Going for broker: success, solutions and the story of MILA Inc. Peg KernLayne Sapp, Mila Inc.
"Go confidently in the direction of your dreams. Live the
life you have imagined." Henry David Thoreau
Bound to rise
America is a nation rooted in the promise that an entrepreneurial
spirit and strong work ethic are all you need to achieve success.
Theoretically speaking, an ambitious young man of 18 could educate
himself about economics, pass the Real Estate Licensing Exam and
begin to purchase and sell real estate. That young man might attend
college briefly, but ultimately realize that entrepreneurship is
not something taught at universities. Perhaps this young man would
one day launch his own company and achieve tremendous financial
success. Sound like a Horatio Alger tale or a rags-to-riches movie
of the week? This is no fictional account: this is the story of
Layne Sapp, founder and CEO of MILA
Inc., one of the fastest growing companies in the nation and a
National Association of Mortgage
Brokers Platinum Industry Partner. Shortly after graduating
from high school, Sapp formed a private lending fund which he
managed until he was 23. In 1984, he broke away from that fund and
began brokering loans, using his own capital and some private money
on the side. In 1989, Sapp incorporated the company as MILA Inc.,
which began doing business in 1992 as a mortgage banker
specializing in non-prime lending products.
Sapp's early achievements and single-handed rise to success in
the mortgage industry without the "benefit" of a college education
might be difficult to believe, until you speak with him. He is what
academics would call "prodigious" and what your mother would call a
"smart cookie" clear-minded, forward-thinking, logical and
inspired; a full 15 years after establishing MILA, he is still
bubbling with ideas about technology, relationship development and
redesigning the alt-A lending process.
Foolish inconsistency is the hobgoblin...
By the mid-1990s, MILA was funding approximately $30 million per
month. However, Sapp was also noticing that his production cost was
excessively high, especially compared to prime lenders. He pulled
his team together to analyze the process and uncover the costly
culprit. "I found that there were so many inconsistencies within
alt-A-B-C lending, that brokers didn't know what to expect," said
Sapp. "Because they didn't know what to expect, they would send in
an incomplete file, which would then generate a slew of phone
calls. It would take you a month to close the loan because the
broker could not send you a complete file to begin with." So MILA
set out to discover how, as lenders, they could anticipate the
brokers' needs and create consistency within the sub-prime lending
process. Sapp gathered his team into a conference room and spent
some serious time analyzing the process. "How can we create a
consistent process where we're pushing information out to the
broker instead of them having to call us?" pondered Sapp. "We
examined what kind of phone calls we were getting from brokers and
how we can manage and measure those calls and the response times
tied to them. In this business, everyone makes excuses up from the
lending standpoint about who's responsible for what, because you
have appraisers, third-party vendors and the rise of value and
title companies; the broker must fulfill the loan conditions and
the lender in turn revalidates them; then you have the argument of
whether those conditions are right or wrong or indifferent. I just
don't want to have any of those arguments."
Sapp's background gives him added insight to take on the
challenge of streamlining the alt-A process. "It is important to
understand what the broker has to go through to get a
pre-qualification, communicate with the real estate agent and
customer, keep everybody happy and then deal with multiple lenders,
all of whom have different rules and conditions. All of these
factors create an inconsistent process. It's not good."
Sub-prime that's above par
Sapp's goal is to manage the mortgage process effectively so that
brokers are freed up to take more applications. This includes
coming up with a consistent automated appraisal approach that
brokers feel comfortable with. MILA is interested in making the
broker productive by getting them leads and simplifying the
process. This way, even if MILA's brokers are making half as much
money 10 years from now because of marketplace compression, they
will still make more money due to the increased number of
applications they can take.
MILA's plan includes extensive training and support programs for
brokers. Instead of simply training about the company's products
and pricing, MILA concentrates on teaching brokers about how the
company manages the loan process, and how brokers can get answers
from MILA's AccessPoint technology. In other words, MILA's focus is
on process, not product. "Teaching [brokers about] the process of
how to communicate, how to complete an application and get the
right results that's what we're trying to manage in the field
today," said Sapp, who also points out that automated underwriting
is only as good as the information you put into it, so if the
training is not sufficient on how to accurately complete the
automated underwriting process, you may end up with an inaccurate
decision. MILA is one of the few lenders that look at 250
underwriting parameters for each automated decision, which enables
them to capture the nuances that many automated underwriting
programs miss. Even with hundreds of different program options and
250 parameters, brokers can still receive an initial decision in 10
seconds. "When the broker fills out the online application through
MILA's automated underwriting engine, the answers are always
accurate, they're always consistent," said Sapp.
