Many lenders are seeing a significant increase in their fixed costs as they deal with reduced origination volumes on one hand and stepped up compliance and regulatory requirements on the other. Quite a few companies are adding compliance experts or entire compliance departments−not to mention new systems and technology−to make sure their origination teams are well-equipped to process and deliver a loan which complies with the qualified mortgage rule.
There are those which are augmenting their staff with temporary workers or contracting with specialized service providers that can provide flexible teams, compliance expertise and technology as originators look to manage these challenges effectively.
When initiating an engagement with a specialized service provider, lenders are often inclined to draw up stringent contracts. These agreements typically address items like response times, quality and accuracy measures, error rates and compliance tests, as well as reporting metrics. The question that begs to be addressed: do stringent contracts ensure quality output and lasting value?
Personally, I believe that delivering value to originators involves much more than simply meeting the terms of the contract.
So, what are the components of creating lasting value? I recommend lenders look for the following key things when contracting with a service provider:
A deep down understanding of the business' requirements - It is important for outsourced services providers to fully grasp the areas that need improvement and the metrics that the client is looking for. From the very start, that means the service provider’s team spends the time needed to completely understand the core business metrics that the client wants tracked and improved. The team also needs to identify the other operational factors that influence the clearly defined business metrics. This is over and above what is usually written in a contract. Next, the service provider should create a mechanism to unequivocally measure and improve these metrics.
Leveraging technology to provide niche solutions–The service provider should bring in the appropriate technology and invest in automation to address key pain areas identified in the overall process. They should create product offerings to address the pain areas faster and accurately. Doing so vastly improves process efficiency and addresses key issues with niche solutions.
Aligning with the organizational culture – The service provider should be able to understand and align with the lender’s organizational culture. That means the provider explicitly comprehends the client’s expectations in terms of reporting and communicating, as well as the true importance of the contract they have agreed upon. The provider also needs to make its leadership team accessible to the lender, with open channels of communication for any issues that may come up. Otherwise lenders may find they are only working with lower level staff with no access to the executive team. Having access to the service provider’s leadership team helps ensure that things that may not have been addressed expressly in the contracts get resolved quickly. All too often, lenders find out after the agreement has been signed that they’re not able to reach a provider’s executive staff, and their problems aren’t taken care of in a timely manner.
Making sure the entire team takes ownership for the success of the originator – Every member of the provider’s team should clearly understand the factors that define the lending client’s success. Each team member should be passionate about working for the client’s achievements. That means going above and beyond merely meeting the requirements of the contract. It requires a different attitude, but will enhance the overall value of the relationship. Providers should have an open environment in which superlative performances of their team members are celebrated to encourage superior service.
By looking for a service provider who takes the approach outlined in the steps above, lenders may just find that their expectations are consistently surpassed. Doing the extra homework can mean all the difference between finding a service provider that will deliver exceptional value, and one that merely does the minimum to meet the terms defined in the contract.
Alok Datta is the chief operating officer at SLK Global, a business process management firm, and is responsible for driving operational excellence and customer centricity across all the company’s business verticals.