Five mortgage industry leaders offer their end-to-end insights and expertise on forthcoming CAR’s – Challenges, Actions, and Results.
By Mark P. Dangelo
Stating the obvious, we are not nearly finished with the 2-year consumer and industry rebalancing saga. If anyone had cherry plum visions that this was merely a prolonged business as usual (BAU) cycle, they might want to check the consumer’s pulse and the underlying analytical facts. Recessions, like recoveries, are played out in “fits and starts.” Today, which ever condition you believe we are still in, our economic “patient” is suffering from rapid-cycle schizophrenia with a touch of “job-envy.”
Poor jocularities aside, there is still significant opaqueness surrounding real estate, lending, business activities, and yes, domestic financial practices and oversight. So as we reach a bottoming of the severest recession in 80 years, it seems a good of time to reflect and listen to the domestic market challenges created as it struggles with a projected multi-year jobless recovery.
It is against these challenges, that we must ask, “What actions should be undertaken?” Furthermore, can we assess the implications or results from political, industry, and organizational actions? How can we avoid the BAU trap?
Therefore, in an effort to gain unique insights within the entire end-to-end mortgage process, I have asked six industry leaders their CAR’s (Challenges, Actions, and Results) to secure a new focus across the persistently difficult operating environment.
· Cheryl Lang, CEO, Integrated Mortgage Solutions
· Anil Suri, CEO, Intelli-Mine
· Bill Cary, Director, Lender Processing Services, Inc. (LPS)
· Lester Dominick, President, MortgageFlex Systems, Inc.
· Judy Margrett, President, The Turning Point
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Cheryl Lang, CEO, Integrated Mortgage Solutions (www.imstoday.com).
Ø Challenge: Loan modifications will continue to pose the largest risk and opportunity for servicers dealing with delinquencies, consumer loan viability, and consequences of workouts. However, the rising demand is creating unintended costs and burdens for consumers, lenders, investors, and servicers.
o Action: With rising unemployment and overburdened staffs, servicers are being forced to find and internalize new operating procedures faster. The rejection of BAU coupled with the complexity and volumes of workout demands, cannot hinder the primary goal of keeping consumers in their homes in an effort to reduce property loses, while ensuring community prosperity and reducing REO losses. As part of a comprehensive loan modification approach, predictive and causality driven analytics must be utilized not just at a macro level, but also on a granular basis to ensure that actions foot to results. Quantities of modifications are not a substitute for quality of results – today the linkages are too generalized and implications of actions not well understood.
§ Result: By clearly understanding the linkages of what constituents a “viable” modification, servicers and investors stand to reach long-term profitability with the borrower and property. Additionally, the use of teams in dealing with workouts aids the servicer with a faster response to the borrower, greater transparency of the efforts, and conformance to vastly expanded government oversight. By keeping viable borrowers in their homes, communities benefit and crime is reduced. Furthermore, using an adaptable end-to-end roadmap for discrete borrower profiles, servicers are able to be responsible to their stakeholders, create a viable exit strategy from the crisis at-hand, and reduce current herculean efforts to a manageable subset of what they are experiencing. By addressing the problem holistically, we now understand that what we are dealing with cannot be fixed overnight – we are only now building the skills needed to deal with a persistent and growing set of interconnected servicing challenges.
Anil Suri, CEO, Intelli-Mine (www.intelli-mine.com).
Ø Challenge: During the current recessionary markets, tight credit and vanishing consumers, companies are increasingly faced with the challenge of re-examining their historical decision making processes in order to remain profitable. Mangers need a clear visibility into their operations, while gaining clear insight into the performance of loan, programs, and channels. The nagging challenge is the ability to pinpoint the leading and lagging indicators of the business, while realizing a single, consistent 360 degree ROI analysis of the organization across multiple departments.
o Action: Products and solutions enable organizations to meet this challenge by harnessing the power of interrelated data to increase performance, reduce risks and drive competitive advantage. Through the deployment of dashboards, scorecards, pre-defined Key Performance Indicators (KPI’s), analytics and reporting functionality, organizations must act on the three main questions facing executives daily.
• Where is my organization today? Deployment of customizable dashboards which displays and aggregates KPI’s providing executives a snapshot on where they are and the predictive trends.
• What is the true picture? Adopting a BPM framework standardizes the measures, metrics, and KPI’s used throughout the organization by combining all the business data into a common data warehouse. This inculcates the discipline of using data from a single source resulting in one version of the truth.
• Where are we going? An adaptable BPM framework provides executives with an early warning system and triggers alerts based on business rules, competitive actions, and third-party intelligence.
§ Result: The status-quo of designing, developing, and deploying a BPM solution is expensive, time-consuming, and results in an inflexible solution. What we recognized is that for organizations to prosper, a dynamic and sustainable BPM framework was needed to properly assess rapidly shifting market conditions. Using a vetted framework generates a solution set which is adaptable to the rapidly changing business, systems, data sources, and user profiles. A leveraging and integration of multiple vendor offerings is no longer optional. Proactive organizations are using integrated, mortgage-centric analytical specialty firms to deliver performance and risk management solutions for their operations. Our team has spent years saving clients millions of dollars with the use of pre-defined templates, indicators, and maps for all aspects of the varied mortgage processes. It is with these experiences that we learned the bottom-line value delivered from a comprehensive approach, roadmaps, and technology – not just one-off applications. In conclusion, it is this superior organizational performance, risk, and objective analytical framework which yields unsurpassed ROI, market power, and operational versatility over the growing cloud of data assets and “wandering” warehouses.
