Friday, August 17, 2012

22nd Wedding Anniversary

Marriage is as much about commitment as it is about love, and I am proud to say that I will have been married to my wife 22 years next month. The song I am listening to, Morning Parade's "Headlights" is the song I will sing my wife on our 22nd anniversary. Our marriage, like many, has been one with great joys and great challenges. I can truly say that I love my wife as much today as I did when we first met. It has been said that a successful marriage requires falling in love many times, always with the same person, and I am fortunate enough to say this has been the case for my wife and I. Happy anniversary Christine!

Tuesday, August 14, 2012

The Future of Lending: Mortgage Manufacturing

Over the years, I have promoted the manufacturing of mortgages mindset. The need for consistent, repeatable processes has only been amplified with the strict regulations directly impacting lenders today. I invite you to read my article from August's issue of Mortgage Banking Magazine, and let me know your thoughts on this paradigm. What do lenders think of this mindset? What will it take for the industry to focus in on this trend and take steps towards this goal? Or are we already there? 

Adopting a New Paradigm for the Mortgage Lending Process
Mortgage Banking Magazine

In the beginning, the process involved in acquiring home financing was much simpler than it is today. There was a great deal of time and paper involved back then, but the deal hinged on a committee’s decision, usually based on personal knowledge of the borrower. 

Today, our process is far more complex--so much so that our business has for some time compared more favorably with that of a product manufacturer than a seller of financial instruments.

Technologists began viewing the lending process under a manufacturing paradigm over a decade ago when developing software. It was necessary to see the entire process as one contiguous whole in order to create tools that would integrate and connect processes quickly to move the deal through to the closing table. 

The rise of a multitude of loan products during the subprime lending boom weakened the manufacturing paradigm as each deal became a “story loan” and the enterprise was managed by exception instead of any fixed rule.

As the industry works to recover in the wake of the resulting bust, it is clear that the rigor imposed by a manufacturer’s view of the industry would have served everyone better.

Those that continue to resist a shift to that paradigm are receiving frequent and often harsh reminders of the potential repercussions. 

The recent bump in originations, for instance, showcased a potential risk to the lender enterprise--at least to those who view the enterprise through the lens of an industrialist. Capacity is the problem or, as a manufacturer would put it, there is a lack of transparency in the supply chain.

There are at least three good reasons for mortgage lenders to begin thinking about their operations in ways similar to manufacturers, and supply-chain management issues are first on the list. The others deal with customer relationship management (CRM) and regulatory compliance.

As long as bankers have been risk managers, they have had to deal with third parties to supply them with the information and data they use to make decisions. Because much of the risk in the deals mortgage lenders originated in the past was sold off, supply-chain management was largely a matter of getting all of the vendors together and letting them decide who would offer the lowest bid for meeting appropriate service-level agreements. Those days are over.

The Consumer Financial Protection Bureau (CFPB) has made it clear that lenders are ultimately responsible for every aspect of their third-party vendors’ businesses, right down to the methods they use to train their people. While all of the rules have not yet been written, the CFPB has already established fines for non-compliance--some as high as $1 million per day.

Lenders can no longer focus on the low-cost bidder if they hope to remain compliant. Add that to the fact that obtaining talent is now more expensive as there are fewer experienced workers to fill more demanding jobs, and supply-chain management becomes nearly as important in the banking enterprise as risk management.

The tools required to effectively recruit, vet, manage and score vendors in the mortgage space are very similar to those that manufacturers use to run their operations. The Quality Assurance/Quality Control (QA/QC) processes required are also nearly identical.

In the past, many have claimed that there is no true customer relationship management in the mortgage industry. In truth, there is precious little loyalty here, either on the part of borrowers or the loan officers that serve them. 

There is “a churn and burn” business mentality where borrowers matter when they’re in the buy zone and then disappear completely when they do not qualify for our programs. CRM tools that have been offered to lenders have largely been ignored.

