Magazine Feature Story

*Pointing To New Leaders*

**By Barbara Perino and Rebecca Walzak**

***Last month we took a look at the innovative needs within the industry and recognized that there is an urgent need and many opportunities for emerging technologies and business models. However, moving from the recognition of need and the current available opportunities to taking advantage of them is a long way from the actual implementation and acceptance of change. So why are some companies better at this than others? Or are there some leaders that are so very innovative themselves that they naturally lead their employees to innovation? Is there such a thing as being an “Innovative Leader” or are the leaders of companies that bring us innovation just in the right place at the right time? And, if innovative leadership is real, what does it look like and how can today’s mortgage leaders lead the charge to make this industry better? 

****Leadership – what it is, why it works and what makes a leader has been the study and discussion topic of numerous papers, books, classroom lectures and boardroom arguments. Yet the reality is that leaders and leadership have been around since history has been recorded. Some individuals are often used as examples of “good” leadership and others are case studies in leadership failure. Is leadership a matter of “time and place” or do “leaders” utilize their time and place as a catalyst for taking the lead? What makes some individuals credible as leaders and others failures? 

****In 2008, James M. Kouzes and Barry Z. Posner published a book called The Leadership Challenge (4thed.;Jossey-Bass) in which they examined numerous attributes often associated with modern leadership. While competency within a chosen field was high on the list, it was not the overriding measure of good leadership. Instead they found a series of leadership practices that appearedconsistently in leaders deemed to be the “best”. These practices, none of which refer to competency in the area of leadership, include:

****>> Modeling the Way

****>> Inspiring a Shared Vision

****>> Challenging the Process

****>> Enabling Others to Act

****>> Encouraging the Heart

****So what then do these attributes look like in practice and is there a relationship between these practices and the ability to lead an industry to redefine itself; to re-emerge from a firestorm of global failure? 

****Examples of Leadership: While there are many well-known leaders who could be used as an example, most people don’t envision themselves as the next Steve Jobs or Jack Welch. There are however numerous examples of leaders that embody these practices in our everyday lives. One such example is the principal of a high school in one of the largest school districts in the country. The high school was in a multi-racial neighborhood which was located on the outskirts of a major metropolitan area and attracted families who had recently emigrated from other countries. In order to facilitate non-discrimination policies the school also offered several magnet programs which brought in students from multiple other neighborhoods. As a result, the school of 2400 had a mix of students that encompassed equal percentages of whites and minorities. To further complicate the situation, many of these minorities did not speak English as their native language. A leadership challenge if there ever was one, yet the school was one of most highly regarded schools in the system and often the focus of television reports and studies on educational success. 

****The individual charged with the leadership had a long tenure as an educational administrator, but he also exhibited the practices of credible leadership. He set high goals and standards for everyone, students, teachers, administration and support staff and provided constant reminders of them, frequently walking the halls encouraging and controlling at the same time. He would never ask any staff member to do something he hadn’t or wouldn’t do himself. While acknowledging the standards and limitations imposed by budgetary restraints, he found innovative ways to supplement the school funds to ensure that teachers had supplemental resources necessary to provide extraordinary opportunities to students. And when it came time to act, when a crisis occurred, he gathered his staff, listened to their ideas and jointly developed a plan of action. Once decided, the staff were charged with “making it happen” allowing them to feel valued as a key part of the solution and the organization. 

****As this example demonstrates, leadership is not limited to CEO’s of big companies but in fact can occur at any level within an organization. Today’s mortgage lenders, executives, vendors and all ancillary service providers could and should be providing this type of leadership. But does that really address the issue of how to identify and support the innovations that are critical to redefining and supporting the new mortgage lending industry? Where does the innovation come from? 

****What Makes A Leader Innovative? Leaders often challenge the status quo and are willing to implement incremental changes such as advanced technology and associated business processes. Innovative leadership however goes beyond this level and leads changes in the way things are done; identifies innovative ideas or encourages and rewards staff for promoting these innovations. Innovation requires taking risks that may or may not provide the expected level, or any level, of reward.  

****There are without a doubt some individuals whose leadership has resulted in innovative ideas, concepts and products. In examining these individuals it became apparent that there were some elements of their leadership style that went beyond those identified by Kouzes and Posner. 

****The first of these was being open to radical ideas. Too often leaders view their job as occurring within the confines of what exists, or is expected, of the industry in which they reside. The idea of radically changing this framework is terrifying to them since it takes them outside the known and into the unknown. Failure is definitely a possibility and losses rather than profits can have serious consequences. There are however, organizations that exist entirely to promote radical change. Look at the concept of the “X-Prize”. The X-Prize foundation is a group “whose mission is to bring about radical breakthroughs for the benefit of humanity, thereby inspiring the formation of new industries and the revitalization of markets that are currently stuck due to existing failures or a commonly held belief that a solution is not possible.”Today the X- Prize Foundation is widely recognized as the leader in fostering innovation through incentivized competition.

****Zappo Shoes CEO Tony Hsieh is a firm believer in the need to embrace and drive change. He encourages anyone with a different idea to “run with it” even if it is not within his general area of responsibility. He is also bucking the trend of using “social media” as a primary means to sell his product. Rather he focuses his staff on PEC; personal, emotional connections. As he has recognized, innovation sometimes means an “old” new. 

