available via API’s supported by simple, effective and well-documented Integration Toolkits to help drive innovation and reduce time to market.

>>Your service integrations should work within an ecosystem powered by a sophisticated rules engine with multiple layers of automation for ordering and accepting return results. It should also have the ability to accurately infer actionable data and documentation as close as possible to real time within the master workflow and capture that information in the system of record.

>>Wherever possible, the service integrations should offer secure bi-directional communications flow for things like underwriting and closing collaboration and compliance. This functionality should also help optimize opportunity across your portfolio and bolster client relationship management.

Partner service integrations should offer a “look and feel” user experience as close to the core LOS system as possible. Excessive pop-ups can create a “disjointed” feel and impact productivity. You should choose partners that offer functionality through standardized interfaces that can be baked into the underlying LOS technology infrastructure.

>>Integrations should be secure, and should reflect both the macro and micro realities of risk management. That means the base integration should be secure, along with the ability to isolate and protect unique parties to a transaction. Be sure your providers offer transparency into their processes and adhere to defined practices.

>>Integrations should be portable and modular and engage in protocols that conform to forward-reaching industry and investor standards (UCD, UCDP, HMDA, TRID, MISMO 3.4, D1C, etc) and be able to isolate and support future innovation as partners and vendors innovate.

>>Finally, engage in deeply interwoven practices with your LOS and service partners, and ensure they do the same with you.  Does this seem like a repeated point? It is. It’s that simple, and that important. Insist upon a transparent, test-driven development mentality and regularly share access to testing and staging environments. And be sure to celebrate achievement and successes together.

The modern mortgage operation needs to be as much NATO as it is Sole Survivor. A strong services and integrations partner plan and a smart services delivery engine may not eliminate every challenge, but it can make the difference between surviving and thriving on the road ahead.

About The Author

Brian Benson

Brian Benson is the Executive Manager of Accenture Mortgage Cadence’s Service Center 2.0, which he believes will be a very smart choice for lenders looking to modernize their mortgage operations.

Lending To Millennials Takes More Than Technology

At Mortgage Cadence, one of the ways that we deliver technology leadership to our lenders is by going directly to borrowers to learn about their needs, expectations, and feelings about the loan origination process. In a partnership with Accenture Research, we surveyed over 1500 borrowers that had recently obtained a mortgage. This article examines our findings of 699 18 to 34-year-olds that are associated with the often-discussed Millennial segment of the lending population, a key part of the survey. Of all our findings, I want to share three that can be applied by lenders today, using their existing technology solutions.

1.) The value of an attractive rate

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There is a lot of industry focus on lenders employing huge marketing budgets to tout a simple application process, as if that were the primary driver for applicants. However, we found that more than half (55%) of Millennial respondents said that the number one reason that they chose their lender was because the lender offered the best rate. With so much competitive pressure to focus on the borrower experience, it’s a great reminder that lenders also must deliver on tangibles that are important to borrowers, including an attractive rate.

2.) The value of an in-person loan officer

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Many lenders are focused on automating all parts of the origination process. Over 65% of Millennials in the survey met with their loan officer in-person prior to signing their closing documents. Notably, when we look more closely at younger Millennials between 18 and 24 years old, an astonishing 78% met with their loan officer in-person prior to closing. This finding dispels the common myth that Millennials are all about building virtual relationships in isolation. Considering the significance of this major purchase and contracting event, we found that the commonly held notion of Millennials shunning in-person relationships does not hold here. To extend this finding further, we found that, of those Millennials that did not meet with their loan officer prior to closing, half of them wished that they had done so.

3.) Top issues for Millennials

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When we asked Millennials about the aspect of the entire loan process that they wished was easier, 27% wanted the loan application to be easier, 29% wanted borrower document delivery to lenders improved, and 36% of respondents wished for an easier way to determine the best lender for them. Because new borrowers may not have the financial connections or familiarity with the lending process that other age groups enjoy, it follows that finding a lender that they can trust to work is a significant concern.

It’s logical for lenders to get caught-up in a focus on technology solutions that streamline an application process and origination efficiencies. However, our survey findings show us that it is just as important when considering the influx of millennials into home ownership that lenders deliver on a competitive rate, ensure that LOs are supported in their need to effectively build relationships with applicants, and that lenders sharpen their marketing messages so that applicants can easily self-identify with the lender’s target demographics.