Consumers also have had little interest in hearing from mortgage lenders when not in the market for a new loan--but that may be changing. As part of its mandate to serve and protect American consumers, the CFPB has launched an Office of Financial Education and hired an executive in charge of “financial empowerment.” With a better understanding of the process, borrowers might learn from the government a new set of standards that they may one day apply to all lenders. As it is, CFPB has already made it very simple for a consumer to file a complaint against a mortgage lender for any reason.

To mitigate the potential risk of borrower ill will and the resulting and as yet undefined penalties the CFPB may apply to it, lenders must approach CRM in a new manner--a methodical manner in which the borrower experience is treated as one more quality of the finished product (the loan), subject to the same quality controls applied to the rest of the lending process. The ultimate outcome will be significantly higher levels of customer service, resulting in increased consumer satisfaction.

But borrower sentiment is only one of many factors that CFPB will monitor in an effort to bring to life the letter of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In fact, there are so many rules that will come out of this law that lenders will have no choice but to consider compliance with each of them as one more discrete unit of resource that must be built into every loan that comes off the line. Managing the lending process by exception no longer makes any sense.

On the other hand, leveraging the mature tools our industry has developed to ensure quality, such as enterprise resource planning (ERP) and Six Sigma, can be an invaluable source of previously unknown benefit to lenders. Even as American manufacturers have made great strides in creating enterprises capable of zero-defect value creation, so will lenders learn to use the same tools to create mortgages that are fully compliant.

There are those looking to revolutionize the industry and who wholeheartedly believe in the concept of manufacturing mortgages. Dan Green, previous executive vice president of Prime Alliance Solutions Inc., Edina, Minnesota who assumed the position of executive vice president of marketing for Mortgage Cadence post-acquisition, said at the time of the acquisition, “I expect to quickly combine our already strong companies together and create one brand and extensive product suite that continues to revolutionize the lending landscape by taking a manufacturing approach to the process and creating zero-defect mortgages.” A strong statement, if I do say so myself.

Today, our industry finds itself in a position to start over. By learning from other industries and adopting a new paradigm for mortgage lending and servicing, we can guarantee success for consumers, regulators and our own industry.

Friday, August 3, 2012

Weekend Getaway: Sturgis Annual Rally

The weekend is upon us! As I have shared in previous posts, riding and my motorcycles are a huge passion of mine and my family’s. This weekend, I am headed up to Sturgis in South Dakota for a few days for the 72nd Annual Rally. Despite what people may associate with this event, it is not the drunken debacle everyone says it is. When we are there, we fill our time with going out to nice dinners, taking beautiful rides in the scenic Black Hills and surrounding Badlands, and attending several art openings, galleries, and book signings. My family and I go up there many times throughout the year as it is just a 350 mile ride from our home in Colorado. Between the open road and the unique landscape of Wyoming and South Dakota, there is no shortage of beautiful scenery; whether the day brings ominous clouds, wildlife, or the perfect riding weather, the serenity of this ride is hard to explain without experiencing firsthand.

I would highly recommend the journey up I-85 to the Black Hills if you ever get the chance. The Black Hills can be more beautiful than even the Rocky Mountains under the right circumstances. After a brief rain shower, everything seems to radiate an inner glow of deep, yet vibrant greens. There are so many great places to stop from antique shops to restaurants in the small towns sprinkled throughout the Hills on your way to Sturgis, and the people are extremely welcoming and always friendly. I can’t wait to get this weekend started, and I encourage you all to do something this weekend that really fulfills you and helps bring you back to the simple things in life!

Tuesday, July 24, 2012

Is Your Chair-Based Lifestyle Affecting Your Memory?

Working in the Software Development industry, it’s common to see developers reclining in their "souped-up” office chairs writing code that ultimately shapes the direction of our technology. Even our other departments are seen spending numerous hours sitting at their desks taking phone calls and typing up emails. However, with more research coming out about the negative impacts of living a “chair-based lifestyle”, it is time to consider making changes within the workplace. The impacts of sitting all day go deeper than the well-known physical damages that result from reduced metabolic rates. New research has shown that in addition to reduced energy levels, being sedentary for extended periods of time also reduces overall mental activity and memory. As a result, more companies are taking the first steps towards creating wellness programs for their employees.

