PERSON OF THE WEEK: By all accounts, William M. LeRoy has the right to rest on his laurels: A 23-year industry veteran and founding CEO of the American Legal & Financial Network, he is one of the most respected leaders in the mortgage banking world. But LeRoy doesn't have time to rest on his laurels – he recently launched a new national attorney organization called The PHOENIX Group Network LLC, which serves the mortgage servicing industry. MortgageOrb spoke with LeRoy about this new undertaking and the state of mortgage servicing.
Q: What was the inspiration behind this new endeavor?
LeRoy: My sole inspiration for forming The PHOENIX Group Network was to create a better attorney selection process. Currently, there are no attorney organizations that make use of regulatory criteria or internal audits to drive membership standards.
Unfortunately, the major organizations are so political in their leadership and operational mechanics that there is nothing substantive that a loan servicing executive, attorney network, or vendor manager can rely on when selecting a new law firm. One thing is clear – regulators mean business. The Office of the Comptroller of the Currency (OCC), in particular, has set a host of third party vendor requirements and risk elements that must be examined and verified by a regulated financial institution that elects to use third-party
Personally, I strongly object to attorneys being referred to as ‘vendors,’ but this is the climate in which we live. The National Mortgage Settlement and Fannie Mae and Freddie Mac set similar requirements. The PHOENIX Group Network views these and other such requirements as a mandatory membership template. We pre-audit firms that seek membership and re-examine them each year thereafter. Firms that fail these audits or engage in behavior deemed a risk element under the aforementioned criteria will have their membership terminated.
The company is structured so that nothing interferes with this protocol. Board member politics and ‘good old boy’ cronyisms do not exist in our network. The key motivators are ethics, excellence and transparency. Loan servicing companies spend a lot of time, effort and money to hire people that can separate the wheat from the chaff when selecting and managing the performance of law firms. Many still struggle with this process in some way.
We offer a simple and powerful solution to this situation: Our network will never contain all of the principled legal practitioners, but we guarantee that when financial services companies select one of the members of our network, they will find one of the finest legal practitioners in their state and the mortgage banking attorney community.
Q: You have stated that you are placing ‘particular importance’ on a prospective member firm's culture. What kind of culture are you looking for in your new members?
LeRoy: The answer requires a look at the macro and micro view of the workings and importance of culture.
The word ‘paradigm’ is very important here. According to Thomas Kuhn in his influential 1962 book, ‘The Structure of Scientific Revolutions,’ a paradigm shift (or revolutionary science) is a change in one's basic assumptions. The term ‘culture’ first appeared in its current context in Europe in the 18th century to connote a process of cultivation or improvement.
For my purposes, culture is the soil in which everything grows – poor soil, poor growth. In our industry we refer to this as ‘fruit from the poisoned tree.’ Our group's membership culture and paradigm requirements are based largely on the OCC's third party vendor management criteria and, specifically, the targeted areas of risk. Major organizations whose ranks continue to include law firms or attorneys identified as participants in robo-signing scandals and bad behavior make it impossible for that organization to have verifiable claims on transparent organizational character or reputation.
I believe local and national attorney organizations have a responsibility to their members, respective industries and their members' clients to operate as if they are collectively the attorney. They should operate as if the organization comprised one member and that the organization's credibility was based solely on that one member's actions. This perspective is a valuable leadership tool when trying to determine what changes, if any, need to be made within the contextual landscape of a large organic organization.
The cultures of many attorney organizations and their members need to change. As leaders, we need to recognize that in order to move our companies forward and enable our teams, departments and companies to change, we need to move from a self-reinforcing feedback loop to a self-balancing feedback loop. In the wrong circumstances, a self-reinforcing feedback loop has also been described as a vicious circle or self-fulfilling prophecy.
In my experience, the secret of positive growth and organizations' survival depends on internally matching the complexity of their external environment. This is the essence of a self-balancing feedback loop. It is critical to involve all stakeholders in our review processes and procedures.
Q: You have also stated that you are looking for only one member firm per state. Why are you limiting membership to one firm per state?
LeRoy: I wanted to build a network where the best attorneys could work together in a high-touch environment to support each other without the pressure of competition driven models. Our membership structure allows members to support each other in everything they do. The motivators are completely different, and this new environment breeds cooperation, information sharing, harmony and performance excellence.
Q: You've been involved in law and the mortgage servicing industry for nearly a quarter-century. During this period, what have been the most profound changes?
LeRoy: The honest answer to this question is a matter of perspective. We are currently in an industry where the negative actions of a few have been so blown out of proportion by politicians and the media that we – and I mean all of us – have nothing but a steep incline of public policy perception and new regulatory requirements ahead.
Leaders must create operational environments where everyone can grow and change as a group and as individuals. In simple terms, we can start by moving from a siloed to a non-siloed operational management approach. We must be careful to ensure that the partners of the firm are the same men and women empowering and enabling the associate attorneys, paralegals and non-legal team members to be stakeholders in the operational processes.
We must also ensure that there is no caste system culture causing people to be afraid or unable to ask questions and interact with decision and vision makers. We cannot see what is wrong with this culture on a spreadsheet. We have to be a ‘boots on the ground’ operator that seeks to understand daily dynamics, or we will never see the old thinking, actions and operational practices that create the opportunities for multimillion-dollar settlement agreements.