Not Easy, Cheap, or “Out of the Box”
Guest Blog by Mary Kladde Walraven
Digital transformation toward automation is not easy, cheap, or “out of the box”. Any of these words used in a sales pitch or marketing material should set off major red flag warnings in your mind, pun intended. Technology and software development, in general, does not typically lend itself to any of these terms, and when you add the complexity of mortgage, then it certainly doesn’t fall into these categories.
This being said, it doesn’t mean that we shouldn’t strive to get there from an end-user perspective. It just means that there is a ton of work to put in behind the scenes by the service organization so that the end-user can BELIEVE it’s “cheap, easy, and out of the box.”
What does this mean and how does it apply to anything in the mortgage business where there are iterative process changes and an exception to every rule?
Understanding what you want “automated” and how the process is measured so you can truly assess and test what you are building will be essential to success. Additionally, biting off incremental realistic targets will be key for automation improvements that are measurable.
If you are automating a manual process, know how to measure the results of what is being built, how much time it eliminates in your process, how it affects quality, and what cost savings are associated with the automation. These cost savings will be reflected in the process, as well as Secondary leakage.
Then when automation is complete, make sure those manual resources are allocated to other endeavors or eliminated so you actually realize revenue margin improvement. Also, don’t expect that all your problems can be identified and solved in one fell swoop because “you don’t always know what you don’t know until you find out you didn’t know it.”
“Buy cheap, buy twice!” Or if you are a really poor judge of character/tech, you may end up buying 3 and 4 times, or become so incredibly gun shy that you never buy at all and fall behind.
The playing field is also uneven. Large companies with big dollars have access to technology and resources first per usual. They also suffer mistakes with a little more grace. This doesn’t mean the small to mid-size players don’t have it or can’t get it. It just means they must be smarter since there is less room for error when selecting a vendor of choice.
When selecting your vendor, make sure there is a least someone on the vendor team that understands your business and the aspects of lending you deal with (i.e. Retail, Wholesale, Correspondent, Warehousing, Servicing, etc.). Can they walk the talk and help lead you toward making good choices?
Anyone who says “YES” to anything and everything you ask or want without providing choices, recommendations, and cost differentiation between those choices and recommendations should set off red flags again, pun still intended.
“Out of the Box”…
This brings us back to point #1. Nothing in the mortgage business is easy and “out of the box.” Every organization is different, has its own personality and interpretations related to customer service excellence, process execution, and legal interpretations related to guidelines and regulations.
This doesn’t mean some things haven’t gotten streamlined. Credit, Flood, and tax transcripts are now commodities for the most part. AUS has also been streamlined, but remember there are still nuances between Fannie, Freddie, Ginnie, FHA, VA, and USDA guidelines, not to mention overlays layered on by aggregators and investors.
Heads winds are also blowing back toward privatization. Do you think certain organizations will be able to negotiate special deals depending on competition between the agencies, market trends, and volume? Ahhhh…The good ole’ days are roaring back.
We also have new entrants into the space that don’t remember the “crash,” and amnesia is sometimes as prevalent in our industry as on TV Soap Operas. Then there are the nefarious that we can’t forget, that will prey on the naiveté of new players.
All joking and humor aside, “Out of the Box” is an oxymoron in our industry and we need to “watch our six”. Credit is loosening, Non-QM (shhhh…Sub Prime) is building, and indications of “recession” are strong according to all the analysts.
Recession typically pushes volume through refis, servicing books are devalued due to portfolio run-off, but new loan boarding climbs on the other side of the trend. Business will be good for many for the duration of this cycle and volume often hampers focus on automation in the interest of getting production out.
Be smart! Try not to get too absorbed and distracted in the swell of volume that you lose focus on what needs to be done to advance your business through automation in the long run. Also use some of that additional cashflow to invest in “good tech,” so you are prepared to survive the inevitable seasonal and cyclical dips of our beloved industry.