Better communication through technology
Sapp has a particular talent for seeing the big picture when it
comes to client relationships. He is also quite innovative about
creating new ways to improve MILA's communication with brokers. But
how can you keep your finger on the pulse of literally thousands of
brokers across the country? The answer lies in MILA's AccessPoint
technology, which develops internal broker-by-broker profiles so
Sapp and his team can see exactly what type of business they are
receiving from each broker, how much of it is purchase versus
refinance and what the average FICO scores are from a particular
brokers' borrowers. This creates an intimate understanding of each
broker and company, so MILA knows exactly how to market and
communicate with them. MILA has also calculated the average time it
takes to complete each underwriting task associated with a loan
once it's been received, so the company can predict when a loan
decision will be finalized, down to the hour a piece of information
that makes the broker's job that much easier. "If it's worth
anything, it can be measured," added Sapp.
In addition, AccessPoint allows company owners to look at every
document and action relating to a MILA loan on a branch-by-branch
level, all in real-time. In the future, the company will offer a
consumer version of AccessPoint, in which the broker can assign
passwords to both the borrower and real estate agent so they can
track the progress of the loan.
MILA also looks to AccessPoint to identify any unmet needs among
its broker clients. "Most of our brokers don't say 'I need this
product,'" explained Sapp. "Instead, they unknowingly ask for it
through automated underwriting; we can track what they ask for and
what we could or couldn't do. We look for trends."
For example, MILA received thousands of requests for loan amount
sizes that were greater than what they were offering. Through
AccessPoint, the company already knew the FICO scores of the
borrowers, the average size of the loans and where they were
located. So MILA recently enhanced its jumbo loan offerings to
accommodate this need, which is what makes MILA so exceptional:
they have developed intelligent technology that not only automates
the loan process, but also acts as the eyes and ears for the
company, right down to the last broker, analyzing unmet needs
before the broker has articulated them.
The rate debate: Can brokers and MILA endure in a rising
rate environment?
Most industry experts agree that a rate increase will happen soon a
prediction that makes many wholesalers nervous, but not MILA.
According to Sapp, "As rates go up, two things happen: Customers
who have been waiting for rates to decrease finally start to buy;
and customers who could qualify yesterday, cannot qualify in a
higher rate environment because the debt ratios are too high. As a
result, the broker who no longer has as many applications to
fulfill will now take an A-B credit borrower. So we typically see a
jump in business when rates increase because our underwriting
criteria are more liberal."
Nonetheless, with rising rates, a waning refi boom and emerging
technologies, the fate of the mortgage broker is uncertain. In the
past, brokers have successfully adapted to an ever-changing
environment of regulatory issues and market trends. Today, however,
the game has changed entirely, and this is where MILA steps up to
the plate once again.
"The lender must be accountable to the broker and create
efficiencies for the broker that they don't have today, to make
sure they are around tomorrow," says Sapp, who feels the future
will empower brokers to "touch" more customers, which is what they
do best. Brokers excel at taking applications and effectively
marketing themselves to friends, relatives and real estate agents,
and MILA wants to free them up to do just that by leaving the
lending and documentation management to the lender. "It's all about
making the broker more efficient and understanding what their skill
set is, understanding how to help them manage their business but
not take business away from them," explained Sapp. "No one can
deliver a product better or cheaper than a broker can today."
Notes:
- MILA Inc. continues to expand with new office space in Lynnwood,
Wash.
- MILA Inc. has purchased one of two empty office buildings at the
Quadrant I-5 Center near downtown Lynnwood, Wash. MILA CEO Layne
Sapp purchased the building for multiple tenants, including
MILA.
- "MILA's success in the Puget Sound market for delivering
high-quality wholesale mortgage products and services paves the way
for our expansion," said Sapp. "In an industry that demands instant
access to critical documentation, MILA is responding with
technology that improves the overall loan processing time. We look
forward to growing and working with the community."
- The new office, located at 20700 44th Avenue West in Lynnwood,
Wash, is a few miles away from MILA's corporate headquarters in
Mountlake Terrace. Nearly $5 million in improvements were completed
in the 176,000 sq.-ft. building, including work to the ventilation
systems, lobby and office areas. MILA employees and additional
tenants are expected to move into the building in late fall.
- MILA's expansion is estimated to bring more than 800 new jobs to
the building and to Snohomish County respectively over the next 36
months. MILA's employee count will exceed 1,000 employees locally,
totaling approximately 1,200 nationally. MILA has two other branch
offices in Arizona and Missouri.
Headquartered in Mountlake Terrace, Wash., MILA Inc. is a
wholesale non-prime lender. For more information, call (800)
332-MILA or visit www.mila.com.
