Mortgage Industry News

The January 25 review of Andrew N. Liveris’ book Make It In America by Wall Street Journal reporter James R. Hagerty caught our attention. Reading business book reviews lets us consider ideas emerging outside our own industry that may shed light on our industry’s challenges – without reading the book. In this case, that effect became even more intriguing since Mr. Hagerty previously interviewed TLC when he covered the WSJ’s mortgage industry beat.

As for the book penned by the chairman and chief executive of Dow Chemical, on the surface it may appear irrelevant to mortgage lenders and businesses that serve them. Liveris favors incentives for U.S. manufacturers to manufacture in the U.S. as a strategy to restore and sustain a balanced, thriving economy. I think it is relevant in two aspects.

Continue reading »

by Ruth Lee

This article originally appeared last week in TLC’s Progress in Lending Column: A Bit of TLC 

Traditionally, independent mortgage bankers have prided themselves on, and in many ways built an industry upon, their sense of self-reliance.  I cannot imagine any veteran mortgage lender taking exception to being described as independent, entrepreneurial, innovative or resourceful.  In fact, it would behoove our government, Wall Street and the media to take our industry’s roots into account as they try to regulate, capitalize on and report about it.

The very same traits that drew people into mortgage banking also happen to be traits that value expedience over process, tend to dismiss details that seem extraneous and highly value their own problem-solving acumen.  When you mix those traits in a profitable, high-volume marketplace, the result can feel a lot like a rodeo.  And when the conditions are just right, a high-energy, spurs-in-the-flanks event can occur.  We just lived through that part.  That was exhilarating, yes?

Nonetheless, and with all due respect to our forefathers’ feats, the rodeo days are over.  Not because they were bad but because the way things were done in the past grows less relevant with every passing day.  Now that the mortgage industry has been spotlighted as one that can support or disrupt global economic balance, we will need to channel our tradition of self-reliance in a more risk-conscious manner.

That means either assigning the appropriate level of staffing and expertise to mission critical operations or electing to outsource the function to a qualified, reputable third party.  Now that the consequences of inaccurate, incomplete or just plain sloppy loan files can be costly and/or business ending, the value of a “do-it-yourself” approach is dubious.

Of course, outsourcing is not new to independent mortgage bankers, but the motivation and ROI have broadened.  Today, outsourcing not only delivers quick market entry and scalability, but also ensures regulatory compliance, risk management and more confident investor relationships. 

All you need to do is scan the headlines of the mortgage, financial services and business media to know that change, regulation and re-regulation are going to be the norm for the foreseeable future. Perhaps you’ve thought about outsourcing before but did not see a clear advantage or need the advantage offered.  Should you reconsider outsourcing? Perhaps. Ask yourself whether your current operation is adequately staffed by experts and professionals who can respond to the current degree of change and loan level scrutiny.  What would happen if your organization had a 20 percent increase or a 20 percent decline in volume?  Would it be able to respond and remain self-supporting?  Would you have peace of mind?

Have you taken a hard look at the costs and lost business that accumulate around your current operation?  Do you have an informed understanding of your outsource alternatives?  Have you talked with your peers who have been relying on outsourcing?

If you plan to be in Atlanta the week of October 24 – 27 and would like to discuss any of these questions or just learn more about the advantage outsourcing can give your business, drop me an email and let’s get together:  Ruth.Lee@TitanLendersCorp.com.

Ruth Lee

I found this question on an industry networking site.  This question was posited by an assistant vice president for an international (BPO) business process outsourcing firm… I assume looking to penetrate mortgage market outsourcing.  The reason it is notable – it highlights the reality that we work in an industry that requires specific knowledge, with process management that cannot be addressed in a few questions or in a couple of weeks of “mortgage boot camp.”  Our industry vocabulary is contextual…  Therefore, this question doesn’t make any sense… I know what he is asking…but as stated – it has to be interpreted….Refinances can be first mortgages and a refinance, by definition, is a new loan.  I believe he is asking purchase/refinance – but that isn’t what he asked.