****While not viewed as an attempt to innovate the industry in the same scope as the X-Prize foundation, our industry has experienced different innovations that have evolved into accepted ways of doing business. One prime example is the Automated Valuation Model or AVM. The idea of utilizing millions of data sets on property values to calculate the value of another was radically different at the time when it was believed that only an individual conducting an on-sight review of the property could be reasonably accurate. Then Dr. Michael Sklarz, a statistician with a long involvement in the appraisal evaluation field developed the idea that statistical methods could be applied to this data to create a valuation that provided better results and also reduced the time and inherent bias involved in the manual process. This radical concept was not immediately embraced by the industry, but over time it has come to be a mainstay for determining valuation and in many cases, proven more accurate than having an individual conduct the analysis. 

****While not specifically developed for mortgage lending, the development of a borrower credit score that could be used to assist in predicting the probability that a borrower would repay his or her debt was also radical thinking. Conducting the studies, creating the score and supporting it while the consumer lending industry adopted it required a long-term leadership commitment.

****One of the more expansive views of innovation is recognizing the opportunity to drive societal change. There is no doubt that the technology advances have clearly changed the way that society communicates and relates to each other. The opportunities to expand an individual’s circle of influence expand exponentially every day. But not all innovative leadership is at this level. Innovations at a smaller level can also be powerful and not only require the type of innovative leadership we have been discussing but actual hands on action to make the innovation a reality.

****Take Sharon Quercioli for example. She has started several different companies all based on ideas that she developed after recognizing a need and/or opportunity. Her latest venture was the development of paper with flower seeds embedded in it. This paper can be used just as any other paper would be, but when finished with it, it can be planted and produce flowers rather than being thrown away and added to a mountain of trash. 

****So What Does All This Mean? Based on this research it is clear that an innovative leader needs to be more than just a good leader. It means expanding each of the attributes of good leadership until they are attributes on steroids. 

****Where a leader must be the model for how the organization is to treat its customers and its employees, an innovative leader will break the status quo to generate, as Tony Hsieh says, the actions that result from the implementation of whatever innovative idea you believe in.

****Leaders must challenge the process and develop a vision to be shared with employees, but an innovative leader will see opportunities to turn the process upside down and be willing to take the risk that goes with making those changes. Innovative leaders not only enable others to act, but encourage and reward the creativity associated with developing innovative ideas. Just as the X-Prize is the world leader in incentivized innovation, innovative leaders must be willing to foster and support radical changes within their organizations. 

****Finally, while passion for the objective is important to a leader, it is the driver behind innovation. From the global innovations of communication to the deeply personal drive to turn trash to flowers, passion for what you plan to achieve must be worn in the open, right on the sleeve.  

****Where Are The Mortgage Industry’s Innovative Leaders? One thing the research for this article did not find was an example of an innovative leader in this industry. Sure, there are some great examples of innovative applications for supporting the industry or providing ancillary services, but none that get to the heart and soul of our business. Instead it appears that industry leaders are so concerned about what is going to come out of all the regulations that they have failed to look ahead, to recognize that there will be an end to the tunnel and that we need to start looking now for the light at that end. 

****If innovative leaders challenge the process, where are the individuals that are leading the charge for a lending process that radically changes the way we do business; refocuses our origination process from an inquisition of potential borrowers to a personal, emotional connection that addresses the frustrations verbalized over the past few years. 

****Servicing, which has been a stagnant, inefficient process with numerous flaws, has gone through a public exposure of these problems that makes Tiger Woods’ problems seem minor in comparison. Yet there is no leader of a servicing organization that has publically acknowledged that the process is so flawed that it cannot be corrected, but re-designed. 

****We need innovative leadership. We need a leader, whether it be a super-sized lender or a small origination or servicing shop to stand up and model an innovative way to make this industry work again. Maybe the creation of an “X-Prize” incentive program would force our thoughts and ideas toward the future? Or maybe it will come down to those in the industry who embrace and drive change, who will be the survivors. Unfortunately those who fail to understand and adapt, who fail to become innovative leaders, will become stories of the past for our grandchildren’s entertainment. 

****ABOUT THE AUTHOR: Barbara Perino is a Certified Professional Co-Active Coach guiding her

clients who are executive leaders and their staff. Barbara has been trained

through The Coach Training Institute (CTI) located in San Rafael, CA. She

completed a Coaching Certification Program through CTI and the International

Coaching Federation (ICF). Prior to becoming a coach, Barbara was

a 16-year veteran of the residential mortgage industry in a national sales

management capacity for property valuation and residential mortgage service providers.

****ABOUT THE AUTHOR: rjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak,

a leader in operational risk management programs in all areas of

the consumer lending industry. In addition to consulting experience in

mortgage banking, student lending and other types of consumer lending,

she has hands on practical experience in these organizations as well

having held numerous positions from top to bottom of the consumer

lending industry over the past 25 years.



