Open the black boxJ. Michael Kimeone-sided information, retail origination
For most, the mortgage industry is, to quote Winston Churchill,
"A riddle wrapped in a mystery, inside an enigma." The industry at
large has historically kept information about the "how and why of
things" a relative secret. This "black box" nature of our industry
provided the opportunity to capitalize on informational disparity
and afforded justification for various fees, charges and
inconsistencies in performance. Rather than honestly scrutinizing
the variances of their businesses, organizations hid behind their
complex infrastructures. The more one-sided the information about
the process, market conditions, prevailing rates, fees, products or
the expectations of corporate performance, the less true comparison
was possible. As a result, the federal government and various state
authorities have attempted to legislate disclosure requirements
designed to crack the industry's endemic cipher but have largely
been unsuccessful. While some of the continued secrecy can be
attributed to good lawyers, robust lobbying efforts and proficient
sales personnel, we've found that most organizations are not
actually capable of disclosing how their businesses work because
they do not have well-defined procedures, good controls or accurate
metrics.
Surprisingly, very few organizations have considered the impact
of information parity and the power of transparency in their
operational design and corporate performance. Originators are
challenged with servicing a demanding and well-informed public, but
are given very few real tools to meet borrower expectations.
Companies that are dependent on retail distribution must constantly
evaluate their organizations, their processes and their
technological infrastructure to ensure that a new informational
disparity from increased consumer sophistication does not cause
their originators to become obsolete.
The power and significance of retail distribution cannot be
underestimated. The role of the originator in the marketplace with
their various relationships to local business and social
communities has proven to be the industrys most important and
valued means of generating new business. However, successful retail
origination requires sales professionals that are well trained,
supported and fully informed. At companies like Meridias Capital and
others, the entire approach to loan origination has been designed
anew with the primary focus on the retail originator, their
specific challenges and how they can best serve their customers and
the public interest.
The various steps involved in mortgage banking are typically
very manual and linear, and while some best practices exist, every
instance of their execution is quite individual. From company to
company, the approaches taken in operations are as varied as the
organizations themselves. For more than a decade, the industry has
been touting technology and automation. Every industry conference,
sales pitch and scrap of marketing collateral speaks of the
technological investment and efficiency that has been planned,
developed or deployed.
Once truly evaluated, most of these organizations have not
changed much. Yes, many have nice looking Web sites and have some
expensive engineers planning to create fancy new tools, but
ultimately, they are bound to an antiquated infrastructure. Most
organizations have cobbled together disparate pieces of software,
made some necessary modifications to accommodate their manual
systems and then announced that they intend to lead the industry
because of their technology. In reality it's the same old analog
process, with a shiny new, digital wrapper. Real technology in the
mortgage industry is very important but equally difficult. Process
automation and its efficiency is a promising and desirable outcome
of implementing technology. However, without a compete commitment
to impacting the way business is done, software can actually be a
barrier rather than a benefit. Great software comes first from a
great process that is well described and well designed. Software
can expedite and automate many things but technology comes from the
design where each step is meticulously defined and consideration is
persistently given to the relationships of each task to the others.
For many organizations the complexity and expense of truly
implementing technology in their business is not practicable. For
them, they should consider modifying their long-term plans; if not,
regardless of their size or relative stability, they are likely to
go the way of the Sony Betamax. Those that think they can do what's
necessary to adapt their business to this new age should think
fast, think lean and think transparent, or they will go the way of
VHS (longer lived but ultimately obsolete).
The moral to this story ... As a successful retail originator
you are a very valuable asset. The mortgage company with whom you
choose to work must provide you tools and support to be successful,
however, they must first have taken the time and put forth the
resources to develop a infrastructure (process, procedure and
technology) that in this new age is considerate of your specific
needs. I am happy to report that companies do exist that can keep
you competitive and support you to be successful. They can be
identified as those who have devoted themselves to the success of
retail originators.
You are not alone in this difficult market and can prosper as a
retail originator in the Internet age when aligned with the right
partner. Look for a lender who is not afraid of transparency, but
rather embraces it. Find a corporate partner that can provide you
timely and accurate information about their process, understands
your business and has a well-defined, well-planned process that can
care for your pipeline and provide you relevant information
impacting your deals. To prosper, you must deliver your customers
the highest levels of support and service, and need not be
handicapped by an organization that has been too slow to adapt to
the realities of the modern mortgage industry.
Open-up the black boxits time for lenders to be held to a higher
standard.
J. Michael Kime is chief operations officer of Meridias
Capital Inc., a residential mortgage lender based in Henderson,
Nev. He can be contacted at (866) 369-7761.