About The Author

Jeff English

Jeff English is Director, Growth Initiatives at Mortgage Cadence. Mortgage Cadence, a wholly owned subsidiary of Accenture, has been working with lenders since 1999, offering mortgage technology solutions designed for point-of-sale through post-closing. In a time when efficiency, speed and the customer experience are paramount to the success of lenders, Mortgage Cadence offers reliable software and dedicated people, supporting lenders every step of the way. Visit for more information.

Tackling Industry Change

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Q: How has new regulation changed the mortgage industry?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Progress In Lending

The Place For Thought Leaders And Visionaries

Yes, Lenders Are Moving Toward A Digital Mortgage

There is a lot of buzz around the digital mortgage, but are lenders really interested in this strategy? The answer is: Yes. For example, Desert Schools Federal Credit Union (Desert Schools) has deployed the Loan Fulfillment Center from Mortgage Cadence, an Accenture company, to help support its goal of a fully digital loan origination process.

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With the deployment of the Mortgage Cadence product suite, Desert Schools — the largest credit union in Arizona and a top 25 mortgage-producing credit union in the United States — is now creating an unprecedented experience for its customer base of more than 300,000 members.

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“After considering various options, we found that Mortgage Cadence’s technology offered the most streamlined functionality, enabling us to quickly implement an end-to-end solution to support mortgage originations from application to closing without ever leaving the system,” said Gary Sneed, Desert Schools’ chief lending officer. “Mortgage Cadence helps us further our commitment to our members by providing a quick, easy-to-use borrower portal that allows for product comparisons and ongoing member education. Thanks to the close collaboration of our teams, we were able to go live on the system swiftly and capitalize on the benefits this functionality brings to our digital mortgage strategy.”

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Mortgage Cadence’s Loan Fulfillment Center — in coordination with its intuitive Borrower Center, Secondary Market Center, Document Center and Imaging Center — provides the tools necessary for Desert Schools to establish a transparent, compliant and efficient mortgage origination process. The product suite walks prospective homebuyers through the mortgage application process step-by-step and enables clients to provides loan status and other information related to the borrower’s loan application via tools within the platform.

With the Loan Fulfillment Center, each step of the process — from processing, document imaging and package creation to underwriting, post-closing and secondary marketing — continues on-platform and through a single system.

“The future of the industry belongs to innovative lenders who are dedicated to taking steps toward the all-digital mortgage, said Nizar Hashlamon, Mortgage Cadence’s executive vice president of sales. “As an industry-leading institution, Desert Schools Federal Credit Union recognized this and positioned themselves to provide an unparalleled experience for their members for years to come. We are proud to support and help fuel their growth by providing Desert Schools with the type of forward-thinking, intuitive member and lender tools that enable ongoing success.”

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at

The Next Stage In Mortgage Evolution: The Robotic Mortgage

Technology has become pervasive in the mortgage industry, with paper loan files quickly becoming a thing of the past. One of the biggest drivers in these technological advances is the desire to improve the borrower experience. Technology presents endless possibilities, and the demand for new functionality is immense. How can lenders afford to adopt new technology and keep the cost of origination down? The answer, for some, could be the Robotic Mortgage.

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“Robotics”, or Robotic Process Automation (RPA), is the newest buzzword in the mortgage business, and it is changing the way we look at automation. To put it simply, RPA is technology that replicates repeatable actions or tasks that would otherwise be completed by a human, working in a single application or across multiple systems. Furthermore, with the use of robotics, tasks that are not linked by dependencies can now be performed simultaneously.

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Robotics is not a new concept; some industries have used robotics technology for decades. For example, manufacturing companies use robotics to complete tasks such as applying a coat of paint to the shell of an automobile. By utilizing robotics, they can speed up processes to increase production while maintaining high quality, thereby reducing costs.