Progress In Lending

The Place For Thought Leaders And Visionaries

Magazine Feature Story

*SaaS Improves the Bottom Line*
**By Mark Ramirez**

***As the morning sun rose over the foothills of Saddleback mountain in Southern California, the frosty dew would smother the windshield of either my mom’s or my dad’s car, whomever got home the latest from work the previous evening and left their car in the driveway. As I gathered my things to get ready for school about 20-something odd years ago, I remember that my dad used to make it a point to head outside and fire up the engine to the car on the driveway so “the ‘ol clunker” could make it to work. My father, the wannabe mechanic, was always cognizant of the required upkeep and maintenance of their cars. My parents had a real sense of pride of ownership and always purchased their cars, although they seem to certainly entertain the occasional lease. During these years, I used to take the bus to school (yes, it was elementary school) and I remember that I would make sure I would walk to the same corner at the same time of every day. The squeaky door of the giant yellow bus would fling open and I would be greeted by the same smiling face of our beloved bus driver.  To this day, I don’t know if the service of taking the bus to school was something my parents paid for or if it was included in the school fees, but unbeknownst to me at the time, this was a very thorough and reliable system for getting kids to school. Never a thought occurred that the bus wouldn’t take the same route, not have enough gas, or even break down on the way to bringing the future leaders of America to their educational destination.
****All the years of education and bus rides have led me to a mortgage industry that is in a transition period; a transition period that involves endless amounts of data and information. Over the past 17 years in this business, I’ve been exposed to a number of different ways to close a loan. I’ve also had the privilege of using and administering a non-admirable number of software and service providers. Recently, I have seen many of these software and service providers move from the desktop to the Internet.
****Software as a Service can be defined as a software delivery model in which software and its associated data are hosted centrally (typically in the Internet cloud) and are typically accessed by users using a thin client, normally using a web browser over the internet (source:
Wikipedia).  What!?!?!  This brings me back to my story about taking the bus to school…
In the software biz, there are primarily three different kinds of delivery models. You can purchase the software (buying a car). You will get a disc in the mail or download a big file but you will be required to install on your own servers or computers, keep up the maintenance on the hardware for those computers, and, in some cases, install your own updates to that software. You then own the software and if you want to upgrade, you will be required to buy the latest and greatest software. Let me warn you, the blue book value of your old software sucks.
****You can also lease software (leasing a car). Typically this means that you can download software and install it on your own servers and computers but instead of paying a large fee upfront, you might pay a smaller fee to get the software and utilize a software license, and if you choose to not continue using the software, your license will expire and you can no longer use the software.
****The last, and most certainly not the least, is software as a service (SaaS). Much like the reliability of taking a bus to school, SaaS is software you pay a monthly or yearly fee for but there is no requirement of hardware, no requirement of IT experts for installation, and usually no cost for upgrades and enhancements.  In the mortgage business, this type of software application can make an immediate impact to the bottom line. Let’s take a look at some examples.
****The Email Issue: It’s no secret that our industry lives and breathes email. The average person sends or receives 47 messages per day (if it were only that many). We rely on it to communicate to our business partners and colleagues and we also rely on it to transfer information back and forth from brokers to bankers to end investors. All that data needs to be stored somewhere. Although storage costs are decreasing, the cost to administer and maintain a reliable and secure enterprise email platform continues to increase. With viruses, spyware, malware, and who knows what other-ware; email will always be one of the major backbones of any organization and must be maintained as such.
****How SaaS Improves Email: You will never catch me working on the engine in my car, I leave that to the experts. Maintaining email combined with anti-virus, anti-spam, disaster recovery, archiving and backup, and security policies is no different. It takes a team of IT gurus to maintain this, even a small network of around 100 employees. Many web hosted platforms alleviate the cost of servers, staff, backup, ant-virus, and anti-spam and group it all into one easy to allocate and easy to administer platform.  All you need is an internet connection and all your employees can be connected via desktop, web, and mobile within 24 hours; without any upfront setup costs. Saas driven email is the quickest implementation you can do to see instant savings and an improvement to your bottom line.
****The LOS Fence: The main argument behind an on-premise LOS and a SaaS LOS all comes down to data security. Even if you had a majority of the services on a network hosted in a cloud environment, many executives will err on the side of hosting their LOS data on premise.  I tend to be on the fence in this respect due to the LOS being the major mission critical application in any mortgage company.  There are advantages and disadvantages to both sides but a LOSaaS (I just made that up) can definitely bring some improvements to your bottom-line.
****How LOSaaS Adds Up: The major advantage to a cloud hosted LOS application is the ability for platforms to integrate with another in a secure and efficient manner. We have all seen examples of this for years past with integrations between DU/LP, Credit Vendors, Doc & Compliance, Product/Pricing Engines, and Anti-Fraud vendors all working to integrate with LOS companies to transfer data back and forth. You may not see a direct improvement in basis points but you will definitely see an improvement in efficiency and time. The more loans you close, the more money you make and the ability to get answers quickly and efficiently by transferring LOS data out to service specific vendors can pump up the volumes quickly.
The Greg Brady of SaaS: We all watched the Brady Bunch and as everyone was focused on how cute Cindy and Bobby were, Greg was growing up to be a man. Customer Relationship Management (CRM) was probably one of the first services to be hosted in the cloud. With salespeople on the go all the time, they needed access to customer data on their phones and on laptops so the CRM SaaS was born.
****CRM = ABC: Every sales person knows the cardinal rule, always be closing.  Knowing and communicating with a potential or a current customer with their pipeline data, pull through ratios, purchase/refinance differential, etc. can pinpoint your salespeople to the relationships that are thriving and even possibly revive the cold ones.  Having information like that available at all times and via any medium can be invaluable to any organization.
****Being a technology guy (aka geek), I am always searching for tools and ideas on how to improve the processes and efficiency of the staff of not only my own company, but also the many mortgage companies that I have worked for in the past. The power to bring together the expertise of different service providers that are absolute experts in their fields can forge together a platform that will make the potential of any mortgage professional become endless. I will go over some of those technologies and how they improve your bottom line.
****Chat/Instant Messaging – As the refinance market has dried up, regulations attack the industry, and almost everyone selling the same flavor otter pops; customer service becomes a central focus of every mortgage company. As my wife will tell you, communication is the backbone to any great relationship. Sometimes the difference between closing a loan and not closing is getting an answer to a question as fast as possible. Chat and Instant Messaging make this happen and the ability for the customer to have direct and instant access to your staff will make you more money…guaranteed.

