Residential mortgage lending is being reengineered. The focus of the reengineering is in three' key areas: reduction of loan origination expenses, improved customer service through innovative use of technology, and development of a flexible organization that responds quickly to changes in consumer demands and the cyclical nature of the mortgage market.
Lenders, software vendors, secondary market conduits, and consultants are leading the charge. For those lenders that continue to do business in the same old way, these changes will put them further and further behind. Over time, the cost of catching up will be huge.
Great products do not make great companies. Rather, great companies make great products.
A great mortgage lender will be a low-cost provider with the necessary supplier, vendor, and investor relationships in place to quickly respond to consumer demands. A great mortgage lender will have the right combination of people, processes, and technologies, and the ability to maintain a leadership position on an ongoing basis.
Tremendous efforts are under way to reduce the time and costs associated with originating a mortgage loan. Automated prequalification and underwriting, electronic data interchange, electronic forms, and customer information systems are some of the primary technology-based initiatives under way today.
Rapid preapproval of borrowers, "lock and shop," flexible rate lock policies, innovative ARM features, and educating new borrowers on mortgage loan products and processes are some of the approaches for attracting borrowers and reducing pipeline fallout.
Innovative distribution channels such as laptop workstations, ATMs, telecommunication networks, computer networks, and interactive video are being developed and implemented. These options also provide the consumer with greater flexibility in accessing the lender.
Some organizations have formed consortiums in order to share the costs and the benefits. Vendors have emerged that provide technical support or handle the entire process. This outsourcing ability opens the doors for any company with the desire and the dollars to become a "virtual" mortgage lender.
New partnerships are being negotiated between lenders and mortgage insurers, title companies, property appraisers, and other service providers to exchange information electronically.
The name of the game is creativity and adaptability. The key to adaptability is rapid implementation. Yet the failure rate for the implementation phase of reengineering is quite high.
There are several key reasons why organizations fail at implementation:
Failure to address all of the implications associated with major change. Internally, major change means new people skills and new organizational structures. Externally, relationships and service levels with.vendors and other service providers must be renegotiated. Because more diverse forms of technology are involved, system support and maintenance, as well as emergency backup and contingency plans, are severely impacted. Often, changes to compensation and reward structures are required.
Choosing solutions that cannot be implemented. Failure occurs when the vision of the future has a price tag that is beyond the pain threshold of senior management, or if it relies on technology that is unproved and requires costly and lengthy development.
Not having a well-defined implementation plan. A welldefined plan is not just a list of all the activities and resources required to reach the desired end result. The plan must address potential internal and external barriers to success. The plan must provide immediate or nearterm cost and productivity benefits that will both motivate and contribute financially to the ongoing, longer-term effort.
The big-bang, implement-it-all-at-once approach is usually unsuccessful.
The rebuilding of the mortgage banking industry has begun. The stakes are high. The competition is heating up. The old days of "schmoozing for loans are over. Mortgage lending has gone high tech. The new players are packin' software at well as hardware. They are lightning fast and dirt cheap. These days, if you schmooze, you lose.