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Mortgage Cadence’s Loan Origination Systems (LOS), the Enterprise Lending Center, represents the progress that robotics has made within the mortgage industry. A loan file was once hand-carried to every department throughout the life of the loan, and validations were a manual task. For years now, lenders have relied on their ELC to automatically drive workflow, task their users, condition a loan, interact with their borrowers and third party vendors, and, most importantly, originate a compliant loan. Borrowers can now apply, follow the life of their loan, upload documents, see conditions, and communicate with their lender, all online. So what differentiates robotics from current LOS technologies?

There are still many repeatable tasks being completed by individuals throughout the loan origination process. Loan set-up, data entry, document comparison, and sending notifications on incomplete packages are just a few examples of items that can be further automated with robotics. Just as robotics is redefining the loan origination process, the possibilities for enhancing the LOS implementation and delivery process through robotics are numerous. For example:

>>Customized Functionality – Imagine a “drag-and drop” graphical tool that lenders can use to create rules automatically, based on the selection of chosen functionality being dropped into the tool.

>>Test Scripts – Developing a test strategy is one of the most important aspects of a successful LOS implementation. Imagine lenders being able to generate automated test scripts based on their system’s customized configuration.

>>Configuration Design Tool – Imagine if configuration could be automatically generated based on the information a lender put into a business process map.

The technology exists to make these ideas real. Lenders that want to maintain a competitive edge are finding ways to use robotics to reduce costs, increase productivity, decrease turn times, improve quality, and provide visibility. Technological innovation will continue to disrupt the mortgage industry, and the Robotic Mortgage is leading the way.

About The Author

Regina Musyl

As a Professional Services Director for Mortgage Cadence, Regina Musyl focuses on organizational improvement through building ground-floor initiatives and process improvement. She joined Mortgage Cadence in 2015 as a Strategic Engagement Manager, responsible for the end-to-end implementation and delivery of the Enterprise Lending Center platform. After advancing to Professional Services Director, Musyl undertook the development of a Client Enhancement Services program supporting clients interested in subsequent phases of implementation or specific enhancements and has since transitioned to overseeing robotics initiatives. Musyl began her career in the mortgage industry in the default sector, followed by a focus on due diligence, compliance and credit risk management. Prior to joining Mortgage Cadence, Musyl designed and built a correspondent loan platform for an independent loan originator in Denver, CO.

Leverage Partners

As a long-time consultant in the financial services industry, I’ve been involved in every aspect of software implementations. Over those years, one thing is certain: Everyone is on the hunt for innovative opportunities to reduce cost, duration, and program risk during implementation. While there are many ways to approach solving these implementation concerns, I’ve seen one tried-and-true method work for both large and midsize lenders alike: leveraging third party partners that are hyper-focused on identifying and avoiding the challenges commonly encountered when deploying a new loan origination system (LOS) will help fill key resource, skillset, and expertise gaps that neither the mortgage lender nor the LOS vendor have readily available or seek to staff long-term.

Tactical and Practical Tools for Success

Partners provide three distinct tactical benefits during implementation for both lenders and providers alike. First, a partner can help cascade the implementation program’s goals, functioning as an intermediate layer between broad directives from executive leadership and tactical changes requested from the operational team on the ground. By establishing explicit and prioritized guiding principles, they continually confirm and/or redirect the implementation to meet its goals for duration, price, scope, and other factors. This independent viewpoint allows for rigorous assessments of the costs, benefits, and risks of implementing each specific scope item or change. They constructively challenge the notion of “because we’ve always done it this way” by constructing and analyzing other scenarios that also meet or exceed project goals.

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In addition, partners can impartially define, consolidate, monitor, and report on priorities across all parties (such as leadership, business, operations, IT/architecture, and vendors), performing program arbitration as needed when conflicts arise. Given their experience in similar situations, partners can also educate parties about the key areas that are frequent offenders for delays, conflict, budget blowouts, and overlooked risks, while helping watch for signs of trouble. Constant momentum is also maintained, working with the team to focus on daily and weekly next steps, while showcasing how these translate to the next phase and longer-term goals, avoiding analysis paralysis and connecting the parts of the overall project vision.

Finally, partners can also offer useful perspective on the broader picture. By attending industry conferences and engaging in larger corporate-wide strategy conversations, partners can help counsel on external topics such as developments in customer behaviors and competitors, as well as internal topics spanning strategies, technologies, and efficiencies across lines of business.