****Social Media – The ways that social media improve your bottom-line can be saved for an entirely new article. We all know that maximum exposure doesn’t necessarily guarantee you more business, but communicating to your community of brokers and loan officers sure doesn’t hurt.
****Video/YouTube – This could be couple in with Social Media but I believe it deserves a spot of its own. Experts believe that by 2016, approximately 70% of the content that we read today will be delivered to us via video.  Enhancing the customer experience can have an astronomical effect if the communication that is happening between you and your customers is done via video.  It’s a more personable, honest, and open-minded approach to going the extra mile for your customers, which will in turn, improve your bottom line with more loans.
****Text Messaging – 2.5 billion text messages are sent every day in the U.S. alone.  Everyone is on the go and I’ll emphasize again that enhancing the customer experience by providing better means of communication will net an improvement to your bottom line and a simple 140 character text message that keeps all the parties involved in the transaction updated consistently, will push your volumes on an upward trend.

****All of the services mentioned in this article are currently being offered as a SaaS solution and can easily be implemented into your business. Whether or not they work for you in your environment will be a decision that you will have to make but I encourage you to embrace each new idea you come across. Hopefully one day, you will find yourself on a street corner with someone smiling at you, and you will happily hop along on their giant yellow bus to a more efficient, and profitable business.
****Enjoy the ride.
****ABOUT THE AUTHOR: Mark Ramirez is CEO of Priceweaver, Inc. With over 15 years of experience in the mortgage banking industry including Secondary Marketing, Capital Markets, Information Technology, and Business Process improvement; Mr. Ramirez is dedicated to providing the very best tools and innovation to forge a revolution in the mortgage industry. His company, Priceweaver, is responsible for building the next generation of technology tools for lenders, banks, and credit unions. Their flagship product, LenderHub, is designed to offer the greatest amount of flexibility than any other product and pricing engine available today.



Progress In Lending

The Place For Thought Leaders And Visionaries

Magazine Feature Story

*Turning Browsers into Borrowers*

**By Randy Schmidt**
***The Mortgage industry is going through some turbulent times. Origination volumes are at their lowest levels in years and lenders are looking for any advantage possible in maintaining and growing their business. Everyone is looking to optimize costs, grow revenue and deliver exceptional customer service. One area that is garnering a lot of attention is the online lending channel.

****We all know that online experiences are becoming a normal part of our daily lives. Whether we are reading our email, checking our stock portfolio, perusing the latest headlines, buying items online, checking our bank balance, keeping up with our favorite sports team or just visiting one of the many social network sites most of us are connected to the internet in one form or another multiple times every day. While we all acknowledge that people all across the country are connecting in record numbers, the unanswered question remains: “How can I make this online environment work for me?”

****In order to make the most of the opportunities that are out there, proactive lenders are turning to technology to become more available to this group of borrowers. By revamping their online presence to educate these consumers, giving them all of the information they will need to make a decision, these lenders are hoping to appeal to this tech savvy crowd.      

****First, let me dispel the notion that success in the Internet channel is achieved any differently than any other part of your business. There is no magic formula for turning Internet browsers into borrowers. Success, regardless of the channel, can be summed up in two words: customer service. Knowing your target customer, and giving them the information they need while delivering an experience that they feel comfortable with, is the primary way to acquire and retain customers. The problem is that different customers are looking for different experiences. 

****The key to online success is to create an all-encompassing web portal that allows each borrower to interact with you on their own terms. Young first time homebuyers may want to research, compare, apply and transact with you entirely online. Existing clients may still desire that personal touch during the application process, but would welcome the opportunity to receive their documents or keep up with the status of their loan online. Older borrowers may still want to do everything in person but are looking for your closest location or contact information. Success depends on having a web presence that can deliver all three experiences.

****Let’s start with the young first time homebuyer knows as a “millennial”. Millenials, also known as Generation Y or echo boomers, are typically 18 to 35 years old and are the first generation to come of age in the new millennium. With over 50 million potential homebuyers born between 1979 and 1991, millenials comprise nearly a quarter of the US population. This group represents a critical target market and virtually every member can be found online. Millenials are leading the way in almost every digital metric including mobile internet usage, mobile commerce and location based services.

****So what type of experience is a typical millennial looking for? Members of this “do-it-yourself” generation, prefer to have a robust toolset available to them 24 hours a day, 7 days a week, 365 days a year. These tools should allow the borrower to gather all of the information they need to make a decision and then allow them to execute on that decision. When redesigning your online presence, there are certain things that you should consider as part of your point-of-sale component. By simply keeping the following guidelines in mind, you will go a long way to achieving the online experience that these borrowers are looking for.

