Process Improvement - By Tony Garritano


Interview with Mark Backonen, CEO of Class Appraisal

Wouldn't you love for the mortgage industry to be booming again? There is hope. Now is the
time to put together the ideas and the building blocks for future prosperity. But how do you
do that? I talked to experts in every sector of the mortgage space to find out exactly what
they would characterize as a game changer.First, I talked to Sharon Matthews, President and CEO at electronic collaboration vendor eLynx. She was very concerned about how the outside world sees the mortgage industry today. “In my opinion, that game changing event that we need is something that will restore trust with American borrowers and investors through accelerating collaborative partnerships between those representing different stages of the mortgage life cycle,” she said. “Together, mortgages and loan data can be processed securely with enhanced transparency and efficiency, while maintaining the integrity of the
data. This collective effort to restore trust, not only in the process, but in the data itself, will encourage lenders to lend, which rekindles big business opportunities through investment in mortgages.
This is mission critical to industry recovery and better serving our lender customers by bringing
borrowers back to the table.” But does technology that will help lenders attain this goal exist today?

 “In my opinion that game changing technology is available today,” answered Matthews. “It is transforming a document-centric approach to a data-centric, fully-transparent, all-electronic mortgage process, from end-to-end. These offerings need only be presented to consumers in the right light to speed recovery. The American consumer needs to be empowered through technology -- to be able to initiate the mortgage loan process and feel like the transaction is trusted and compliant. Until consumer trust and confidence is restored, we cannot move forward. Any step toward this goal will speed the recovery, even if it’s only by processing and fulfilling all mortgage documents electronically, after a face-to face interaction with a loan officer.” Certainly investors agree with Matthews or else we wouldn’t have UMDP. The idea is to mandate a more data-driven approach to mortgage lending.

The first guinea pig in this process was the appraisal sector. So, I thought I would turn my attention there next. I asked Mark Backonen, CEO at appraisal management company Class Appraisal, what he thought an industry game changer would be. He replied, “The industry needs to be able to bring interest rate relief to as many homeowners as possible nationwide. Everything we do is an effort to deliver a superior product with innovative workflow solutions to assist lenders in doing their job. We have built a team of lending executives and appraisal experts to dramatically change the service levels of the valuation industry. Reducing the monthly debt service for homeowners nationwide is critical to restoring the confidence in our housing market. “The game changing technology that we need,” he continued, “is to synchronize all of the data elements and be able to deliver them in an optimal format to all the parties involved in the lending decision. a la mode has been a valuable asset with the evolution of the Mercury Network. Class Appraisal evolved from a midsized appraisal management company to an industry leader within three years, in part from the hard work and dedication of the talented innovators at a la mode.”  So, technology vendors like a la mode and others, can certainly play a role if they are innovating to help their clients succeed in a very challenging market. No technology is more critical than the loan origination system. Lenders perceive their LOS as their life’s blood, their system of record. As a result, my next stop in trying to isolate a few game changers was to talk to an LOS vendor. In responding to my questions, Michael Detwiler, CEO at loan origination system company Mortgage Cadence, noted that, “Many trends we are seeing in this new year are hopeful signs of things to come. More depository institutions are forming relationships with mortgage companies, forging new business opportunities and ensuring greater strength and growth. In addition, despite signs that correspondent lending is losing
steam, Mortgage Cadence has signed multiple new clients looking to leverage our platform for exactly that purpose. “In terms of technology, the rules-based, preconfigured underwriting engines with built-in calculations and threshold validations to enforce specific investor or product-specific guideline requirements are critical. In today’s highly regulated mortgage marketplace, lenders and investors are acutely aware
of the risks associated with the origination of loans that do not meet strict compliance standards; specifically, the exposure to repurchase risk from investors and/or insurers, federal and state regulatory inquiries and audits, as well as the ever-present potential of civil litigation.”From there I started to look at docs. As the industry becomes more data driven, and rules oriented the role of docs will change. Docs will become simply an output vs. a static form. As I thought this part of the mortgage business through I talked to athleen
Mantych, Senior Marketing Director at document compliance and preparation company MRG Document Technologies. She concluded that, “Too many times when we hear the word game changing, people think it’s a magic bullet. Something that is going to radically change our lives and make our challenges instantly go away. The fact is that there already exists some great technology and business partners who have the solutions and insight to help speed up recovery.“Instead of looking for the next biggest event or the next new
technology toy on the market to change the business model once more, lenders should embrace the technology at hand. With the advent of new compliance regulations yet again bearing down on the industry, navigating this road map will be difficult at best. The focus during these challenging times should be on streamlining business practices and utilizing the best of technology and compliance partners that are already available to lenders. By lenders relying on their compliance and technology partners to support today’s market this will be the game changing event.”That got me thinking: Are lenders using existing technology to the fullest and if not, why not. So, I had a discussion about this with a lender and surprisingly his view of a game changer had little to do with technology at all. Brian Koss, an Executive Vice President of National Production at national lender Mortgage Network, Inc., noted, “The ability for those who are currently
meeting their obligation to refinance to near market rate would unleash money into the economy immediately. Those who are paying their bills even though they are upside down are confident enough to reinvest in their homes and community. So the President’s proposal in the State of the Union to allow refinancing of “ALL” mortgages is truly a step in the right direction.“The biggest obstacle to more refis or purchases is consistent
valuation,” he added. “There is a tremendous amount of inconsistencies in AVMs and with experienced appraisers. Creating a more accurate valuation system that doesn’t result in large amounts of red flags would instill confidence in lenders to make commitments timely and bring more deals to the table. Not having any valuation agreeing with the next one only adds doubt.”Certainly Koss is right. However, I came away thinking that if lenders don’t use the technology they have to achieve these goals everything falls flat. Perhaps the game changer is to get lenders to think more about their technology and how it can help them achieve their goals instead of focusing too much on various loan products and other minutia. Just a thought to ponder.