Email this pageArchived Columns
The Value of Decisioning Technology
By Scott Kersnar, Editor, Mortgage Technology Magazine
When someone needs to pour cold water on the enthusiasm of the moment for some new mortgage technology system or trend, you can always count on Mortech principal Jeff Lebowitz to toss a full bucket. He seldom jumps on somebody’s bandwagon, and he cautions mortgage technology vendors to remember that lenders seldom do either. "Only one in 20 lenders is adventurous enough to consider early adoption of a new technology application," he said in a Mortech white paper.
When talk turns to mortgage industry adoption of decisioning technology - particularly the analytics on the market that can help a lender monitor performance in real time - Mr. Lebowitz acknowledges that a minority of lenders "are very good at managing their affairs." But the typical choice is to manage ad hoc via spreadsheets to augment outside help from LP, DU and the decisioning tools of the aggregators.
Mr. Lebowitz said Mortech studies show that lender adoption of management technology has not grown in five years. "Lenders are buying into pricing systems that are more for operational purposes than for managing internal systems." What most correspondent lenders do, he said, "is align themselves with the intellectual technology provided by the large aggregators like Wells and Chase." In effect, he said, that makes correspondents "franchisees" of the aggregators that get the lion’s share of their business.
"We had always thought that lenders were being trained to monitor and measure important operational elements when Fannie and Freddie first brought out their automated underwriting systems," he recalled. "We had hoped that would stimulate lenders to take a more scientific approach to their business." However, he said Mortech figures show only one in three lenders purchasing management control technology for servicing systems or for interest-rate and pipeline management. "The market doesn’t always respond in a way we think is rational."
But that may be changing. Surviving lenders saw what happens to competitors that spent all their tech dollars to supercharge production instead of analyzing results and paying attention to underwriting. "The perception is that risk analytics is one of those ‘nice to have’ technologies instead of a ‘need to have’ technology," says San Clemente, Calif.-based mortgage industry consultant Laura Pephens. "But for any business with any level of risk -- whether that’s operational risk or financial risk -- it’s a requirement in this marketplace. You need to manage your risk in real time, every day. If your performance indicators are showing a deviation from the plan, whatever benchmarks you have established, you need to address that immediately. You have to know what adjustments to make today in relation to yesterday’s performance."
To do that, she said, you need a database robust enough to let you create a data warehouse that draws data from all your systems so you can have a handle on lead-conversion rates, operational costs, loan-level profitability, gain on sale from secondary delivery, and all other indicators that tell you where your deficiencies lie so that you can address them as they come up.
Among her clients, she points to Nationwide Lending, Irvine, Calif., as a company that internally developed a set of business intelligence benchmarks it made accessible to all sales and operational teams. To give managers a real-time picture, Nationwide automated publication of those benchmarks through their internal systems.
For those who haven’t yet done the same, she singles out Intelli-Mine as a vendor that can create a data warehouse for you, at a cost most lenders can’t match. Newport Beach, Calif.-based Intelli-Mine also says its biggest competitors are the internal IT staffs of the mortgage lenders it offers to serve. "They are right when they say there is nothing else like it out there," Ms. Pephens stated.
A favorite way to display analytics on a manager’s computer screen is a dashboard. As you already know if you use iGoogle as your homepage, creating dashboards is no big deal once you have the right tools in place. I saw Intelli-Mine’s Kurt Hadfield assemble a dashboard in a matter of seconds during a demo, using templates and selecting the scorecards and other analytics a typical mortgage executive would need. "Dashboards came into play about four years ago," said Intelli-Mine president and CEO Anil Suri. "Before I launched to the market, we had deliver similar products to other industries. The technology was always there."
To explain the need for a system that draws on all systems to create benchmarks, analytics and reports, Mr. Suri describes a loan as "a collection of relationships" which come together to give a mortgage banker "a specific financial result." To illustrate the various interactive combinations and permutations of internal forces within a hypothetical "midsize mortgage company with two channels, wholesale and Internet direct," he calculates that 1,200 brokers and 10 Web reference sites, 22 products, borrower’s demographics classified in 16 profiles, eight processing teams, four warehouse lines and 14 active investors (1,210x22x16x8x4x14) would produce "almost 200 million possible combinations." You can’t track and manage all that with an Excel spreadsheet and a set of monthly reports. As you can see for yourself with a visit to the Intelli-Mine website, the Intelli-Mortgage package enables putting the appropriate dashboards and benchmarks at the service of all levels of management so that each can see "what is and is not working, why the performance variance exists and how to correct the problems affecting their performance."
Midsize wholesalers that still view these analytics as "nice to have" instead of "need to have" should be aware that their broker partners may already be embracing dashboards of their own. Companies like Ellie Mae, PushMX and MortgageDashboard offer brokers to manage pipelines and audit trails on an automated basis "by keeping a record of everything that happens with a loan, who did what and exactly at what time," in the words of PushMX CEO Dean Harrito. "If there is a problem with a loan, you can verify who’s responsible. In addition, our conversation log is always time-, date- and user-stamped. That can never be altered or erased."
Brokers and lenders alike are becoming aware that they can no longer run their shops "by the seat of their pants," as Platinum Capital Group senior manager Jim De Beck put it in describing why they chose to use PushMX along with Calyx Point. "One of the major points we like is the reporting capability, particularly compliance-related reporting, who sent out VOEs, who did what at what time. The reporting function also allows the management of the company to predict where the company is going and how much money each loan officer is producing."
Can you afford to know any less than that about your business?