****>> Educate the consumer – give the consumer all of the information they will need to make an informed decision. Tell them all about your products and services. Explain the differences between your loan products. Let them look up unfamiliar terms or acronyms. The more information that you can provide to them, the more comfortable they will be with the process.

****>> Give them choices – Allow the consumer to look at a variety of products and rates. Give them calculators that allow them to play with different loan scenarios. Better yet, gather some basic information and let the system automatically run all of the calculations for them.

****>> Allow them to apply online – Once they have decided on a particular product and rate, allow the consumer to act on that decision. Electronically walk them through the application process in a clear and concise manner. Ask only the information that you need and keep them informed of their progress along the way. Allow them to save their application at any point in the process and return to it at a later date and time if necessary.

****>> Answer their questions – Along with having helpful tips available during the application process, make sure that you are available to help them at any point in the process. Install a live chat service to allow the consumer to reach an originator or help desk representative at the push of a button. Research has shown that lenders offering their customers online chat during the application process are 25% more likely to close the transaction.

****>> Respond quickly – There is nothing more frustrating to a borrower than to take the time to apply online with a lender and then have to wait for hours or days for a response. Consider utilizing automated underwriting at the point of sale where the borrower can get a conditional approval of their application while they are still online. At a minimum, send them an email confirming their application and letting them know what to expect next.

****Unfortunately, one mistake that many lenders make is that they think of their lending portal as only a point-of-sale tool. While point-of-sale is important, it is equally important to have your customer portal double as a communication center. With today’s active lifestyles, it is becoming extremely important to provide a real-time communication channel with your customers. As I mentioned earlier, there will still be a segment of your customer base that prefers to deal directly with a loan officer during the application process. Regardless of the origination channel, all of your customers deserve to be kept informed. Areas that should be considered when designing your post application communication channel include:

****>> Loan Status- report to your clients, loan officers and branches the status of their loan while it is in process. Information regarding the status of verifications, appraisals, inspections, closing dates and a variety of other information should be gathered from your LOS and made available to the borrower online.

****>> Secure Messaging – much of the data gathered during the origination and processing period contains sensitive and personal information. Disclosing this information via email may be a security risk and should be avoided at all costs. By adding a secure messaging component to your customer portal, you can keep the borrowers in the loop and satisfy your security team all at the same time.

****>> Two way document delivery – You can speed up the lending process by delivering your disclosures electronically to the borrower. Again, for reasons of security and due to regulations imposed by the ESIGN act, electronic disclosures should not be delivered via email.

****Finally, to complete the customer experience you should consider adding a section to your online portal that integrates with your loan servicing system. In conclusion, a dynamic and professional online presence should serve as an extension of your organization.

****ABOUT THE AUTHOR: Randy Schmidt is President of Data-Vision, Inc. and is responsible for overall operation and strategic planning for the company. Randy became involved in the IT side of mortgage banking almost 30 years ago and has been involved in numerous projects on both the origination and servicing side of the business. In 1993, Randy co-founded Data-Vision, Inc., in Mishawaka, Indiana as a Web design company. He then combined his previous mortgage experience with Internet knowledge.



Progress In Lending

The Place For Thought Leaders And Visionaries

Video Insights: Paper And Non-Compliance

Paper and Non-Compliance*

***PROGRESS in Lending is proud to bring you this video by Mortgage Cadence. Too often lenders cling to and even hoard paper for fear of some regulator finding them to be out of compliance. Here’s what will happen to that lender over time:


Progress In Lending

The Place For Thought Leaders And Visionaries

Video Insights: Ensure UAD Compliance

*Ensure UAD Compliance*

***As a public service, PROGRESS in Lending wants to alert you to a new solution that can solve your UAD issues. Specifically, UAD Reader is a free application that lets anyone work with any appraisal sent in the newly required “UAD” MISMO 2.6 XML format. The GSEs are requiring appraisals in MISMO 2.6 XML format as a part of their Uniform Appraisal Dataset (UAD), but you won’t be able to open, read, or verify the contents of the appraisal without a way to open and read the files. UAD Reader is a free application put out by a la mode that solves this industry problem.


Progress In Lending

The Place For Thought Leaders And Visionaries

Magazine Cover Story

*Trend Setting

**Executive Interview**

***Mark Phlieger was among the first to evangelize on behalf of Web-based computing when he launched Avista Solutions. Now his thinking has gone mainstream. The trendsetting company celebrates its 10th anniversary. Avista celebrated other milestones and added a record 37 new customers in 2010, comprising 20 community banks, totaling $12 billion in assets, 10 credit unions and seven independent mortgage bankers. On March 25, 2011 there were 63,000 active B2B user accounts across Avista’s customer base.

****Other milestones include Avista relocating its corporate headquarters to Charleston, South Carolina in July 2010, a city that Phlieger said offers much support for the technology industry and cultivates high quality talent. Since signing on its first customer in 2001, Avista Solutions has: processed more than 100,000 loan applications in one month, reached a 28-day implementation time record. Mark Phlieger talked to us about what happens next now that the Web has gone mainstream.

