MAR 7, 2012

Related White Papers

Part 3: Technological Considerations for Leading in the New Mortgage Marketplace
Read Part 2: Changing Lender Process in the name of Consumer Protection
Part 1: Leading in a Changing Mortgage Marketplace
Risky Business

What Mortgage Bankers Could Learn from Penguins


If there is any place on this planet that deals with risk in its most basic form, it is Antarctica. Having just returned from a visit there, I can assure you that the risks people and animals face there are truly a matter of life and death. A species’ ability to adapt means the difference between survival and extinction.

There have been animals in Antarctica for centuries, even in the face of climate changes, superior enemies and limited resources. While some animal species dwindle, others are thriving, such as one species of penguins—the Gentoo—that are multiplying rapidly while other species of penguins are diminishing in numbers.

So, what does this have to do with mortgage lending?  

For starters, one of the major challenges we as an industry are facing is survival. Like it or not, the mortgage industry is undergoing a change at least as cataclysmic to us as global warming is to the penguins of Antarctica. To the penguins whose lives are dependent on having ice water and frozen rocky berths on which to build their nests, the disappearance of ice shelves and the thawing of the earth means potential extinction. The Gentoo penguin is not only surviving, but thriving. They have adapted to the warming of the continent by building their nests in ground that is wet rather than frozen, whereas others have not been able to adjust and are laying fewer eggs, and fewer of the eggs that are laid are hatched. Adaptation is key.  

There’s a correlation here between penguins and mortgage lenders and their ability to adapt to new environments. Unfortunately, a number of lenders are resistant to change. For years the industry has focused on the investor, and selling loans to produce the return expected. Now, with a changing environment and an increased regulatory focus, we are being forced to focus instead on the consumer. And that means we have to adapt.

What will separate the surviving companies from those that become extinct? The lenders who recognize that this change is happening, and who really focus on what consumers need and expect, will be the survivors. They will be the ones that adapt to the changing electronic environment that consumers have integrated into their lives, including things like smart technology and social media communications. Those that continue to resist this change will soon find themselves left out in the cold with increasing consumer complaints and growing regulatory interference with their business.

Consider Quicken Loans. Their focus on satisfying consumers with their efficiency and consumer-friendly attitude has sky-rocketed them into one of the major lenders in the country.

Lenders and services must begin to identify necessary changes in operations and create measurements that will demonstrate to consumers and regulators alike that they have migrated toward satisfying the consumer, as well as the investor.  

Penguins, like lenders, may look alike to most of us, so only time will tell who adapted to change and who got stuck deliberating whether change was worthwhile.

Comments (2)
I talk to originators every day and I am still amazed at how resistant many are to using technology. Even when the technology is aimed at providing a better service to the consumer while still helping to drive revenue, many banks and credit unions resist. And forget about mortgage companies. They hate to break out of their comfort zone. Meanwhile, the originators that do embrace technology continue to move ahead. Yes, they can learn from penguins.
Posted by Wayne Howe | Friday, March 09 2012 at 12:27PM ET
The current focus on manufacturing quality in the loan origination process can only be solved with technology. Lenders have large staffs doing nothing but completing manual reviews on loan data to validate it prior to funding. This is both costly and ineffective at solving the problem. Lenders will be forced to change their internal processes in order to be able to limit repurchase risk and hope to make a profit.
Posted by WILLIAM CARY | Wednesday, March 14 2012 at 4:58PM ET
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