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National Mortgage Professional
Jun 05, 2005

Bundling: Is your company prepared?Shawn McGowanbundled services, pros and cons, bundling partners The Real Estate Settlement Procedures Act (RESPA) reform that was proposed last year by the U.S. Department of Housing and Urban Development created a stir among many market professionals, but also opened eyes and sparked interest in others. The prospect of RESPA reform may have been shelved temporarily, but new business trends were born from underlying concepts driving the proposed regulation, one of the most notable being bundling. Even businesses outside of the housing arena have become privy to (and are currently taking advantage of) the benefits of an all-in-one solution. These companies are making efforts to combine synergies and offer consumers competitive advantages. Much debate continues in the marketplace as to exactly what constitutes a bundled offering. Is it simply a pricing package that lenders can offer consumers or is it actually bundling product data and delivering merged underwriting information? Additionally, much uncertainty remains as to how and when the bundling issue will resolve. No one knows whether business models or regulations will drive the service, but one thing is guaranteed: bundling is a rising trend in the marketplace and is catching on quickly. Is your company strategically positioned to remain competitive and successful in a bundling world? Advantages of bundling The RESPA proposal created additional momentum for bundling within the marketplace, motivating many firms to evaluate current settlement services strategies and prepare for a bundling platform. Proponents of bundling have touted the advantages of a complete platform for years. There is some industry reluctance in terms of forced regulatory reform, but combining settlement services can be advantageous to all parties involved in the closing process. Consider the circumstances. The consumer wants a simplistic and pain-free process. Providing one fee for all closing costs is not only time-efficient and cost-effective for borrowers, but also brings a value-add to the marketplace. Obviously, packaging settlement services is a win-win for the consumer and when approached tactically, it could result in huge savings for both lenders and the various third parties involved. Therefore, it is imperative for industry players to prepare for what lies ahead. The underlying factor is that consumers drive business and revenue; as an industry, we must adjust to their changing needs, which means adopting the fundamentals of a bundling platform. From an appraiser's standpoint, bundling provides a premium opportunity to increase business and gain awareness in the marketplace. For example, if an appraisal company bundles services with a title company, both companies gain access to a number of new prospective clients, while providing added value to existing clients. It is a linear relationship that enables partners to offer competitive services to consumers looking for the most convenient, yet efficient solution. All constituents of the closing process are important to consider when bundling services and all parties can benefit from combining offerings. In addition to saving time and resources, a bundled platform is an excellent marketing opportunity for companies. Being able to promote a bundled services offering could be a key differentiator for companies in an increasingly crowded marketplace. The central theme is this: The only way bundling makes sense from a regulatory or business standpoint is that the sum of two parts together is more efficient than the two standing alone. What steps can your company take to prepare for bundling? If we now believe that bundled services are coming in some form, it is just a question of when and how. What steps is your company currently taking to prepare for the shift? There are many factors to consider in the decision to become a bundling partner, but perhaps the foremost areas to consider are operational and technology capabilities, parallel initiatives and business culture. Certain operational and technological capabilities must be in place to become an efficient bundling partner. A viable production platform is an obvious necessity to handle all orders. Further, the bundling partners must have a solid integration of technologies to make a more effective bundling solution. Parallel strategic initiatives between partners Making sure that strategic initiatives match with potential partners is key to maintaining a successful bundling relationship. First and foremost, the partnership must make sense. Understanding your partner's business and operational model is the first step to securing an affiliation. Two entities must efficiently exchange product information and truly understand the process behind all company decisions and procedures. For example, if a lender decides to offer bundling services to their borrowers through an appraisal and title company bundling initiative, the lender should take every initiative to understand the synergies created by the bundled products in order to better serve their borrowers. In this way, a value proposition is created that benefits all of the participants in the bundling initiative. This is a way to proficiently handle resources and create a partnership that will guarantee a true return on investment (ROI). Combining settlement services provides consumers with a more attractive product offering that should drive more business and create an ROI to the lender. Partners should hold the same responsibility to manage more successful ROIs by creating workflow efficiencies. This is accomplished by acquiring partners that match not just in size and stability, but more importantly, in culture as well. Two companies must truly believe in a partnership that will bring added value to both companies and provide a bundling solution that will offer prices that are more competitive. When the bundle has found balance with all participants, it is likely durable enough to withstand the pressures of an ever-increasing competitive marketplace. What makes a good bundling partner? It is important to choose your bundling partners wisely. Each company and/or person may have differing views on what makes a successful partner. I believe one important aspect of securing a strong partnership is the value each party places on customer service. A good partner understands all product offerings along with their benefits and liabilities. All of these products become part of one central domain and all parties should be coherently aware of each one to prosper as a bundling provider. It needs to be understood that the weakness of any one product or service weakens the bundle and can affect all of the bundling partners. Said differently, it is not just important to find a partner that can create bundled products, it is more important to find partners that deliver great products and services that can be easily and efficiently bundled. In this way, all products, those bundled and those delivered outside of a bundle, are assets to the partnership. Bundling must be a true added value and not an offset to a product weakness or service. So, are you ready? In order to answer this question, I would suggest the following self-assessment: •Know yourself and your organization. Whether you are a lender, a vendor or a value-added intermediary, you need to know if bundling is part of the strategic plan. Bundling will take commitment. Decide if this commitment fits your business needs. •Know your products and services. It is critical to know if your products and services will hold up their end of the bargain in a bundling initiative. Otherwise, you are setting yourself up for disappointment, along with your partners and clients. •Know your prospective partners. No matter how good your products are as stand-alone offerings, the wrong partnership will be challenged to be successful. Choose wisely. •Know your marketplace. This really speaks to the pressures that any bundling initiative will face. Flexibility and commitment will be two important keys to success. Shawn McGowan is president and CEO of Valocity, a national valuations solutions provider. He may be reached by phone at (866) 367-8611 or e-mail [email protected]
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