****Q: As we see more institutions with depositories like community banks and credit unions enter the mortgage space, are you noticing that the bulk of your new clients are these types of institutions?

****MARK PHLIEGER: Yes, absolutely. We signed five banks this month. The market has shifted to depositories doing lending. What we’re seeing is mortgage bankers combining with these depositories. Also, it’s important to remember that banks are heavily audited, so when we talk about the differences between a bank and a mortgage banker, the banks are heavily accustomed to regulation. That is not an insult to the mortgage banker, it’s just that the banks are more used to being under regulatory scrutiny.

In terms of the sales cycle, they are longer these days. How long? Credit unions have the longest cycle, banks are in the middle and the mortgage banker is the shortest. We love dealing with community banks and credit unions.

****Q: Recently the MBA revised down its origination volume projection for next year. Originations are expected to be at their lowest point in 15 years. How do lenders and vendors survive this market?

****MARK PHLIEGER: Less volume means that we have to sign more customers. We are signing four or five a month, but hope to move that up to seven or eight as volume falls. Right now our largest customer is only 4% of our revenue. Our goal is to have a lot of customers in the small and mistier market.

There’s a general attitude that there is rapid change going on that we have to deal with. Banks know that they have to generate fee income to make up for other revenue that they’re losing, which is driving them into the mortgage market. They also don’t want to invest in legacy technology where they have to invest in a heavy IT staff, servers, Citrix, etc. They want to plug and play. They want to go out and find their people and just turn on the technology. We’ve grown a lot in this down market because of our cloud-based model. They also like the all-in-one solution. They don’t want to deal with 10 different solutions.

****Q: Avista celebrated its 10th anniversary this year. How has the mortgage industry changed in 10 years?

****MARK PHLIEGER: I had more hair and I weighed a lot less when we started Avista. Honestly, it used to be more go-go. It was all about volume, but now it’s about quality and compliance. It’s changed a good bit. There is a lot of opportunity for vendors that are interested in innovation and offering a top-quality tool. You want leading-edge technology so you are where the client wants to go. These days we talk about mobile and cloud-based solutions. Your technology has to solve the problems of your client. For technology like that, I think there will always be opportunity.

****Q: Avista was among the first, if not the first, company to come out with a completely Web-based solution. Now it seems like the market is where you were 10 years ago. How does that feel?

****MARK PHLIEGER: It’s nice to see. We were cloud-based before cloud-based was cool. We’ve been Web-based on Day One. Over the years it has gotten easier with Google and Amazon setting the bar for cloud-based products. We don’t have to evangelize as much. On the downside, there is more competition, but that’s ok because mortgage bankers are going to pick the product that best fits their needs. They want anytime, anywhere access. Just like we made the transition to everything Web, the next transition is to everything mobile. The reality is that I read and consume all my information on my iPad. That’s where we’re going next.

****Q: What does it mean to be cloud based?

****MARK PHLIEGER: Simply put, it’s about delivery as a service instead of selling a product. Think about it this way, you don’t care where the power plant is as long as you plug in your iPhone and it gets charged. We handle infrastructure, platform, etc. Once you sign with us we take you through implementation and set everything up for the client instead of giving them a box and saying: Here you go. It’s a different model. We charge based on the closed loan instead of by the license. When the model is more like a lease instead of a license, there is an incentive for everyone to work together to make the business a success. You have to care.

****Q: There has been a lot of consolidation in the LOS space and that is likely to continue. Most recently we saw Ellie Mae acquire DataTrac. What do you think about LOS consolidation?

****MARK PHLIEGER: This was predicted and it will continue. The players that ran a desktop or client-server model will get consumed. This acquisition validates the cloud model. Speaking of Ellie Mae, you see in their quarterly reports that most of their revenue is coming from cloud-based products.

I believe there is a lot of opportunity to be independent and have a leading-edge platform. Avista is end-to-end and we’ve built everything. So we can compete well with any other LOS. You need a solid infrastructure to support banks and credit unions. You can also be more nimble when you’re independent.

****Q: Avista also made headlines with its FHA Connection link earlier this year. How is that going?

****MARK PHLIEGER: We’ve always had clients that were heavy in FHA. We wanted to build a piece so that lenders doing FHA didn’t have to leave the platform. We’re committed to FHA and customers told us that this was important. FHA share remains substantial so we need to do everything we can to make it easier for our clients to originate an FHA loan. We’ve had a great response. We also enjoy working with FHA. FHA is very professional.

****Q: Continuing to talk about integrations, last year you did integrations with Kroll, Wolters Kluwer and Fannie Mae’s EarlyCheck. What is your integration strategy?

****MARK PHLIEGER: It’s based on what is required from a regulatory or delivery point of view. We also look to where we can get efficiency for customers. Lastly, it’s based on customer feedback. They tell us what companies they like to do business with. We put all that on the roadmap and partner with those companies. We will be live with UCDP within a month. It’s important to make sure that customers have what they need. Integrations are also almost done with Genworth and LogicEase from ComplianceEase. You touched on Wolters Kluwer. We were the first end-to-end product to offer their Expere product. You’ll see more closing doc integrations.

