Unlike 2012’s theme of surviving rather than thriving, IDC Financial Insights’ December report, “Top 10 Predictions,” indicates 2013 to be a period of growth for the global financial services market.
While we’ve made great strides towards recovery, the new year will not come without its own set of challenges, particularly fueled by increased regulation.
With numerous new and pending rules around qualified mortgages, ability to pay, escrow accounting, loan officer compensation and so on, the current regulatory landscape has forced many lenders to make difficult decisions about changing technologies.
The dynamic and changing environment has made it exceptionally difficult for mortgage lenders to operate, and as a result, are looking to technology as the solution.
The downfall to new technology, however, is that it can feel much like paving the freeway during rush hour—it is very complicated, fraught with risk and susceptible to failure.
Let’s consider a few observations from industry experts.
In his book, “The Mythical Man-Month: Essays on Software Engineering,” Frederick P. Brooks Jr. revealed that:
- 47% of software is not delivered
- 29% of software was delivered but never used
- 19% of software was abandoned
- 3% of software was changed, then used
- 2% of software was used as delivered
Additionally, Stratmor Group’s Len Tichy and industry expert Tom Bascom noted in a well referenced article that 80% of all loan origination software fails to meet expectations, and 10% fail outright or is never installed.
That leaves only 10% successful, a significant and costly quandary.
So how can lenders avoid being flattened on the technology implementation freeway?
One answer is to think outside the box: mortgage bankers should consider project management or a PMO (program management office) structure within their organization. Think of this role working as a chief of staff to the firm’s CEO.
In a typical mortgage banking business, there are underwriters, processors, closers, shippers and a secondary person, among others, but rarely a position dedicated to project management. The ability to get things done across functions with the end state in mind requires an individual or small group of people who are not involved in the manufacturing flow of loans.
The lack of such roles has led to many failed implementations.
Creating an autonomous role apart from the business functions, however, is only half the battle. That role should focus not just on technology, but also on solving business problems and identifying business opportunities. Items like training, process redesign, and compliance are perfect areas for enhanced project management or a PMO.
In doing so, mortgage lenders can better address systems, processes and procedures related and unrelated to technology—key to the overall success of their business.