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Lenders in the wholesale and correspondent business are preparing to facilitate a customer who must deliver on time and accurate services to a borrower, in a newly engineered process—and make money. Most managers on all sides of the origination, funding and purchasing table, are spending every minute working on policies, procedures, and training for the new rules that will go live overnight Oct. 2. Their focus is on operational steps and meeting compliance requirements. Without a doubt, this is causing more than a few sleepless nights thinking through the numerous known and unknown challenges.
What will the new standard be?
One of the most significant unknowns is whether the company’s capabilities will match customer expectations. Then, even if they meet their goals, which of their competitors will set higher service levels and meet those? Will there be an even newer standard in the loan process that hadn’t been anticipated? What will real estate agents and borrowers expect in the application to closing timeline? These are questions to answer within your organization and then develop the systems to meet these service level goals.
TRID procedures, for all business channels, are being designed from the depths of the rule’s challenges and building outward. This has been a necessary approach in order to start designing the “new normal.” This approach starts with the negative and works to overcome the problem. System capabilities and staffing are driving an outcome, or more likely the realization, that results in a process with limitations. With each limitation comes a potential barrier to service levels.
The optimistic procedure designers have high hopes that originators armed with early disclosures and communication skills will set the gold standard in service level agreements that beat the competition. This has the classic over promise and under deliver written all over it.
The view from the street at this point indicates the new standards in wholesale are shaping up to give less control and flexibility for brokers and that correspondents can expect a tougher pre-purchase review process. In both cases, the borrower could be the loser.
Service lessons from outsourcing
As wholesalers and investors set rules and determine controls under TRID, customer service level agreements (SLAs) should be redefined at the same time. There is nothing that hits the bottom line as much as a service problem. Customers and the sales team lose confidence in the company’s ability to get it right the next time. Operations associates become negative as exceptions are made to policies in order to put out the fires. To avoid this all too common cycle in mortgage lending, take a look at how outsource providers manage change of this magnitude.
Outsource service providers are accustomed to big changes. Every client is unique and so is every project. Project implementation usually involves learning a new Loan Origination Software (LOS), completely new procedures for every step from application through servicing, company specific policies and most importantly communication styles, and customer service level expectations. It’s not only learning the new ways of the client but redesigning internal procedures and systems to match, conduct internal quality assurance, track and report. The process requires a clear road map to ensure success in quality and ultimately customer service. Wholesalers who follow a similar road map will build long term value for their brokers and gain efficiency by improved quality and communication during the loan process. Investors conducting pre-purchase loan reviews can develop a business partnership that spends fewer resources on low risks tasks.
The roadmap for successful includes four critical components:
►Implementation of Best Practices
This outsourcing roadmap aligns with TRID implementation in any model that must work with a business partner who has the direct borrower contact.
This pre-implementation phase for TRID, in wholesale and correspondent, is not just about publishing policies, procedures and checklists or holding a few Webinars. The lender or investor holding the money must establish their promised service levels for turn times, based on a set deliverable. These goals must be mutually agreed to by both parties, and clearly understood. The service level agreements include detailed checklists questions to ensure important details aren’t missed in complex scenarios.
The pre-implementation phase must also include a walkthrough of the process. Most people are visual learners and there is nothing like actually touching the keys and moving the mouse to start solidifying an understanding of the process. This process walkthrough includes every screen, every document, and includes review of escalation procedures and key contacts for problem solving. WebEx sessions can accommodate the first stage but ultimately at least two team members should have an opportunity to shadow an expert and touch the process at the source.
The more dedication there is to the pre-implementation phase, the smoother implementation will be. Wholesalers should be identifying how they can reach their brokers on a very intimate level. It is an opportunity for every account manager to become a trusted adviser and help the brokers truly understand their new roles and responsibilities.
Implementation and ramp-up
The implementation for TRID is a challenge with everyone at the starting line on Oct. 3. In a typical outsourcing road map, implementation can be a phased in approach with a ramp up plan. The ramp up phase is the time to obtain true knowledge transfer, control production, and execute a feedback loop through reporting and reviews.
For wholesalers, a ramp up will need to be a part of the pre-implementation stage. The ramp up plan can include on boarding training and support specifically designed for the brokers based on their capability and need. Most wholesalers can classify their brokers into three or four groups. Three will be easier to work with in TRID planning. The three broker groups are generally:
1. Those who currently exhibit consistent quality with high volume;
2. Those with inconsistent quality and measurable volume; and
3. Those who will just plain require extra support and are worth it.
The ramp up plan for each group will identify their specific SLAs and the right training and quality assurance measures to match. Then each group will require a specialized support team or escalation support model.
Investors purchasing from correspondents have an opportunity to consider ramp up and ramp down plans in the pre-funding review process. The knowledge transfer should be easier than it will be for wholesale, but nonetheless an important process. There may be different SLAs for varying groups of correspondents. As consistent quality metrics are met, the quality assurance process can be modified to fit a lower risk model supplemented by targeted reviews. The feedback loop here is critical for process improvement and cost reduction. Systems should accommodate a real-time and automated rebuttal process. Reporting should also be real-time with regularly scheduled reviews between key stake holders.
The implementation phase should be a defined period of time. This will vary by service and product, but should cover from receipt of the loan to successful delivery, insuring or boarding in servicing, depending upon your business. With this in mind, the time frame and may range from 45 days to 90 days or longer for new construction.
Governance structure and post-implementation
Project managers should be assigned for each group to track that SLAs are being met and change management is working. Client advocates, business unit owners and front line managers need regular meetings to close gaps, reconcile changes, and evaluate customer service levels.
No matter how much technology you have, nothing beats the value of getting everyone in the same room to work through process improvement. The ability to work together under a clear governance structure will make are break the success. The responsibility to make this work rests squarely on those with a title and not with those on the front line.
The post-implementation phase measures the success of the other phases through daily reports, feedback and scorecard results. From the information collected, the governance structure facilitates process improvements, new knowledge to transfer, and continuous updating of procedures and training.
In the end … being the one who holds the money and makes the rules, only gets you on the playing field. Execution pays the bills.
Alice Alvey is senior vice president at Indecomm, leading the Indecomm-Mortgage U division, Internal QA and Compliance. She is also the author of Indecomm’s FHA Practical Guide and VA Practical Guide. She may be reached by e-mail at [email protected].
This article originally appeared in the August 2015 print edition of National Mortgage Professional Magazine.