****Q: You talked about signing a record number of new clients last year. How is this year shaping up?

****MARK PHLIEGER: It’s solid. We will best last year in terms of the total overall number of customers signed up and the total value of the contracts signed this year is larger as compared to last year. It is competitive, but we’re seeing opportunity. It’s important to understand what banks and credit unions have to do from a compliance standpoint. It’s intense because they will make sure the vendor complies, but that’s ok for us. We do well up against due diligence scrutiny.

****Q: So, what does the next-generation LOS look like to you?

****MARK PHLIEGER: It’s about more access. People may be coming in from desktops, laptops, tablets, etc. In my opinion, the system also needs to be end-to-end and all-in-one. There is a focus on data quality. You need a common database and consistent process flow. It also has to be quick. The services also have to be baked in like credit, flood, compliance, fraud checks. Everything has to be based on Web services and MISMO XML to get that efficiency. We are a big MISMO supporter. It has been huge for us to reuse code to connect to more services. It’s about technology and customer service coming together. You also need 24/7 access, redundant data centers and thinking through the whole mortgage model.

****Q: How would you define the state of innovation in the mortgage space today?

****MARK PHLIEGER: I like change, but across the industry I’m not sure that’s the case. If the vendor wants to be relevant you have to innovate to solve real business problems. You also need to have an A team to go in and consult with customers. In a transactional model you want to help your clients adopt the technology. You have to go into every client shop to make sure that they are using every feature. You can’t rest on your laurels. In a cloud model we’re not shipping disks so we can roll out new features instantaneously, but we have to educate our clients about all that’s possible. In this market, that’s a big deal.


****Mark Phlieger thinks:

****1. You will continue to see expansion in vendors providing a cloud-based, all-in-one model.

****2. Mobile applications will continue to explode. People want information anywhere, anytime.

****3. Compliance and data quality will continue to be a focus, as it should, in mortgage lending going forward.

****ABOUT MAK PHLIEGER: Mark Phlieger is president and CEO of Avista Solutions, the Charleston, South Carolina- based creator of all-channel, Web-based loan origination systems. Co-founding the company in 2001, Mark has led Avista since its inception and has an impressive record of achievement in pioneering and development in the mortgage technology space. Mark was a team member on the Fannie Mae project that developed the groundbreaking technologies of Desktop Underwriter and Desktop Originator and later became responsible for their implementation and adoption as the industry standard among Fannie Mae lenders.



Progress In Lending

The Place For Thought Leaders And Visionaries

Magazine Cover Story

*Looking To The Future*

**Executive Interview**

***Nancy Alley is not new to the mortgage space. She has been around the block. However, now she has a big company in Xerox Mortgage Services to shepherd. What does she bring to the table? Well, if Nancy’s history is any indication, she is ready to help struggling lenders forced to deal with decreasing volume and increasing regulation move their business to the next level.

****Back in the late 1990s Nancy co-founded a company that offered electronic signatures and electronic vaulting to the mortgage space. This technology is just now gaining its footing, but Nancy was there from the start evangelizing and doing her part to move the industry forward. She’ll bring that pioneering spirit to XMS. Here’s her take on the future of XMS and the mortgage industry:

****Q: For a lot of people, imaging and paperless are synonymous. What’s your take on how the definition of paperless has changed in the past five years?

****NANCY ALLEY: When you think about paperless and take a step back, it was really just about getting rid of paper five years ago. We are in a very paper-intensive industry. So, paperless started with just replacing paper. What did that mean at the time? People started scanning documents and it was limited to a few departments within the lender shop. I would argue that paperless is so much more. You can now manage, share and collaborate on images and electronic documents. Further, as we go into the future you’ll be able to manage, share and collaborate using data. We’re moving along this evolutionary path. We are not talking about how you get rid of paper with our clients because most have done that already. Now we’re talking about electronic collaboration. When you think about collaboration, it has to bust outside of the lender’s walls. It can’t just be internal. It has to be cradle to grave. That’s my vision.

****Q: Do you think the UMDP initiatives are going to help or hurt the industry?

****NANCY ALLEY: This is a hot topic. In the past couple of years, this industry has seen huge change. Change is always painful at first, but I’m a big supporter of these initiatives because they will push this industry to the next level. How? These initiatives will drive paperless adoption and true electronic collaboration. This forces us to go even further and move away from being document centric to being data centric. Right now lenders have data in different systems, but they may not talk to each other and that data may be in different formats. That now changes. To have the transparency to truly analyze everything that we’re doing is key. I think this makes that possible.

The other positive piece that is not specific to UMDP, but relates to UMDP, is that UMDP mandates the use of MISMO data standards. That’s a good thing. Historically we have always had proprietary systems and data formats that don’t talk to each other. So, we do have to get over the pain of change, but once we get passed that as an industry, this will be a great thing.

****Q: Let’s talk about you for a bit. You recently were named the GM of Xerox Mortgage Services. What are your plans for Xerox Mortgage Services?

****NANCY ALLEY: I’m excited to accept this position. I would have never agreed to do this if I didn’t think we had bright days ahead. Greg Smith coined a lot of phrases, but before he left he used to say that we don’t skate to where the hockey puck is now, we skate to where the puck is going. I agree with his philosophy. That’s what we’re going to do. We are going to skate toward the future. The future is about data. Part of what we’ll be doing is becoming more data centric so our clients can collaborate based on data and not just documents.

