Forward on reverse: Reversing the credit crisis at World Alliance Financial; A conversation with CEO David Peskin, Part I

Forward on reverse: Reversing the credit crisis at World Alliance Financial; A conversation with CEO David Peskin, Part I

August 17, 2008

Is your LOS only working part-time?Chip Cummings, CMCLOS, UCE, loss origination system, payroll disbursement
Ah, summertime! It's time for fun in the sun, cool margaritas
and family vacations. Technology allows us to be flexiblework from
anywhere, at anytime and take time off whenever we want. But is
your loan origination system (LOS) doing the same and only working
part-time hours?
The job description Just as you would with any
employee, the first thing you need to do is evaluate the actual job
description of your LOS. While our LOS is only software and can't
be directly compared to a hard-working, coffee-breaking, dedicated,
bi-weekly payroll disbursement, the process is actually the
For an employee, you define the job function based upon the
desired results for your organization. A closing agent follows a
process to make sure that the loan file is complete and insurable
when delivered to the investor. They know what that process is as
you've defined it, and it's just one function in a string of steps
that allows you to deliver your services.
Similarly, you need to establish exactly how you want your LOS
to function. Yes, we know that it has to keep track of loan data
information, spit out 1003s and track when our appraisal comes
back, but have you really defined how you want it to function as a
piece of your overall delivery system? As your central business
tool, in many ways, it's more important than many of your
individual employees. Since employees are the ones who run it, you
will need to define the role of the LOS, and then incorporate that
into the job functions of those that use it.
For the LOS, that means defining what I call the ultimate
customer experience (UCE). The UCE is the process flow you define
if everything went perfectly on a loan transaction. I mean
everything. You need to think through the exact steps of what
happensfrom the moment a loan file is entered into the system,
until it closes and beyond. What fields do you want it to track?
Who enters that information? What triggers are set up to remind
people to perform certain tasks? For example, in Ellie Mae's
Encompass mortgage automation system, milestones and document
tracking flags are used to create an accountable flow based upon
loan type, dates, forms, approval conditions and customer profiles.
Your system can do the same thing.
Start by breaking up each process segment: Origination,
processing, underwriting, closing, post-closing, shipping,
servicing, marketing and customer service. Within each segment, let
the people help define the UCE for each segment, then put the
entire flow together. Once complete, go back and evaluate the
roadblocks. What happens when each one of those steps is missed or
circumvented? For example, if the processor doesn't send out the
initial client welcome letter, then we incur a delay in getting the
insurance information back. What's your fix? When you hit this
roadblock, there needs to be a secondary solution to get the
client/loan right back on the UCE flow. Missteps like these are
what lead to delays and costly increases in customer
dissatisfaction. Define these steps with the help of your team,
isolate as many roadblocks as possible and establish the
corresponding fix and you've just defined the job description for
your LOS!
Part-time to full-time! So now that you know
what you want the LOS to do, how do you actually get it to do that?
The answer is through automation. Your LOS is only a piece of
software. It is set up to provide you with basic functionality for
your shop, but most people use it just that way, as a basic
origination and processing tool. Face it, you're not getting the
most out of your system, and most of it is because you haven't
taken the time to set it up the way you operate. Take a weekend and
personalize it! Everyone uses a 1003 for the application. We all
know how to fill out a good faith estimate and Regulation Z
disclosure. But what makes you different from your competition are
the personalized steps in between. When you get your LOS system to
fill in these gaps for you, it's the same as taking a part-time
employee into hyper drive and not having to pay any extra!
The key to effective automation is putting your UCE into your
LOS system. This not only allows for you to define and track the
loan process more completely, it increases efficiency, saves money
and time, and allows for future niche-marketing activities that are
only possible through effective database management!
For example, if you do three types of loan products in three
different states, then you should have nine master loan templates
in your LOS systemone for each loan type in each state. There will
be different disclosures and forms in each package, but there will
also be differences in the letters you send to the clients in those
states for those loans. When a loan is originated for a Federal
Housing Administration loan in Michigan, the borrower gets a
certain personalized introductory letter that is specific to their
data set. A construction loan will include a UCE step with
communication to the borrower about lien waivers and title company
requirements. That would certainly look stupid on a jumbo rate/term
The key is that each one of these steps is programmed into the
LOS template, tracked electronically and flagged if it doesn't get
done. Remember your last construction loan closing where the lien
waivers weren't there? Yeah, that's my point.
I know it takes time upfront, but it will save you boatloads of
headaches in the long run. Take your UCE and automate each step of
the process, as well as each of the components within that process
step, and you'll get a lot more bang out of your LOS system in a
Performance reviews Many loan originators and
business owners believe that performance reviews are based upon
bottom-line returns. Was there improvement that impacted my
profits? Well, that's only part of the equation.
Successful business owners know that while profits are
important, the systemand even more so, the environment that runs
that systemis far more important in establishing long-term success.
Many successful companies have a bad quarter or two, but are quite
successful over time because of the way their system is
implemented. It's not only true for the McDonald's or Nike's of the
world, but for you as an individual company, as well. Your success
is defined by how well you create your personal business system,
the execution environment of that system and the delivery based
upon the clients expectations. Your LOS is the tracking and
delivery system that binds the three together.
However, every car has to be tuned up eventually, and your LOS
system is no different. Successful performance reviews of your LOS
system actually start with the team members who implement the
system. When creating your UCE, make sure that your employees have
an enormous amount of input and control over the design of their
area segments. Not only do they probably know their job better than
you, but they will be more involved and excited about the
implementation and execution of the UCE that way. They will also be
the first to identify and fix problems, since it involved their
input from the start. This will also save you from having to tackle
little issues and having to personally maintain every aspect of the
LOS. I can't tell you how many consulting clients I've had where
the biggest obstacle standing in the way of their success was the
ownerwho was standing in front of me and who had to control
everything. There was nobody to give him a performance review! To
conduct a performance review on your LOS, get your team members
together once every six months to evaluate your written UCE process
and how that process is being implemented within the LOS. Can you
eliminate or combine steps? Do you need to add certain tasks or
forms? Is the data being collected and tracked correctly? Can we
implement effective marketing campaigns and niche-marketing events
based upon the LOS structure? Can we track and measure the impact
our LOS is having on the customers' experience in dollars and
Only after you've established the role of your LOS system,
effectively implemented it into your environment and measured the
results can you take a vacation and be sure that your LOS is still
working for you full-time while you're gone! Now if you'll excuse
me, I've misplaced my lime around here somewhere &
Chip Cummings, CMC is president of Northwind Financial
Corporation, an international speaker, trainer and consultant to
the mortgage industry, and author of "Stop Selling and Start
Listening!Marketing Strategies That Create Top Producers." He can
be reached at (616) 977-7900 or at