Mike Sorohan
MBA NewsLink sat down with Michael Detwiler of Mortgage Cadence Inc., Denver. He oversees strategic planning for the overall operations of the company and is responsible for sales, marketing and managing the Mortgage Cadence product suite and additional service offerings. Prior to his role at Mortgage Cadence, he was president of 3t Systems. The company’s web site is http://www.mortgagecadence.com.

MBA NEWSLINK: Is there a balance between responsible compliance practices and burdensome compliance requirements?

MICHAEL DETWILER: Yes, there is a clear balance. Currently, there is a considerable amount of fear regarding compliance obligations due to the lack of understanding of the depth and breadth of the requirements. With education, comes the understanding that these obligations are not overwhelming and can be managed with some effort and ingenuity. These “burdensome” compliance requirements are rooted in the concepts of responsible lending, and there is no longer a “shortcut” or easy way to get around these obligations. Lenders must ensure that their borrowers understand the products, the process and their obligations as a borrower.

The balance between responsible compliance practices and burdensome compliance requirements starts with having a comprehensive understanding of what these requirements are, how they impact your business, and what needs to be done to meet these obligations. With any significant change, there is going to be some push back, but the lenders that have survived this credit crisis are smart and can find a way to succeed even with these additional compliance requirements.

NEWSLINK: What do you see as the main differences between a loan origination system (LOS) and an enterprise lending solution (ELS)?

DETWILER: This question is somewhat humorous to me as we literally wrote an article on this exact topic in 2005--the same year in which we also coined the term Enterprise Lending Solution, and then many of our competitors followed suit and began to market their products as enterprise lending solutions--you can find evidence of this by simply locating the first marketing materials and articles on ELS platforms.

A loan origination system is exactly that--a system with a sole purpose to originate a loan and manage that individual component of an operation. An ELS, on the other hand, very much resembles an Enterprise Resource Planning software application. It manufactures mortgages similar to the manufacturing of any other product; the loans we write require certain raw material (data) and suppliers (third-party service providers) that make up the supply chain required to build a mortgage.

An enterprise lending solution offers sophisticated, data-driven workflow automation powered by a rules engine and is further backed by imaging, Optical Character Recognition and dynamic document technologies. Essentially, an ELS is designed to provide an enterprise-wide set of automation tools that will streamline lending processes, squeeze costs out of operations and increase profitability.

NEWSLINK: You recently said you believed that the origination industry was in an “atmosphere of denial” regarding compliance requirements. Do you still feel that way?

DETWILER: Absolutely. Loan repurchases have increased more than 35 percent from Q4 2010 to Q1 2011. Since the Consumer Financial Protection Bureau assumed authority in July, it has become clear that relying on one-size-fits-all solutions with little to no compliance checks and support will no longer be acceptable. Unfortunately, some lenders are looking the other way instead of accepting the very real truth that their technology providers are not up to par. It is imperative that these companies turn to complete technology solutions with true compliance support in order to minimize their risk of buybacks and penalties.

NEWSLINK: With total mortgage originations predicted to fall to around $1 trillion this year, do you expect lenders and servicers to invest more--or less--in technology? And why should they invest more?

DETWILER: If lenders and servicers want to be in a position to increase market share when the industry picks back up, there is no better time than now to invest in technology. In order to stay ahead of their competition, lenders and servicers must look to a complete solution that eliminates manual and disparate systems. By doing so, they can begin to streamline processes in preparation for increased volume in the years to come. Also, as buybacks continue to be a concern, even one buyback can be disastrous for a lender with today’s razor-thin profits. Why take the risk with your current provider when you can save yourself the worry by switching to one that backs its services up with compliance xupport and a superior liability policy?

NEWSLINK: Some feel that document preparation and delivery solutions are becoming a commodity. Do you agree with this?

DETWILER: Due to the fact that many vendors have not evolved and merely offer a static forms library with no additional services, I can understand why, if you were only looking at those vendors, you might say they offer a commoditized solution. However, that is not the case. There are solutions capable of dynamically generating relevant document packages and populating each document with the extracted data. Over- and under-disclosure is a continued concern in the industry, and without a dynamic document solution, errors are likely to occur because you are relying on manual intervention as opposed to smart technology.

A true document preparation and delivery provider should also offer document management and risk mitigation services and truly “partner” with their customers by offering services outside of technology. Lenders and servicers need to recognize the major differences between vendors and shift their sights to a truly dynamic document provider capable of providing relevant and accurate packages the first time in addition to world-class customer service--becoming a lender’s risk mitigation arm.