MortgageOrb checks in this week with Jim McDonald, president of McDonald Computer Corp., a veteran systems provider for financial institutions. McDonald shares his thoughts on tech investments, platform models and FHA modernization.
Q: How has the credit crunch affected servicers' attitudes toward investing in technology?Â
Jim McDonald: Generally – recession or not – servicers are not always eager to invest in technology. Servicing for decades has been measured in cost/benefit terms. Even then, most CEOs do not consider servicing a top priority when is comes to investing.
Servicing has traditionally financed other company ventures. However, as more servicers feel the pinch, they are looking at ways to cut costs, and if a technology provider can offer services that can help them to do that, they may be an avenue to consider.
Q: In which areas do you anticipate technology providers will focus future enhancements and upgrades during the next year?
McDonald: Web-based systems. Stand-alone work stations/systems are becoming obsolete. Portability of where you perform your job is the future.
Q: Are some servicing functions inherently unable to be tech-driven?
McDonald: Customer service and especially collections, by the very nature of both, are people-oriented. You will never be able to replace person-to-person contact with technology, because it is so impersonal.
Q: When deciding which system model to employ – either a hosted solution or a software as a service approach – what considerations should management keep in mind? What benefits does each strategy provide?
McDonald: Hosting gives you more control, but it has the pitfalls of investing in IT people who must learn the application, only to have them depart once they become productive. You are constantly bringing personnel up to speed. Outsourcing eliminates this problem, but to a certain degree, you may lose control. depending upon to whom you outsource.
Also, through outsourcing, you are in a better position to benefit from other enhancements made generally in the business. By hosting, you depend upon your in-house people to keep abreast of new requirements and innovations.
Q: Are there any ways in which servicers can better utilize technology?
McDonald: Make some investment in enhancements each year, and don't allow your servicing department to become too outdated. Be proactive about replacing PCs, servers and other devices before they break down. Maintaining all software updates on a timely basis is also a simple way to keep your technology system serving your growing needs effectively.
Q: Due in part to the huge spike in Federal Housing Administration (FHA) market share, the Mortgage Bankers Association is advocating for the FHA to have greater authority when it comes to investing in technology. From your perspective, how urgent is the need for the FHA to improve its systems?
McDonald: FHA needs to simplify its electronically transmitted data files. When FHA went to the EDI format in the '80s, it was a bad idea – and it is still a bad idea. The format was more complicated, involved more programming and accomplished little to nothing. The industry has gone back to transmitting encrypted flat files again, which tells you that EDI was essentially a waste of time and money. In my opinion, FHA should adopt the KISS method.