Bill Cary, Director of Origination Solutions, Strategic Consulting Services, Lender Processing Services, Inc. (LPS) (www.lpsvcs.com).
Ø Challenge: In the early part of this decade, financial institutions were very focused on making the mortgage origination process more efficient and streamlined. There was a great deal of re-tooling to incorporate automated workflow tools and automated decisioning models to make the mortgage process easier for more people. Then, the buildup of the housing bubble occurred, followed by the ultimate crash of the real estate market. Understandably, many financial institutions ‘overcorrected’ by assuming that everything they had relied upon in the past was ultimately proved to be wrong. They lost confidence in many of their automated tools - in particular automated underwriting engines - as well as in their risk assumptions. Unfortunately, the resulting credit tightening that has occurred and impacted both high risk and low risk consumers.
o Action: What is needed is an approach that allows lenders to avoid high risk transactions, while still making the mortgage process simple and streamlined for people who are good credit risks. Risk segmentation is the answer. The use of automated tools and streamlined processes for people with good credit histories, are appropriate for the large segment of the borrowing population that has continued to stay current on their mortgage obligations. It was not a mistake to use automated tools and decisioning in years past – but rather, the problems facing many servicers today stem from the large number of high risk loans that were made. By using the comprehensive, robust analytical modeling that LPS offers, and accessing the company’s database of over 40 million loan level records, servicers can make lending more streamlined for low risk customers.
§ Result: 88 to 90% of mortgage loans are being paid on time. If servicers segment their customers and prospects into tranches, and utilize a mortgage process and decisioning model that is appropriate to the level of risk, they will make it much easier for credit-worthy customers to do more business with them. The industry must get beyond its fear of losses and move forward to attract profitable new business. By using the advanced workflow tools, sophisticated risk analytics and industry leading data offered by LPS, financial institutions can streamline lending for their lowest risk customers and earn more profitable business.
Lester Dominick, President, MortgageFlex Systems, Inc. (www.mortgageflex.com).
Ø Challenge: With rapidly accelerating regulatory compliance guidance for FHA loans, how can originating technology and automation of processes be utilized to increase end-to-end efficiency, auditability, and adherence during times of industry uncertainty and reduced budgets?
o Action: On-going research, assessment, and development of conforming loan originating technology must be diligently performed by both the software provider and the lender in anticipation of the final rulings from Congress and the Regulator (e.g., GFE). The use of iterative, agile techniques must also be adopted to ensure not only accuracy, but also adaptation as future clarifications are issued. Active, cross-team collaboration (between lender and software vendor) must be utilized as part of a rigorous discipline to address stringent product and consumer oversight demands.
§ Result: The use of a collaborative vendor to lender iterative approach improves not only the quality of the end result, but also addresses the lenders internal challenges – education, training, communication, conformance, and cost to execute. Moreover, while most assume reporting and adherence as a non-differentiator, hidden benefits may be realized in data accuracy and integrity, automated conformance to policies and procedures, and consistency and repeatability (using rules and decision engines). With this tight integration and preparation for oversight, the security of the transaction is also improved, thereby providing the lender and the customer with much needed trust and risk mitigation.
Judy Margrett, President, The Turning Point (www.turningpoint.com).
Ø Challenge: The continually missed opportunity for many organizations resides with their inability to profitably leverage multi-faceted customer approaches, which satisfy four interconnected responsibilities: a) pervasive government mandated consumer regulations, b) the need to manage, maintain and foster the relationship with not only customers but all sources of new business, both direct and indirect, c) comprehensive, rule-driven accountabilities, and d) organizationally aware intelligent marketing solutions. Organizations can collect, analyze, and manipulate data intelligently, but if they can’t build relationships and a social networking framework in a way that guarantees returning customers and house holding, then they are just another company offering the same or similar products.
o Action: Overwhelmingly more important than point-driven contact or sales solutions, this “next generation” software will cohesively knit together the organizational marketing strategy, performance tracking, automated execution, and even regulatory compliance. Organizations that deploy non-intrusive technology (e.g., SaaS), which supports extensive industry business application services, will be able to achieve results faster and with less organizational turmoil and cross-department demands. Intelligent marketing is not just about contact management and analytics, but real people speaking to real people about the products and services of a given company. Moreover, it is those discrete actions to control the customer content messaging, without losing the personal touch, which drives social networking to deliver viral marketing so they attend, join, or buy. By examining the end-to-end implications of disjointed technologies, business functionality, marketing frameworks, consumer compliance, and operational strategy, organizations may be able to achieve greater returns in a market that will be very difficult well into 2010.
§ Result: By accepting that technology and data are facilitators to marketing intelligence, the integration of independent organizational actions (and technologies) will succeed at driving revenue growth, while at the same time enhancing operational efficiency and managing risk. We have personally witnessed that through the integration of pre-defined business services enhanced with superior technology (e.g., data collection, database management, activity design and copy, campaign execution, production and fulfillment, compliance capable, results tracking and performance analysis), organizations may achieve outstanding returns without traditional capital expenditures. The results of intelligent marketing are not singularly about customer relationship management, but achieving vastly tailored and positive relationship management with B2B’s, partners, prospects, employees, and others that are needed to keep, foster, and maintain interactions across an ever shrinking timeframe. By deploying an expanding array of services (and technologies), key players across the organization and its processes are held accountable for results, actions, and plans – all delivering much needed end-to-end marketing intelligence solutions that provide results today and tomorrow.