I understand that there will always be some individuals that prefer sitting at their desk all day, and that is a choice they can make. However, others feel the negative impacts of sitting and, I believe this creates the potential for depression and unhappiness. I often hold “walk and talk” meetings with individuals from my team while walking outside whether with a destination in mind or just as a means of getting out of the office. In addition, as part of Mortgage Cadence’s new wellness program, we are currently testing out a treadmill desk that will allow employees to make phone calls via a headset while utilizing the desk to set their laptops on. If this proves to be successful, more will be phased in. My hope is that those who test the treadmills out will experience increased focus and a feeling of improved productivity, which will ultimately lead to a happier and healthier work environment. What do you think of these new treadmill desk, and what other changes do you think would help get people up and moving while at work?

Friday, July 20, 2012

What I'm Listening To Now

The Temper Trap - Trembling Hands
I was already planning on sharing the below song, but with the recent Aurora, Colorado shooting, it seems all the more relevant. My most heartfelt thoughts and prayers go out to all those impacted by the shooting. There is something to be gained in all of this darkness. When someone calls out for help, listen. Do what it takes to get them the help they need.

Currently touring the US. Check them out!

Thursday, July 19, 2012

Good News on Homes: Negative Equity Declining

The below was sent to me by Donald M. Miller with W.J. Bradley Mortgage Capital, LLC regarding the housing marketing. These new stats are definitely a positive sign of hopefully things to come.

According to a new report by Core logic, 11.4 million (or 23.7%) of all U.S. mortgaged residential properties are in “Negative Equity” (when a borrower owes more on their mortgage than their property is worth). 
These figures are down from 25.2% in Q4, 2011. The Negative Equity share is at its lowest in nearly three years. 

Here are some details from the report. This is good news, slight as it may be, but good news! 
  • Negative Equity declined to $691 billion in Q1, 2012, down from $742 billion in Q4, 2011. 
  • More than 700,000 households returned to positive equity in Q1, 2012. 
  • 2.3 million borrowers had less than 5% equity, i.e. near Negative Equity in the Q1, 2012. 
  • Negative Equity and near Negative Equity mortgages accounted for 28.5% of all residential properties in Q1, 2012. This is down from 30.1% in Q4, 2011. 
  • Nevada had the highest Negative Equity percentage with 61% of all mortgaged properties underwater.

Decline in home values or an increase in mortgage debt is the cause of increase in Negative Equity. Negative Equity improved, in large part, due to improvements in home price levels. Additionally, sell through of existing inventory is fast and furious as we enter mid-summer. 

Tuesday, July 17, 2012

Conclusion: The LOS vs ELS Debate

Over the past few months, I have addressed the long-standing debate between the LOS vs ELS. Is there a difference? Does a true ELS really exist? Does the LOS still have a place? The answer to all of these questions is yes. The LOS of today is not trying to be an ELS. It is a standard pre-configuration of the Enterprise Lending Solution and is generally geared for small to mid-size regional banks and credit unions looking to get up-and-running quickly with little configuration or customization. The ELS, on the other hand, is highly customizable and is designed for larger lenders with internal IT staff and development resources looking to create customized platforms that mirror their internal processes while leveraging extremely advanced technology. Both platforms are meant to increase throughput, decrease costs, and mitigate risk while maintaining compliance. 

Bigger is not always better.
Start off with technology that fits your current needs.
As we enter the halfway point of the year, it is more important for lenders to recognize their pain points and what is holding them back from success in this “Borrower’s Market”. By recognizing whether you have the internal resources to manage and customize an ELS or whether you want your vendor to take 100% of this on so you can focus on your business, you can begin to decide what is right for you – a loan origination solution or an enterprise lending solution. The line gets blurrier as the customization goes up, but it is crucial to know that you can choose to implement an LOS's best lending pre-configuration with plans to move up to an ELS. Getting live on a system is crucial in order to establish a foundation on which to build upon. In addition, setting expectations upfront with your new vendor and having a well-defined process led by an Internal Project Manager can help reduce the risk of over-customization that can hold back go-live. By knowing what is crucial to your business can help establish a strong system, leading to happier customers and the beginning of a long and prosperous partnership. 

