Executive Summary
With near zero interest rates in 2020, the sudden surge of mortgage applications tested the lenders’ operational efficiency. Not surprisingly the lenders who had invested in redefining their antiquated processes and technologies were able to increase their throughput and profitability. Lenders who were struggling can adopt an agile operating model which is unique to their company to have more satisfied customers, lower costs and faster cycle times. We make a case for building and implementing custom agile operating model.
COVID-19 and Operational Agility
With 22 million (and counting) jobs lost to the COVID-19 pandemic and Federal Reserve interest rates at near-zero numbers, a huge number of Americans are seeking to refinance and lower their monthly payments. With many lenders lagging behind, experiencing increased closing times under these conditions, digital capabilities, technological infrastructure, and an adaptable business culture have emerged the defining features of lenders that will thrive through the pandemic and beyond. The agility of these lenders enables them to keep ahead of the constantly shifting market and regulatory atmosphere, rapidly-advancing hardware and software, huge amounts of data to process and interpret, and the absolute necessity to get the absolute most out of their staff. Applying a tailor-fit agile methodology to a lender’s strategy, structure, process, and technology enables enhanced customer care through digital technology, unit cost reduction through operational optimization, and easy operational compliance with both regulatory demands and customer needs.
Case for Agile Strategy
Agile strategy stresses adaptability, proactivity and efficiency. Agile lenders are able to outcompete their rivals by quickly seizing every opportunity to add value. This reactivity to data permeates the firm: using data processing to preempt customer preferences and market shifts, restructuring teams to enable clearer goals, better prioritization and greater focus, proactive training of loan officers to stay ahead of changes in regulation, and constant assessment and iteration of the entire model. The agile lender is results- and performance-oriented and consequently very well aware of its health, and progress towards its strategic goals, and the extent to which iteration is giving way to meaningful evolution. This means automatically managed, customizable and easy-to-read data views on the backend: unobstructed visibility into the business process and real-time, on-demand information on every level of operation. This business intelligence enables performance-oriented improvement efforts: monitoring pull through rates alongside customer service initiatives to maximize quality of service, using application approval and denial analysis to optimize the loan pipeline, and avoidance of abandoned loans through constant real-time analysis of loan statuses, allowing for automated intervention into the approval process, securing forms, documents and signatures from borrowers, as well as detecting errors within the application and review pipelines. Just as a pilot relies on her instrument panel to fly safely, agile lender has an array of key performance indicators which it monitors to assess its performance and inform its decisions. The structure of an agile lender is defined by the self-managing team. To the greatest extent possible, each decision-making structure and process in the business is simplified and automated, but the human drive of the organization is preserved through constant and robust communication within and amongst a set of highly specialized and autonomous teams. Working practices are just as much focused on increasing worker satisfaction and happiness as they are increasing profitability. While leadership defines goals, teams figure out how to best utilize their talents to achieve those goals, how to organize labor and prioritize tasks, saving precious time, money and morale that ordinary lenders spend on wasteful management.
Agile lenders understand they can’t afford to waste manpower and capacity spending a month and a half in origination on the average loan, as ordinary lenders do. The agile lending process combines innovative product constructs (unified frontend for mobile and web, automated credit reporting, asset verification and underwriting, digitized document and loan management, etc.) with a digital end-to-end mortgage origination process to provide customers and employees with a system that is fast, easy and seamless. An omni-channel customer contact system integrated fully into the office to reduces human intervention and achieve resolutions more quickly while elevating the customer experience. This paperless system is simpler and more reliable than the competition. With each team understanding the technological system underlying and facilitating each facet of the business, they’re able to develop practices that use technology to provide speed and flexibility to the model, which itself uses technology to quickly and constantly evolve. APIs, computer programs that allow lenders to bundle the capabilities of multiple applications into one, offer the customer a fast and seamless buying process and more varied and interesting work for loan officers, machine learning systems help integrate origination and servicer application with compliance checks to both close loans faster and decrease human workload. With the agile lender being a leaner, faster and more flexible organization enjoying more satisfied customers, hugely faster throughput, lower costs, greater volume, greatly reduced turnaround and increased employee productivity, it’s clear that any lender that isn’t embracing agile is on borrowed time. They can’t, however, just decide one day to transition the firm to an agile operating model, every aspect of the organization and its process must be analyzed before a customized model and plan can come together, and be applied to the business.
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