“Please explain the key similarities and differences in the process between First Mortgage Originations(new loans) and refinance loans.”

Mary Kladde

Today’s MBA Newslink contained the following…

Offshoring, Outsourcing Poised for Growth
NEW ORLEANS–The outsourcing and offshoring sectors, in both captive and vendor models, appear ready for even more business as it matures beyond its primary existence in India. Despite inherent operational challenges, it may be the best time for the mortgage industry to consider its adoption.

I agree with the outsourcing. Numerous stories have reported lately that lenders aren’t able to maintain back office fulfillment and operations in house due to reduced originations and the continued need to cut operating costs. However, offshore outsourcing in an industry that is inherently complex, indigenous to the US economy and is currently undergoing nearly unprecedented regulatory investigation and changes is not the answer. Even if the industry weren’t in its current state of flux and licking the wounds that resulted from the recent bust of inflated appraisals, adjustable rates and reduced lending quality, any outsourcing of sensitive personal and financial data offshore just isn’t smart, even in a stable industry.

I have outlined my argument in support of domestic outsourcing – outsourcing these sensitive and crucial back office operations to experienced, onshore mortgage industry professionals – several times, including here and on my business web site here.

I believe, if the mortgage industry new what was good for it and was really as concerned with quality in lending as they should be, the headlines should start reading “Onshoring, Outsourcing Poised for Growth.”

Mary Kladde

“Focus on your core competencies and utilize the core competencies of others to your advantage.”

Lenders, like any other savvy business professionals, should focus on their core competencies and not risk the quality of their pipelines by banking on limited experience or trying to manage multiple mortgage operations and processes in-house if that is not their area of expertise. This is a tried and true business strategy, as is the outsourcing of operations that fall outside of a business’ core competencies.

In the mortgage industry, outsourcing makes sense for small lenders who do not have the resources to keep certain processes or experts in house. However, lenders should take care to outsource the processing of this sensitive information to industry professionals who have the experience to manage different loan products and aspects of the lending process, and who have current and up to date knowledge of industry standards, regulations, and compliance issues that affect their area of expertise. In addition, they also usually have the latest and greatest software and technology needed to manage their field of expertise.

Although some large lenders have tried offshore outsourcing for some aspects of the loan cycle, with the recent market problems, increasing regulatory focus on the lending process and an industry wide call for “a return to quality”, lenders need to reassess whether or not saving money on the front end by offshore outsourcing is worth the costs and risks on the back end.

Some things just don’t outsource well offshore – mortgage loans are one of those things. Consider:

1. The U.S. mortgage industry is a creature indigenous and unique to the U.S. economy:

It is at every point and in some way intersecting with state and federal guidelines and regulatory bodies throughout the entire loan process. Everything about the mortgage industry in the US would seem to require some level of knowledge about the specific state and federal provisions covering lending practice oversight. When considering outsourcing, your focus needs to be on ensuring that the outsource provider selected cannot only understand US state and federal requirements, but must also be able to communicate any needed actions in an efficient and expedient manner.

2. Language barriers are hard enough without adding industry specific details that are consistently changing.

Mortgage lending and all the surrounding rules and regulations are difficult enough to explain and describe in our own native tongue with a general understanding of and the right to homeownership. Foreign data processors are fundamentally at a disadvantage trying to understand how it all works in a second language.

It is very difficult for those having very little, if any, concept of owning their own home to explain the benefits and requirements of a mortgage.

3. Is exporting sensitive consumer and financial data overseas a wise practice?

United States consumers have been plagued by identity theft at staggering rates over the last several years. Distributing sensitive information into areas not completely under the control of stringent domestic regulations and US oversight “can be” an unnecessary risk.

Lending processes should be outsourced to domestic specialists with the experience, industry specific knowledge, and domestic expertise necessary to ensure that quality is maintained throughout the life of a loan.

Outsource? Yes. But never sacrifice quality to save money on the front end. It is far more costly to clean it up on the back end, as our current situation clearly demonstrates.