So are you ready to make the switch? How long will you let the inefficiencies of antiquated systems play a detrimental role in your business? It’s amazing to me how many prospects come up to me complaining about how incredibly unhappy they are with the performance of their current platforms. I’ve been listening to what lenders have been saying in an effort to meet those needs unlike any other vendor in the mortgage technology space. It’s no secret that Mortgage Cadence’s ELS is second-to-none in the industry, and now, with our recent acquisition, we will now be able to offer more options to the credit unions and regional banks looking for an LOS. 

The process of switching to the LOS or ELS of today is easier than you may think, and it’s worth it to get rid of a system that is handcuffing you with inefficiencies. Why do you think so many lenders are willing to sacrifice performance and stay in an unhappy partnership with their current vendor? What’s holding people back?

Friday, June 29, 2012

Hot Rods and Car Shows

Recently, I have been able to take some time to travel for pleasure and digest everything that has taken place since the beginning of Spring. In taking some time to clear my mind and focus on one of my personal hobbies, I attended the 15th Colorado Nationals Good Guys Hot Rod and Custom Show in Loveland, Colorado earlier this month, which I have been a member of for many years now.

Along with my family, I brought along my ‘32 Highboy Roadster (see top photo), and even though it was not submitted for any awards, I was flagged down and given the Staff Choice Award. I have put a lot of heart into restoring this Roadster and was pleasantly surprised to win!

In addition to the Colorado show, my father and I packed up the trailer with my car and our motorcycles and headed out to Los Angeles for the 48th Annual L.A. Roadster Show.

Interestingly, the LA Roadster Show was formed in the early 50s when guys would stop at the original Big Boy drive-in restaurant located in Hollywood, ready to drag race. The club became official in 1957 and has now turned into a world-class swap meet. Over the course of 2 full days, we walked the several acres’ worth of motorcycles and hot rods. If you know what you’re looking for, you will find some absolutely amazing treasures for both motorcycle and hot rod enthusiasts alike.

At the end of it all, the time spent with friends and family allows me to recharge my batteries and get in a state of mind ready to tackle the coming weeks. What is your outlet when you want to take a break from work?

Friday, June 22, 2012

End of the Week Thoughts | Positive Forward Momentum

As I close out one of the busiest and most exciting weeks at Mortgage Cadence, I am very pleased at the reception we have received. The positive reaction from not only the media but also our customers has been overwhelming, and I am so glad they were able to see the ultimate vision of the acquisition. Continuing to travel down the path of a customer-centric approach to mortgage technology, this was a natural decision but was not without much consideration and due-diligence. Austin Kilgore wrote a well-written post discussing the distinct differences in approach between being privately-held like Mortgage Cadence and publicly-held like other entities doing business in the markets we serve. He really captured the essence of what I have been conveying all along; the decision was based largely on Mortgage Cadence and Monitor Clipper Partners’ belief in a customer-centric approach to lending. Ultimately, lenders appreciate technology providers geared towards customer service rather than forcing change through acquisition. I believe we have done just that through this transaction, and the decision to focus on the customer will ultimately lead to our continued profitability and success. 

Thursday, June 21, 2012

The Five R's of Superior Service

As I have grown Mortgage Cadence over the years and established our reputation as the leader in the mortgage technology industry, we have also worked hard to be the only company to offer a customer experience that is unmatched. Recently, I read an article on that highlights the five core values to an exceptional customer service experience. CEO of a fresh fruit delivery company, Chris Mittelstaedt, summed up the Five R's of Superior Customer Service well. Below are his five R's and my thoughts on each as they related to the mortgage technology business:

1. Be Respectful
There are times when customers may be upset and come off disrespectful, but no matter what, we must treat everyone equally and be receptive to their concerns and what they are trying to convey.

