PERSON OF THE WEEK: There seems to be an endless amount of talk on the need for quality control in mortgage banking. However, making the transition from talk to reality can be a bit tricky. For advice on how to make this critical leap, MortgageOrb spoke with Tyler Sherman, CEO of Denver-based Motivity Solutions.
Q: In the run-up to the 2008 economic crash, many originators were faulted for emphasizing quantity over quality. Is it possible for today's originators to generate volume that offers an equal level of quality and quantity, or will one always be more dominant than the other?
Sherman: I don't think originators can get away from quality performance with the prospect of loan buybacks hanging over their heads. Even a minor mistake on a loan can lead to a repurchase request.
Quality control on the front-end is the future for loan originators – if it's not already. But that doesn't necessarily mean they have to forgo quantity either. It means that they'll have to change their business processes to ensure quality performance without lengthening the origination process or producing any mistakes as they increase volume.
The first step to reducing errors is to establish software connectivity for transferring data from loan files. A system needs to be in place so that rekeying information becomes a thing of the past. That's one reason for a number of mistakes.
Higher-level executives also need to analyze performance in their origination departments and recognize the strengths and weaknesses within loan processing operations and in the performance of individuals. From this analysis – using actual data from the loans, the processing times and performance metrics – more resources can go toward building up weaker segments of the business, such as low-loan volume, creating a greater understanding of why the strong areas work well and leading to fewer errors. As a result, executives can gain insight and put it into achieving a higher quantity of loan volume without sacrificing quality.Â
Q: Do you believe that the mortgage banking industry, as a whole, is making an effective use of data to measure optimal performance in the origination space?
Sherman: As a whole, the mortgage banking sector has a plethora of data, but I don't believe it's being used as effectively as possible. First, there needs to be a means to connect the data among the various divisions in an origination process – from the loan officer to the processor to the underwriter and closer. This requires software connectivity so that data can transfer easily from one system to another.
Second, executives need a filter for this data so that they can examine the performance metrics behind it. For example, how many loans did a particular loan officer originate and how many of those loans were closed? What rate of loans did a particular underwriter approve or not approve? How quickly are loan processors getting the mortgage application to the underwriter with all the necessary items? Are there any errors in these loans?
The answers to these questions are found by using dashboards and scorecards based on the availability of data. Through these filters, origination shops can substantially improve performance because they can make a quantitative analysis of their business. This is true business intelligence at work.
Combining data within an analytical framework is all about doing business better, not just in the mortgage industry, but in other industries as well. Can it be applied more efficiently to mortgage banking firms? I certainly think so.
Q: On the servicing side of the industry, there seems to be an endless amount of data available. How can today's overworked servicers effectively manage that data and turn it into invaluable information that will help with their decision making?
Sherman: Servicing is a different animal from origination, but the underlying processes are similar. Again, it involves filtering out the data to find its true value and creating greater efficiencies from it.
On the servicing side, we need to look at a variety of issues – time spent speaking with distressed or near-distressed borrowers, resolution times, tasks individuals take on in achieving loan modifications, short sales and, if necessary, working on foreclosures. There also needs to be vendor accountability in appraiser data and property management reports, for example. Servicers must manage all this while following compliance guidelines.
Servicers who use software connectivity that can transfer data from one area to another without rekeying information are going to be ahead of the game. They, too, can use true business intelligence to optimize performance. By using dashboards and scorecards in business intelligence software systems, servicers can determine the strengths and weaknesses within their various departments.
For example, is this single point of contact spending enough time speaking with a borrower and is the single point of contact getting relevant information from that borrower? How many loans are securitized and how many are in portfolios? Did the appraiser provide an accurate appraisal in the amount of time given? Are the property management reports accurate? Were any mistakes made in a short sales package sent to an investor?
There is a lot of data to filter through, but the use of dashboards can greatly assist in deciphering the information and drilling down to relevant, quantitative numbers within an organization. In the case of servicers, decision makers can use the performance metrics to ‘work smart’ rather than overwork their servicing agents.
It could mean spending more time with certain borrowers who can likely modify their loans, or focusing more on a short sale for a borrower unable to make a payment. It might mean a reorganization of staff based on overall workload. It might also mean putting in alerts or mechanisms that ensure compliance among servicing staff.
The tools are there to recognize and enhance performance within any organization. That means improving quality and working more efficiently. These tools give upper management analysis and decision-making capabilities that benefit servicers and lenders alike.
Q: On a personal note, your firm was recently ranked as the 210th fastest growing company in Inc. 500 list published by Inc. magazine. At the risk of sounding corny, what is the secret of your corporate success?
Sherman: In the past, we used business intelligence to run a very successful mortgage banking operation, Watermark Financial Partners, and our success is due to having this experience, in combination with our efforts to drive the entire mortgage banking industry to do the same. And, the fact is, we stand behind our business intelligence platform so much so that we use true business intelligence and our Movation platform to run Motivity Solutions, which is also a clear contributor to our success.Â
We understand our own strengths and weaknesses – hopefully, more strengths than weaknesses -and we strategize for growth based on this quantitative analysis. Also, we are always striving to improve our business processes and performance. Industries are fluid, particularly the mortgage industry, and it requires constantly measuring how and where to make adjustments.