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.