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While it’s clear that a partner’s “outsider” status strengthens their ability to add tactical experience and expertise that isn’t part of the current organization, they also come equipped with a kit of practical tools that have been refined and expanded over many years, projects, industries, clients, and teammates. A third-party partner should bring to each assignment a kit of practical tools backed by specific expertise in areas including:

Program strategy – Ideally, partners will have line of business-specific templates for target operating models across people, process, and technology and maintain frameworks for developing quick wins, intermediate goals, and longer-term program vision.

Vendor management – Lenders can leverage partner-developed vendor RFI scorecards, questionnaires, and high-level requirement templates for initial comparison and selection, and then subsequently use trackers for monitoring and ensuring on-time delivery.

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Program management – Partners should maintain a toolkit of status report, risk/issue trackers, project plans, role/responsibility definitions, and project organizational chart templates across the variety of implementation methodologies.

Analysis – Partners should have developed best-practice process flows for both business and technology as well as high-level and detailed requirements and use case templates.

Testing – Lenders can avoid developing a single-use testing strategy and supplement their own test scripts and defect management tools via partner templates.

Training – Partners pair with vendors to design comprehensive training strategies as well as build and execute training.

Configuration and support – Provide data mapping, code development, testing, and deployment within or wrapping around the core platform

The benefits don’t stop there, either. Due to the transient lifespan of any single implementation, partners have developed resource specialties to fill the temporary project gaps created when a lender with a strong focus on operational strategy decides to implement an offering from a vendor with a strong delivery strategy.

For example, partners have built up teams that specialize in specific verticals such as mortgage, home equity, consumer lending, and commercial lending. These are particularly useful for lenders that want to challenge their current operations or are moving into a new product offering. Partners also have teams working across products to focus on horizontals such as channel optimization and marketing, risk and regulatory, business process outsourcing, talent and organization, etc. This can provide lenders with a health check on how they’re performing or supplement areas in which the lender knows they need additional support improving.

Partners may also have specialized capabilities and thought leadership in new offerings such as digital, mobile, reporting and analytics, artificial intelligence, machine learning and robotics, and data privacy and security. This can augment the partner’s ability to define progressive, yet practical next steps.

When to Leverage a Partner?

Comparing the implementation strategy and goals against the current organization capabilities and availability will help confirm the cost/benefit of adding a partner. Key elements to consider include the need for advisory support (important if the leadership wants independent advice on the industry, strategy, execution, and/or operations, or if the lender is moving into a new line of business or expanding into unfamiliar territory) and/or strategy support (which may depend upon how mature their model is for defining, framing, and executing strategies).

The lender may also need execution support, depending upon who and how much of the current operational team can be diverted to support the implementation and what mechanisms exist to backfill those needed for the project. Finally, the lender may need capability support, depending upon any implementation skillset gaps that internal resources have and whether the lender is looking to build and leverage these project execution skillsets again in the future. If so, key focus areas for internal development plans need to be established.

Two other elements are important in the decision as to whether to take on a partner. The first is project duration. What would the expected ramp-up time for a partner resource be, given the role and responsibility? What would the expected ramp-down time be for leveraging an internal resource in the same role?

The second is project cost. Here, the analysis focuses on comparing the expected cost, skillset, and allocation for an external partner against an internal resource.

How to Leverage a Partner

Partner organizations have built out flexible models to deploy resources aligned to lender scope, budget, and duration. Depending on the project, different types of resource models are available; three of the most commonly used are:

1.) Staff augmentation. Partners can provide one or two resources in key areas to function alongside internal project resources. This allows the lender to pull in templates, industry knowledge, and extra support on smaller projects.

2.) Tactical team. Partners can also be placed within specific areas, such as a requirements-gathering, testing, or project management, to provide a specific skillset or function. This allows the lender to reduce the project load on the operational team.

3.) Advisory services. Lenders can also request specific advisory services from partners to speak on key industry topics, review project strategies or decisions, or serve on executive committees. The independent voice helps provide an additional layer of quality assurance for the project.

In the end, it is up to each organization to assess their own implementation readiness and maturity, ultimately determining when, where, and how best to leverage potential partners. There is ample opportunity to create a unique combination of internal resources, software vendor resources, and third-party partner resources to best fit priorities and budgets while driving towards a successful LOS deployment that is fueled for long-term prosperity.

