5 Ways High Performing Lenders Set Themselves Apart
Uncovering the clues to people, process & technology.
People + Process + Technology
Implementing new software, any software, is challenging. No matter the quality of the platform nor the strength of the team responsible for standing it up, getting to go live is daunting. Anyone who has worked this process knows how many issues arise when new systems are introduced and either integrated into existing workflows or used as the impetus for modernizing traditional business processes. It’s akin to asking your mechanic to work on your car while you’re driving it.
Fortunately the days of overly-challenging implementations are, for the most part, behind us. There are now implementation teams in our industry that would make a space agency proud. Well-trained, experienced and efficient technology experts that know what it takes to get new software up and running quickly. I work with such a team.
The timeframes for new technology implementation have shrunk as well. What would have taken a year or more just a few years ago can be done today in a matter of months or even weeks, in the case of LOS add-ons. New software architectures, a robust ecosystem of industry APIs, MISMO data standards and systems built from the ground up for compatibility have streamlined this traditionally difficult work.
There are still many issues to work through, but, for the most part, adding new technology to a company’s tech stack no longer strikes fear into the heart of company management the way it once did. This is a not a bad time to be working as an IT executive in the mortgage industry.
But that’s not to say that new technology comes without serious challenges. Beyond managing the switch to a new platform, which has been the subject of entire books, there is another challenge that we see many lenders struggle with as they bring new technologies into their companies. It doesn’t manifest itself during implementation nor at go-live. It happens after that. I call it the second day dilemma.
What happens after you go live
The day the new software goes into production is a great day. Everyone on both the lender and the vendor side have been working very hard, preparing for every possible problem that may occur and configuring the system to operate optimally.
By this time, the staff has been trained on the new tools, the workflows have been adjusted to take advantage of the power the new platform offers and management knows what metrics it expects to track that will demonstrate to all stakeholders that the new technology was worth the cost. The switch is flipped and the new technology lights up. It’s a day for celebration.
This is normally when we expect to read the line, “And they all lived happily ever after.” But they rarely do, at least that’s the way it often looks at first. It’s the day two dilemma: now that we have this great new tool, what steps do we take to maximize our investment in it?
There is an easy answer, of course: Do what you did before only better, cheaper or faster (or some combination of these). Yet this doesn’t always happen, and given mortgage performance trends of the past five years, appears to happen rarely.
High performance lending operations are built and maintained through constant attention to, and manipulation of, three key variables: people, process and technology.
Technology gets the most attention lately; there’s never been so much of it focused on the mortgage industry, nor has its promise been so great.
Yet the industry faces a real conundrum: even with all the new technologies available, and the consumer adoption of digital mortgage at an all-time high, borrower satisfaction is low and declining. Please don’t misunderstand, new technologies are essential. They make dealing with the industry’s ever-growing complexity possible. Without them, a digital borrower experience would still be a myth and full compliance would approach the realm of impossibility.
But what this conundrum points out is the technology variable must be manipulated along with the people and process variables. Day One work is and has to be heavily focused on technology. Day Two work, on the other hand, has to be heavily focused on people and process and can’t be ignored. This is a lesson we’ve learned from high performance lenders in our annual, long-running benchmarking study.
Year after year, the nation’s best performing lenders find a way to make their technology investments pay large dividends. Given that before the system ever gets switched on, these lenders have gone to the trouble and expense of finding the right tool, vetting the vendor, negotiating the agreement, working with the installation team and managing the change internally, this is no small feat.
In my experience, there are three ways many lenders respond to the second day dilemma that can only be described as mistakes. There are also some things that the industry’s best performers do on the second day that can provide some guidance.
Three flawed decisions for the second day
The first flawed decision we see lenders make on the second day is to employ their new software platform to enable the same old workflow imposed by the limitations of their old platform. This is the quickest way to throw better, cheaper and faster right out the window.
You invested in the new software to enable better execution, leading to higher productivity, which is the key to higher profitability. Why, then, would you not task your new technology with taking your production to a higher level?
The biggest reason this happens is humans. Staff will continue to operate exactly as they have operated in the past unless they are both trained and managed through the change. Training on the new system is not enough on its own. We used to call this problem lack of adoption. Today, we call it a significant waste of new technology spend.
The second flawed decision we often see is ignoring new functionality offered by the new platform because the staff has never used it before or because someone in legal wonders what might happen if something goes wrong. Fear can be a major demotivator, and when it comes to new automation that has not previously been tested by the company, it can lead to functionality being switched off permanently.
What a waste! While we must concede that the uncertainty in the legal department is very real as they truly have no experience with the proposed workflows, it takes collaboration between business and legal to optimize workflows while mitigating risk so that efficiency is optimized. Once the functionality that management determined was necessary to reach company goals has been successfully installed, it falls to operations to make it work, but the foundation for that work is laid through collaboration with professional risk mitigation experts before the technology is ever chosen.
The third, and by far the most flawed decision lenders make on the second day is going back to market for new functionality that they don’t know is already built into the powerful new platform they just switched on. It seems like this would never happen, but it’s happening all the time.
One of the biggest reasons for this is the influx of new fintech companies entering the space. They have a Silicon Valley flair for marketing and package their tech tools like the next shiny object the lender must have if they hope to get the attention of the consumer. Given the success of their efforts to distract millions of consumers with simple apps involving flapping birds and crushable candies, it’s easy to see why some lenders fall under their spell.
But when the functionality promised by these firms is already built into the platform the lender has already invested in, it becomes wasteful — both in terms of time and money — to go back to market for more. These decisions are where profits are won and lost for the lender.
A better strategy for the second day
It’s natural to ask the question that leads to the second day dilemma. Every lender should work to get every bit of power out of the technology tools in which they invest. In our study of the best performers in the industry, we found that the nation’s top lenders respond to this question in three primary ways.
First, they work with their vendors, their internal management teams and even outside consultants to redesign their workflows to get the most benefit out of the new technologies. Of the three keys to high performance lending — people, process and technology — process is likely the most important. It can make good people great and make powerful technology sing.
Second, they work with their vendor to get the training they need to get their staff on board with the new functionality and up to speed on all of its capabilities so they can make the most use of them. Then, once the training has been delivered (and made available to employees for reinforcement), management actively manages through the change, ensuring a very high rate of adoption.
Finally, they measure the benefits they are receiving from the new technology by tracking the five critical KPIs that every mortgage loan originator should be tracking (Velocity, Borrower Share, Pull-Through, Productivity and Cost to Close).
Making the wrong decisions on the second day will cause the lender to leave money — and productivity — on the table. By working to get the most out of the powerful new platform the lender has already invested in is a much better strategy for getting the most long-term value out of the firm’s investment and for becoming one of the industry’s top performing lenders.
“We owe our members the most convenient, transparent and intuitive lending experience available on the market today — and Mortgage Cadence’s product suite makes this a reality for us.”
Senior Vice President of Lending, Tinker Financial Services