2. Be Responsive
Observe, listen, and understand your customer's problems before creating solutions. This has been key to our success and has allowed us to take our technology to the next level time and time again. 

3. Be Realistic
Set realistic expectations! This is crucial to a successful implementation and fundamental to any successful technology business. 

4. Be Responsible
When everyone takes ownership of their responsibilities and the way tasks are delegated and handed off, the doors to greater communication are inherently opened.

5. Be Remembered Positively
Be able to walk away from an interaction with your head held high. If you aren't able to do this, something went wrong in the above 4 R's. I strive to create a work environment that offers a positive culture to ensure that everything we do, and the interactions we have with customers, are left on a positive note.

Are there any other R's you think are crucial to not only a positive work environment but a positive customer experience that are not listed above? Post your thoughts in the comments!

Wednesday, June 20, 2012

Breaking News! Mortgage Cadence Acquires Prime Alliance

Recently, my blog posts have been few and far between, and you may be wondering where I've been. Over the past few months, I have been extremely busy travelling all over the country, meeting with customers and prospects, and working through potential acquisitions. We are in the midst of some very exciting times at Mortgage Cadence, and I’m excited to share with you the announcement of Mortgage Cadence acquiring Prime Alliance!

To give you a bit of background, in late 2010 Mortgage Cadence announced its relationship with Monitor Clipper Partners in an effort to support our growth plans and progress our offerings with the end goal of exceeding customer expectations.  I believe our relationship with Monitor Clipper has produced many tangible advancements in our overall business operations and in the solutions we provide our customers as we continue to strive to be the single best partner our clients work with. 

The reasons for the acquisition of Prime Alliance are very simple, I see the Prime Alliance team as very talented and their technology advanced.  We also share a vision and manufacturing mindset that will continue to automate the mortgage process resulting in our customers’ ability to confidently deliver 100% compliant products.  I believe that combining our organizations will greatly benefit our customers in the form of leading-edge solutions and providing world-class customer service; supported by the best and most experienced individuals in the mortgage lending space.

There are more exciting updates to come, but for now know that our commitment to the mortgage industry is as strong as ever, and I look forward to all the doors this will open!

Thursday, January 5, 2012

Totally ridiculous!!


Bank of America (BAC) must turn over excess funds from a record $335 million discrimination fine to community organizing groups. Critics say it's a "political backdoor" to subsidize Democrat-tied Acorn "clones."

The unusual mandate is buried in a Justice Department filing last month detailing settlement terms with the nation's largest bank. Prosecutors had alleged BofA's Countrywide Financial mortgage unit discriminated against minority homebuyers in the years leading up to the financial crisis.

Funds not passed out to alleged victims after two years will be handed out to "qualified" groups unconnected to the case that provide credit and housing counseling and similar services to blacks and Hispanics in areas where the discrimination allegedly occurred.

Prosecutors say the more than 200,000 alleged victims of Countrywide subprime loans reside chiefly in Chicago, Detroit, Los Angeles, Phoenix, Las Vegas, Denver, Houston, Dallas, Atlanta and Washington, D.C. Community organizing groups have large operations in these cities.

The order further states that recipients of such funds can't be tied to Bank of America. But they can include nonprofits that offer financial education, counseling and other aid related to mortgage programs to which BofA has "furnished substantial support."

In 2008, BofA donated $2 million to Acorn Housing Corp. of Chicago. It also gave $500,000 to the National Community Reinvestment Coalition of Washington and $300,000 to the National Urban League of New York.

The government must OK the selection of nonprofit groups benefiting from money left over from the $335 million interest-bearing escrow fund ‹ the largest U.S. residential fair-lending settlement ever.

Millions of dollars could end up at housing-rights groups that pressure banks to lower underwriting standards for uncreditworthy borrowers, critics say.

Justice is improperly using banks to subsidize Democratic-aligned groups, Heritage Foundation fellow Ernest Istook says.

"It's a shakedown," the former GOP Oklahoma congressman told IBD. "This is another political backdoor to use the government to channel money to your friends."