About The Author

Monica Ottenbacher

With over 10 years in the mortgage industry, Monica Ottenbacher helps lenders develop enterprise strategies across people, process, and technology as the Solution Architecture Lead for Mortgage Cadence, an Accenture Company. She also manages the Mortgage Cadence Partner Program to develop industry alliance partners that support and enhance Mortgage Cadence’s delivery and software capabilities.

Five Years Of Benchmarking History – And Success

What can be learned when the same group of lenders cooperate over the same time period to compare key metrics? Mortgage Cadence has worked with a group of customers for more than five years developing, refining, and presenting true peer-to-peer benchmarking results on five mortgage metrics we all agree are key to understanding lending performance. The task seems simple enough on the surface: Look at the metrics, see how they compare over time, draw some conclusions, present the results, and box the project up until next year. The thing is, though, that the five-year period from 2012 through 2016 was a period in mortgage history like no other. The data keeps raising interesting questions as well as yielding interesting results.

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The Metrics

We have published on our approach in the past. We look at the macro-level with the intent of shining light on loan velocity, pull-through, customer share, productivity, and cost-to-close. These five metrics help our customers view their business in comparison with other lenders just like them. They often raise questions that lead to performance improvements going forward. That is reason and reward enough for the research effort, yet the Study yields much more.

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The More

The five year period ending in 2016 was one of the more interesting in the last 30 years of mortgage lending. After a more than 30-year period of sustained refinancing in a rate environment not seen since the early 1940s, the mortgage market began its long-term transition to purchase-money lending. Not that rates have risen dramatically; we all know that they have not. Almost everyone who could refinance or wanted to refinance did so and at a rate they are unlikely to give up unless forced to do so. With refinance demand at an all-time low, the switch to purchase is logical as well as economically more stimulating to the overall economy.

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A long-term purchase market is good. It comes at a cost, however. One of the key findings from our Study is that purchase-lending has an adverse effect on productivity as well as cost-to-close. Cost-to-close and productivity are inversely related: One goes up, the other goes down. With purchase beginning to dominate the market, lenders can count on costs remaining higher than they otherwise would in refinance markets.

Major regulatory initiatives occupied a great deal of lender time during the five-year period covered by the Study. Performance on three of the five relevant metrics plummeted in 2014, the year the qualified mortgage and ability to repay rules took effect. Later that same year, the industry turned its attention to learning all it could about TRID, making plans for its implementation by the fall of 2015. Productivity, as well as pull-through, decreased to their lowest level in five years. Cost-to-close increased to its highest level over the same period. While this was not the mortgage industry’s worst period in modern memory, it was close.

It is only fair to mention that two other factors in addition to regulatory impact likely influenced 2014’s results. The first, purchase lending, was discussed previously. These loans are more complicated, take more time and cost more money to produce. As mentioned, however, purchase markets are good for the mortgage industry and the economy overall. The second factor is that mortgage volume decreased in 2014 from 2013. Volume dropped faster than staffing levels. This also adversely affects cost-to-close and productivity.

There is Still More

The stories from this year’s Study are still revealing themselves. The tide may be turning on the seemingly ever-increasing cost-to-close trend. For example, 2016 was better, by a small margin, than 2015, and it was far better than 2014. One year of slight improvement does not make for a trend, though it does create reason for hope. There are additional insights that we’ll share in the coming months as we continue to sift through the data and uncover other interesting items that, we hope, guide us all to better performance.

About The Author

Dan Green

As Executive Vice President, Operations for Mortgage Cadence, Dan Green works with the team to create greater efficiencies in all areas and coordinating efforts that enhance service quality and teamwork. Formerly, Green served as Chief Operating Officer/Chief Marketing Officer of Prime Alliance Solutions followed by Marketing Lead for Mortgage Cadence. Prior to that, he had an eight-year career with CUNA Mutual Mortgage where he was responsible for origination, servicing, lending technologies, process reengineering and education. With over 30 years of financial services and mortgage experience, he’s keenly interested in lending performance and performance benchmarking that helps lenders constantly increase efficiencies while enhancing the financing experience for borrowers.