Today's mortgage industry is struggling to find a process to manage technology. More than seven in 10 lenders view technology as an operational requirement funded as needed, not as a strategic, defining force for their business, according to Jeff Lebowitz, co-author of the Mortech study of technology in mortgage banking.
For these lenders, the goal is to do enough to stay in the game, but not necessarily to lead it. But ironically, as competitive pressure mounts to automate underwriting, work flow, and point of sale tools, as well as incorporate web-based marketing and other emerging technologies, the tactical player finds that the game has changed.
The playing field is leveling, but on a higher plane than before. Without sophisticated means to integrate and manage complex technology applications, lenders will find themselves unable to recruit and retain the best people, boxed-out from offering the latest financial product offerings, and left behind in standards of customer service.
Waterfield Mortgage, Fort Wayne, Ind., sees itself in the minority of strategic players who view technology investment and management as essential to remaining a leader in an increasingly competitive field. Our quest highlights the challenges of extracting value from large-scale technology investments and offers some perspective and lessons learned along the way.
Technology-typically in the form of a vendor's product-delivers far less intrinsic business value than we are conditioned to believe. Lenders must add significant value, in the form of process definitions, business rules, customization and add-on business functionality, in order to squeeze real value from the off-the-shelf technology they purchase.
Too often, technology is expected to serve as a proxy (kind of a business-in-a-box) for the well-defined practices and processes lenders need to design up front to improve their business. The problem with defining business processes up front, however, is that it is extremely hard work.
Since 1991, Waterfield has put a premium on buying, building and integrating large-scale, mission-critical systems: loan production, secondary marketing, mobile origination, telemarketing, automated underwriting, work flow automation, and optical imaging. Loan servicing, while less volatile, has been an underlying focus since the early 1980s.
To tie these systems together efficiently, we have had to become experts in electronic data interchange, network management, systems integration, and project management.
In every case where we have relied solely on the embedded processes in a purchased technology to improve our business, we have been disappointed-not with the quality of the product or the integrity of the vendor, but simply with the fit of the product's prepackaged processes to our specific requirements.
Likewise, we have also been disappointed when we have taken shortcuts in developing our own solutions. At least we had no one else to blame for the lack of adequate analysis, thought, design, and planning.
The first version of our proprietary laptop origination system was built and deployed fairly quickly, in part to quell the clamor for laptops from our sales force. However, according to the system's author, Bill Vernard, it was "merely a portable version of our back-office processing system and, of course, failed to satisfy our people who wanted a tool designed specifically to facilitate the point of sale process, not just capture data and print documents."
Our second, more carefully executed effort was a resounding success. It took a 12-member team a solid, labor-intensive year working with an active user group from the design phase through user-acceptance testing. The result was a system that our people believe in and that ultimately changed our fundamental business process and sales culture.
But building the desired user functionality turned out to be the easy part. The mistakes we made in the second round had more to do with underestimating the time it would take to integrate the point of sale system into a seamless fit with our back-office production system.
By seamless, I mean making sure that regulatory disclosure calculations match precisely on both systems; that product and pricing information is delivered to the field reliably and accurately, two or three times a day; that dial-up communications and data exchange are automated to the maximum degree and made robust; and that documents like the Good Faith Estimate printed on one system matched the other.
And once we had overcome the difficulty of technology development, we faced the challenge of introducing our new technology to our people.
The impact of a technology-enabled process change on the culture of your organization can surprise you. Sometimes the results are sublime, sometimes ridiculous.
It's all imaged. And with a centralized, tightly integrated work flow, imaging, automated underwriting enabling our process, 98% of our customers are issued a written approval decision with integrity within 48 hours. Not only had we reached target goals, we improved our productivity, making our sales force and processing staff an efficient, integrated team.
But not everything unfolded smoothly or according to our plans. For example, when we discovered that during our conversion from 65 distributed production branches to three regional operations centers, we inadvertently conditioned our new recruits to the wrong standard of behavior in validating loan status changes.
We chose to bulk load thousands of applications into the new system and have our new production staff manually advance these cases individually and rapidly through the sequence from case opening to the loan's actual state. Quite by accident, we taught them to be less cautious in this process than we want them to be under normal conditions-behavior that had to be unlearned.
Another surprise made our help desk more difficult to manage than we expected. Seamless integration of imaging, work flow, and automated underwriting made these three systems appear as one to our production staff. In the early phases of deployment, when we needed precise problem reports to expedite system changes and defect removal, our end users could not accurately articulate which component of the system seemed to be malfunctioning.
Perhaps the most challenging cultural change issue centered on the expectation that our system would drive enough of the process to allow a person with a minimal understanding of the mortgage transaction to be successful in our back office. This would enable us to reduce the cycle time from raw recruit to competent production specialist from two years to a few months.
We are happy with successes like the increase in our staff productivity, which has helped us achieve our targeted gains in efficiency. And our regional operations centers have surpassed our expectations, processing loans that have resulted in customer satisfaction ratings over 96%, despite the recent wave of high-volume pressure.
Nevertheless, we are still faced with an unacceptably long training cycle for key production personnel. To address this issue, we are developing a corporate university to bring our training time down to six months and enable us to respond more effectively to rate-driven demand cycles.
We know that much of the technology we deploy is helping us to deliver our business process more effectively. So the struggle, in our view, is not only to find a process to manage technology, but also to define and create the best practices to enable with technology.
The most important lesson we have learned, the hard way, is that unless we define and document our requirements in excruciating detail, we simply will not know what we are about. And no technology, no matter how well conceived, will deliver us from that ignorance.
There is no substitute for understanding the issues, knowing the details of your needs and being able to express these as a complete thought (otherwise known as a detailed design specification). A high-level wish list compiled as a Request for Proposal just isn't good enough. Sadly, it seems that the vast majority of lenders think it is, which may explain why so many are disappointed with the results of their efforts.