Also, the XMS Network is very important. The network is central to my vision for XMS going forward. You don’t want to limit yourself to a solution in your walls, you want to communicate out in a seamless way. That’s how you drive true ROI.

****Q: As the founder of what was Advectis and the BlitzDocs product, we all know what Greg Smith brought to the table, but what does Nancy Alley bring to the table? How is XMS going to be different under Nancy Alley?

****NANCY ALLEY: If you look at how Greg grew the company, you go back to the evolution of paperless. He did an amazing job of getting lenders to go paperless. I believe that one of the reasons Greg hired me was because of my tireless dedication to driving the e-mortgage. I am going to steer XMS down that road. I am going to make sure our clients have a roadmap to get to the full e-mortgage.

I also lead the efforts with BlitzDocs XE. My expertise around e-vaults has already shown itself within our product offering. I think Greg letting me develop XE was a test to see what I would do with his baby. We are going to continue to build that out.

****Q: Next year is the five-year anniversary of Advectis being acquired by Xerox. How has Xerox Mortgage Services leveraged its relationship with Xerox and its sister companies?

****NANCY ALLEY: Advectis was the original company. They had a great solution and great people. None of that has changed. However, we can now leverage Xerox so we can integrate services that we couldn’t provide PRIOR. For example, the goal of XE is to fulfill electronically, but we don’t live in a perfect world. If the customer opts out we can seamlessly deliver the package through the mail in paper form. We also see a lot of demand for business process outsourcing. We can offer that and work on the file to do things like data extraction. At our fingertips we have all these other entities that we can leverage.

****Q: The MBA predicts the loan volume to drop off significantly in Q4. How can lenders use technology to survive?

****NANCY ALLEY: If we in the mortgage industry have proven anything in the last few years, it’s that we’re a tough bunch. I have no doubt that the industry will survive, but we have to be more flexible, which is where technology comes in. Lenders need to be looking at solutions that drive automation and collaboration. As volume drops off you need to figure out how you’re going to make money. The solution also has to be flexible because volume changes. One thing to look at is volume-based pricing to tie costs with your volume. As an industry we can’t stop innovating, but when you buy technology you need to make sure that it goes cradle to grave and improves the whole process. Nobody can afford to do big pilots, they need technology that will improve their process now that can solve their problems. To this end, the technology should be able to manage exceptions and be agile. As volume dips, that’s where you get revenue and ROI.

****Q: What is the state of the industry and where do you see it going?

****NANCY ALLEY: We all read the papers and watch the news, there’s still a tremendous amount of uncertainty. As volumes drop we are warned that volumes will drop further. We’re also told that interest rates will increase. I don’t see light at the end of the tunnel, but it’s not all bad news. Lenders are getting comfortable working in these tight conditions.

Getting more granular, I like where we’re going in terms of the data requirements. I hope this is the push we need so we can effectively and transparently share and collaborate on docs and data. We are a member of MISMO and I’m excited about MISMO acceptance. The more we can share data and collaborate based on data, the better the industry will become.

****Q: With the rise in regulations and changing market dynamics, what are lenders’ biggest pain points and how are they leveraging technology to overcome them?

****NANCY ALLEY: Lenders struggle with the constant flow of new rules. There are always new rules being thrown at them. The politicians are always thinking of something new. Lenders are now worried about UMDP. Are they ready? Are their appraisals in the right format? Will they be able to send to the GSEs in the right format? That’s just one example. As I look at that pain points, that’s why you need to leverage your vendor. Your vendor has to make sure that you’re ready. So, lenders need to continue to use technology and expect that their vendor partners to step up to help them navigate these new rules.

****Q: Last question: How would you define the state of innovation in the mortgage industry today?

****NANCY ALLEY: As a technology provider we always want people to be proactive, but it’s a balancing act for lenders. During difficult times you are forced to look at how you do things, how you can do things better, and you’re forced to innovate. We are looking at how we can assess the market and provide a tool that solves business problems. Having said that, you can’t innovate just to innovate, you have to innovate to improve what you’re doing. For example, you may be innovating by providing electronic signatures on disclosures. That’s great, but you need to do that with all your disclosures, for all your loan types, with all your borrowers. So, we need to innovate, but we need to innovate comprehensively.


****Nancy Alley thinks:

****1. Lenders will spend their technology dollars on comprehensive solutions that can easily and seamlessly manage exceptions.

****2. The definition of paperless will progress from basic imaging capabilities to the ability to collaborate on documents and data from cradle to grave.

****3. Lenders will no longer define all-in-one, or end-to-end, by the software system they use, but rather by the extent of their vendor’s reach to other partners throughout the mortgage lifecycle.

****ABOUT NANCY ALLEY: Nancy Alley brings more than 20 years of financial services and mortgage industry experience to her role as the vice president and general manager for Xerox Mortgage Services. In her previous role as vice president of product management for Xerox Mortgage Services, Alley managed the company’s document collaboration solutions, BlitzDocs and BlitzDocs eXtended Edition. Alley also previously led the product management and engineering efforts of eSignSystems, a leading eSign and eVaulting provider; and spent eight years at GE Capital Corporation developing her product management and business development skills in the mortgage banking technology area.



Progress In Lending

The Place For Thought Leaders And Visionaries

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.

****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.



Progress In Lending

The Place For Thought Leaders And Visionaries