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October 17 2011 13:04

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Technology Solutions for the Real World

Gardner, Harry. Mortgage Banking68.3 (Dec 2007): 102-103.

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Abstract
Lenders are looking at every possibility that might cut costs and streamline operations. While it might seem counterintuitive to think about new technology implementation or development projects at a time like this, some lenders are doing just that. Technology innovation and new systems implementation has always faced a bit of a Catch-22 in terms of timing. The second factor is even more fundamental: Technology saves money. In 2004, MISMO commissioned a Time and Motion study to assess the cost savings that were achievable simply through the use of industry-standard transactions in the mortgage lending process. The study concluded that a savings of 15 basis points and $249 per loan was possible, even without including eMortgage in the equation. Adding a true eMortgage capability to an existing document-imaging investment adds even more cost-saving scenarios. Technology provides real savings for today's business processes, and an opportunity to do things better by streamlining those processes.

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Full Text
The current state of the industry dominates our collective consciousness these days. Articles, advertising, conferences and conversations all focus on the industry's difficulties and pain points-reduced production levels, the subprime lending problem and small (even negative) profit margins. Lenders are looking at every possibility that might cut costs and streamline operations. While it might seem counterintuitive to think about new technology implementation or development projects at a time like this, some lenders are doing just that. Every business must make its own strategic and tactical decisions based on many internal considerations, but there are two basic factors that are helping to drive this trend. Changing the tires The first factor is a simple adage that is timely in the current market: It's much easier to change the wheels on the bus when it's not moving. Technology innovation and new systems implementation has always faced a bit of a Catch-22 in terms of timing. During a business boom, the bus is running full-speed down the highway-all internal resources are focused on loan production, on keeping up with the pipeline. Although plenty of revenue is coming in, there's simply no time or manpower available for new implementations; neither does anyone want to risk making changes that might take down a mission-critical system unexpectedly. Yet, when things slow down, management is rightfully concerned about the bottom line, and may often be resistant to making large expenditures for new technology.

But for forward-thinking management, these slower times are clearly an opportunity to pause, reflect on the technology infrastructure and make strategic decisions about new technology. There is more time to evaluate current processes, talk to solutions-providers and execute a well-planned, well-tested migration to new systems. Those new systems will be in full production mode, with initial bugs and issues shaken out, by the time the next production boom hits-ready to scale up and handle more business with the same staff resources. The bottom line The second factor is even more fundamental: Technology (and especially standardization) saves money. Doug Duncan, Mortgage Bankers Association (MBA) senior vice president and chief economist, views technology from an understandably economic frame of reference. "Technology is a tool that offers an improvement in production: Either it allows firms to generate more output with the same amount of input, or the same amount of output with less input," he says. Many lenders and technology vendors are already achieving cost savings through the use of MISMO standardized eCommerce transactions, and some have taken the next stepsmoving into paperless processing and beyond that into full eMortgage implementation for maximum savings and process efficiency. In 2004, MISMO commissioned a Time and Motion study to assess the cost savings that were achievable simply through the use of industry-standard transactions in the mortgage lending process. The study concluded that a savings of 15 basis points and $249 per loan was possible, even without including eMortgage in the equation. A real-world illustration of this came later, from a lender chief technology officer on the MBA ResTech Committee, who told us that by starting with a MISMO transaction, his programmers could build a new business partner data interface in less than one month, rather than the usual six months. Moving into a paperless processing environment can save bottom-line costs in many obvious areas-supplies, printers, copiers, filing, security and the physical movement of all that paper during a typical workday. There is also the cost savings on the physical shipping of paper, overnight and courier fees, and so on, to consider. But also consider some of the less-obvious savings in actual business operations with a paperless environment: Because the loan documents are onscreen, several employees can work on the same package at the same time, if needed, without requiring even more paper copies to be made. In a larger organization with multiple office locations, the workload can be balanced by sharing the virtual loan files, and if one site is temporarily shut down by unexpected events, the work on those loans doesn't come to a sudden halt-the other sites can smoothly pick up the most urgent work and maintain business continuity. Adding a true eMortgage capability to an existing document-imaging investment adds even more cost-saving scenarios. With document image and data combined in a single electronic file, the data stays synchronized to the document, and can be used to populate multiple backend systems without rekeying. Production levels can scale upward with the same staffing levels because of the process efficiencies.

Rick Luckadoo, vice president of warehouse lending for Flagstar Bank, Troy, Michigan, gives an example of another, less tangible benefit of eMortgages in the warehouse lending process: Every day, he receives overnight shipments of paper notes from correspondent lenders. Having physical possession of those paper notes provides Flagstar with the necessary "holder in due course" legal status, and reduces the risk of related transactions. If bad weather prevents the overnight shipments from getting through one morning, much of that day must be spent making business decisions about whether to risk funding those lines without yet having their legal rights in the notes perfected through physical possession. In the eMortgage world, electronic notes can be delivered instantly after closing, instead of days later, and that delivery is, of course, unaffected by the weather. During an industry downturn, every area of cost savings can help improve the bottom-line margin-the difference between a net loss and a profit for each loan. Technology provides real savings for today's business processes, and an opportunity to do things better by streamlining those processes. In many cases, the benefits from new technology can create substantial savings in business processes that are not yet even identified-far beyond the obvious costs of shipping or printing. Sidebar Technology (and especially standardization) saves money. AuthorAffiliation Harry Gardner is the Mortgage Bankers Association's (MBA's) senior director of industry technology and MISMO vice president of eMortgages. He can be reached at hgardner@mortgagebankers.org.

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Indexing (details)
Subjects Technological planning, Technological change, Computerized loan originations, Image processing systems, Mortgage banks, Cost reduction United States--US 9190: United States, 5220: Information technology management, 8120: Retail banking services Technology Solutions for the Real World Gardner, Harry Mortgage Banking 68 3

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Pages Number of pages Publication year Publication Date Year Section Publisher Place of Publication Country of publication Journal Subjects ISSN CODEN Source type Language of Publication Document type Subfile

102-103 2 2007 Dec 2007 2007 MISMO Memo Mortgage Bankers Association of America Washington United States Business And Economics--Banking And Finance, Real Estate 07300212 MOBAAX Trade Journals English Feature Technological planning, Technological change, Computerized loan originations, Image processing systems, Mortgage banks, Cost reduction 234925503 http://search.proquest.com/docview/234925503?accountid=131417 Copyright Mortgage Bankers Association of America Dec 2007 2010-06-11 ABI/INFORM Global << Link to document in ProQuest

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