Brian Lynch: Amidst Refinancing Boom and Reduced Interest Rates, Institutions Use Financial Data to Their Advantage


PERSON OF THE WEEK: Brian Lynch is the president of Irvine, Calif-based Advantage Systems, a provider of accounting and financial management tools for the mortgage industry.

In a recent interview with MortgageOrb, Lynch shared his views on how reduced mortgage rates are creating an era of refinancing, how the trend to push better access to financial data is impacting the industry, and how technology is affecting every aspect of the mortgage business and becoming a crucial part of the accounting department.

Q: As the first quarter of 2020 settles in, how can financial institutions focus on growing their business, increasing efficiencies and using financial data to their advantage?

Lynch: The COVID-19 crisis has caused a new era of reduced interest rates, and mortgage companies are taking advantage of the opportunity for borrowers to refinance. Mortgage bankers were already seeing a robust demand heading into the spring housing market, and companies like MBA, CNBC and Freddie Mac have all reported a more than 200 percent jump in refinance applications. 

As the Fed continues to cut rates, financial institutions can expect to see an influx in refinance applications because of “the expectation that the Federal Reserve will lower its interest rates significantly in the next few months, keeping longer-term rates low for most of the year,” according to CNBC.

Financial institutions need to have different budgets in place for different market conditions to effectively compare their performance to the appropriate budget. In the past, companies may have worked from a single budget or worse, no budget at all. Today, we can create multiple budget scenarios, such as an optimistic budget, a pessimistic budget or high refi budget verses a low refi budget to manage against.

Managing branches is also important and putting the most up-to-date data in the hands of those branch managers is becoming critical. Allowing those branch managers to get that data over the web in real time as opposed to being emailed stale spreadsheets is becoming a must. This ultimately helps financial institutions see the bigger picture, increase internal productivity and make data-driven financial decisions to grow their business.

Q: What is driving the growing demand that all staff have access to financial data rather than the data being limited to the accounting department?

Lynch: Today, everyone is used to being online. Logging in to their accounts with their bank, email, Amazon or social media, today’s user expects to see the information on their accounts in real-time. From executives to managers to younger associates, employees at a mortgage operation are no different. They are expecting to see all their information up-to-date, in real-time, and that includes their financial data.

Managers are responsible for their profit center within the institution and need real time information to see how that profit center is doing so they can see if they are on target. Making good decisions on old data is difficult. Managers need access to current data to properly react to the changes they face every day, and financial institutions should take advantage of accounting technology with cloud-based capabilities that encourage collaboration between the accounting department and non-accounting managers and executives.

Q: How has this trend changed over the last five years, and how do you see it changing in this decade?

Lynch: The biggest change we are seeing is to stop pushing spreadsheets out to people. In the past, financial data was restricted to the accounting department, and then, it was gathered into reports for executives and board members. This model discouraged engagement with employees and limited the control of data to just a few members of the institution’s staff. 

People should be able to access the most current data whenever they want. With access to modern technology and financial management tools, employees at every level should have access to the financial data that pertains to their job. For branch managers, this means not only having quick access to a current income statement but the ability to do things like drill down into each loan at their branch and compare each loan officer’s data. 

Another notable development is the proliferation of business intelligence tools. In the mortgage industry, these tools are pulling data from the client’s Loan Origination System, Pricing Tool, Hedging software and Loan Servicing software as well as their accounting software. Gathering this broad level of data allows the user to more easily spot trends and opportunities.

The mortgage industry has seen tremendous growth in the tools available to streamline the mortgage process – especially when it comes to broadening the access to financial data. However, in the next decade, we will continue to see technology evolve and more accessibility to management tools that will help institutions increase efficiencies and predict future trends.

Q: As technology continues to become a necessity in every aspect of business, how are mortgage industry accounting tools best used by financial institutions to achieve a higher ROI on their investment?

Lynch: In the mortgage industry, the right accounting tool should make accounting easier – specifically for mortgage bankers. Some companies are still using generic accounting products that don’t have a single line of code devoted to the needs of mortgage bankers. 

These clients are also usually buried in spreadsheets trying to reconcile loan balances on their balance sheet. However, the right accounting system should make those loan level reconciliations easy. The ability to record transactions at loan level is critical because huge sums of money can be lost if, for example, just the money spent on appraisal fees isn’t managed properly. 

Escrow liabilities present a special headache because they can be audited by different states and agencies. Having a system that is built for the task at hand can provide the confidence in knowing that the accounting is being done correctly and that the balances being presented to managers throughout the company are correct.

Having confidence in the system and the procedures being employed allows the user to then take advantage of profitability analysis available because of the granular level of detail that exists. Seeing income from the company level down to the branch or loan level should be done easily.

The dashboards and reports should be engaging and user friendly – encouraging employees to utilize the features of the technology. The right mortgage accounting technology should allow executives, managers and originators alike to make better data-driven choices, which ultimately helps the institution grow and helps customers in the future. Having the most up-to-date information and access to loan level detail can benefit mortgage originators in serving their customers and provide a more efficient and productive mortgage process.

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