Technology’s Growing Role in Vendor Due Diligence


BLOG VIEW: One of the most arduous tasks facing any mortgage lender’s vendor management team is due diligence. There is a lot of effort that goes into making sure an organization has the best vendors – and that those vendors are doing their jobs correctly. 

Though it is hard work, it is crucial, as the wrong vendor has the potential to make the headache of due diligence and vendor management that much worse.

The task is especially painful for mortgage lenders who operate within a large footprint. When dealing with so many locations, there will be different vendors for different areas.

Even national vendors perform better in some areas than others.

With so many different vendors to consider across locations, lenders are challenged to stay agile. Even larger lenders often need extra help when it comes to managing vendors across the country.

Today, an increasing number of lenders are leveraging technology to help them choose the best vendor for each different situation and location. With technology getting smarter, it only makes sense for lenders to leverage it to make intelligent decisions for them.

Due Diligence is Not Optional

Vendor due diligence traditionally has eaten up a lot of resources for lenders. The research that goes into the due diligence process takes a good deal of time and manpower. Should a lender find that a given vendor is not a good choice, they must start the process all over again, wasting more time, money and resources.

However cumbersome the process may be, it is not optional. Lenders must ensure they are using the best vendors, as the wrong ones could cost them extra money, slow down operations or even create unnecessary risk.

The process becomes especially tricky for lenders with a large lending footprint, because when it comes to vendors, one size does not fit all. Vendors that perform well in one geolocation might not do the same in others. This difference only adds to the due diligence workload of lenders with a large customer base.

Some lenders attempt to mitigate this by having more than one vendor share the workload for a single service type. This attempt at load-balancing is good in theory, but typically ineffective in achieving its intended goal as the lender is not using real-time intelligence to determine which vendor is performing better in each location. 

Technology is Optional But Not for Long

To stay profitable, lenders must adopt technology to simplify the tricky process of due diligence and vendor management. Instead of paying people to spend hours on this difficult task, lenders can invest in technology that automates the process.

The top vendor management technology platforms provide access to data on where vendors perform best, in addition to how much they cost, how efficient they are and so on. This is important as it means lenders no longer have to do the research.

Based on this data, the technology can make informed and intelligent decisions about which vendors a lender should choose.

This one investment makes a huge step toward removing the headaches of due diligence and is critical for ongoing vendor management.

Corey Smith is chief product officer at Austin, Texas-based FirstClose, a provider of property and borrower data intelligence and settlement services nationwide.

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