Under the settlement, BofA can not discuss details of the case. But in court papers, it denied all the discrimination charges and argued that it had pledged "substantial" sums to such community organizers before the crisis.

Countrywide's Other Bill
When BofA bought Countrywide in 2008, it committed a record $1.5 trillion to minority lending and urban reinvestment. The 10-year accord replaced the bank's half-finished $750 billion goal set in 2004, when it acquired Fleet Bank.

A key recipient of that earlier deal was Boston-based Neighborhood Assistance Corporation of America, certified by HUD to counsel delinquent borrowers.

NACA founder Bruce Marks has called mortgage standards requiring down payments and good credit "patronizing and racist." He has also demanded banks stop foreclosures on subprime homes.

In 2004, Marks threatened to blow up the BofA-Fleet deal by complaining to regulators that the banks were not making enough loans to minorities under the Community Reinvestment Act. The banks, in turn, pledged to make $6 billion in mortgages for borrowers with weak credit, along with other funding.

That year, U.S. banks promised a record $1.6 trillion in loan commitments to CRA lobbyists ‹ who, all told, have wrung $6.1 trillion in CRA agreements and commitments since the anti-redlining law was enacted in 1977.

Such accords also often include pledges to provide flexible terms, including lower down payments with a waiver of higher interest rates and fees to cover the added default risk. Also, banks typically agree to a second review of minority applicants with marginal credit scores.

Bank mergers had become "a major point of leverage ‹ and source of funding ‹ for community activist groups," said Competitive Enterprise Institute analyst Michelle Minton.

Nonprofits Exact Bank M&A Fees
Federal regulators must consider complaints from such groups in issuing CRA ratings and ruling on merger deals, giving banks a strong incentive to bow to their demands.

In the 1990s and early 2000s, one in five financial institutions were acquired in a merger or acquisition. But banking M&A has slowed, and so have banks' loan pledges to these nonprofits, from 2004's peak $1.6 trillion to just $12 billion in 2007. (Analysts say BofA-Countrywide's 2008 commitment of $1.5 trillion was an exception.)

BofA and Wells Fargo (WFC) are close to the 10% deposit cap. Each owns about 10% of U.S. deposits, which means they can't legally acquire other banks without divesting branches.

CRA lobbyists have expressed frustration with the lack of opportunities to hold banks "accountable."

"A dwindling number of mergers and acquisitions deflates the opportunity for consumers to comment on CRA ratings ," Greenlining Institute executive director Orson Aguilar recently testified.

Istook believes Attorney General Eric Holder is stepping in on their behalf to "extort" money from banks.

"They are creating a grant program, unsupervised by Congress, unconstrained by any government safeguards or accountability and with no guidelines to control or restrict the Department of Justice in giving or withholding approval of who gets the money," he said.

Last year, Justice ordered two AIG bank subsidiaries to finance such organizations as part of their punishment for allegedly discriminating against black borrowers. Under a March 2010 consent decree, Federal Savings Bank of Delaware and Wilmington Finance of Pennsylvania must pay a minimum of $1 million to "qualified organizations" that help "African-American borrowers."

While Justice would not provide a complete list of approved nonprofits, a spokeswoman told IBD that the National Urban League and Operation Hope are eligible for AIG settlement funding.

The National Urban League has aggressively opposed stricter credit standards. It argues that requiring 20% down payments "stifles homeownership for communities of color."

Operation Hope's founder, John Bryant, is a CRA activist and major Democratic donor who serves on President Obama's financial advisory council.

At least some of the Obama administration's record number of bank discrimination cases seem to be coming from the same types of community activists that Justice is ordering banks to financially support.

Justice last year sued Midwest BankCentre of St. Louis for failing to offer enough credit to the city's poor and African-American residents after the St. Louis Equal Housing and Community Reinvestment Alliance began writing complaints to federal regulators.

© 2012 Investor's Business Daily, Inc. All rights reserved. Investor's Business Daily, IBD and CAN SLIM and their corresponding logos are registered trademarks of Data Analysis Inc.