Are the challenges of a difficult market bringing business intelligence technology to the fore in mortgage lending?
Many think of BI software as an enterprise-level tool for mega-lenders to look for problems and extract more efficiency from their legacy systems.
Indeed, the large tech vendors — the IBMs, Oracles and SAPs — have all acquired BI firms to augment their technology offerings to top-tier banks and other major corporations.
PNC Bank's mortgage technology functionality, for example, is supported by business intelligence and reporting initiatives with technology from two vendors, Informatica and Oracle's Business Intelligence Enterprise Edition and database technologies.
BI aimed exclusively at the mortgage lending vertical is relatively new, introduced in recent years by companies like Intelli-Mine. But these vendors have struggled to price their offerings to deliver verifiable and replicable returns on investment for any but the largest lenders.
These days, there is nothing arcane about business intelligence technology. Creating BI tools can be done with Excel and a Web browser. The book “Microsoft Business Intelligence for Dummies” details how to create online analytical processing, or OLAP, tools for organizing data inside a relational database management system to deliver custom, or ad-hoc, reports.
The most familiar BI tools are dashboards and scorecards. A fully featured BI system includes ad hoc query and analysis and predictive analytics.
Hence, for example, OLAP is used to provide “actionable data” quickly for managing and altering mortgage origination processes in real time.
Given that lenders face a compliance requirement to track, time-stamp, document and archive every step in the origination and processing of a mortgage — and do it all as efficiently and cheaply as possible — it would stand to reason that business intelligence is the hottest product in mortgage technology today. It isn't.
One adoption hurdle is that many lenders think of a necessary “return to basics” in underwriting and processing means a retreat from technology and innovation. Another is that the regulatory climate is so complex that lenders are reluctant to put all their compliance eggs in any technology basket they don't already use.
Moreover, the collapse of so many of the subprime lenders that boasted leading-edge technology has created what many see as healthy skepticism about the value of mortgage technology, including BI.
“It's not so much about the technology,” said Ellie Mae's Jonathan Corr. Rather, he said. “The question is whether lenders run their businesses in a heads-up manner to avoid buybacks, unnecessary costs and regulatory infractions.”
He said Ellie Mae's Encompass loan origination system “has had powerful reporting capabilities for years.”
However, beyond reports, said Lloyd Booth, president and COO of Blueberry Systems, “Business intelligence incorporates key performance indicators that traditionally span a lender's loan data and general market information and provides feedback with regard to the lender's past KPIs, such as investor delivery first time fundable percentages for the prior month.”
Without adopting BI technology per se, the mortgage industry's general focus on managing risk proactively at the underwriting and processing level has been growing in recent years. Thus, a partnership between FICO and Core Logic has emerged to give broader access to multiscore credit-rating benchmarks.
A lingering barrier to BI adoption is reluctance from system administrators, particularly those at firms using older legacy LOS technologies that lack the robust relational database management systems of current offerings.
Advanced queries, called joins, require simultaneous access to separate tables and can impact the entire system, notes Len Tichy, Stratmor Group managing director for technology advisory services. Therefore, many system administrators lean toward restricting query access to a lender's system of record by scheduling intensive reporting in off hours. That excludes real-time functioning of BI systems in a production setting.
Traditional origination and servicing workflows are process driven and therefore, averse to the highly interactive online environment.
As mortgage technology moves from process-oriented to performance-oriented practices, said Tichy, business intelligence should be a key mover.
Having served as an advisor on some 125 LOS implementations, Tichy cautions that operating mortgage technology systems is never as simple as would-be users hope it will.
“Owning a dog and imagining owning a dog are not the same thing,” he said, noting that drawing information from one system to another has its perils. “Hitting the database with a stupid join can cause system failures,” he said. In up-to-date systems, indexing and parsing queries with system-recognizable tokens streamlines the process of making joined queries so as to avoid impacting the entire system.
BI Results for Mortgage Lending
The signature feature of robust BI systems, such as SAP Crystal Reports, is the ability to efficiently generate reports from a wide variety of data sources. As Tichy observes, Boulder, Colo.-based Motivity Solutions brings these capabilities to the mortgage vertical.
Employing a range of mapping and retrieval methods, its Movation business intelligence technology draws data from multiple databases, accounting, human resource, customer relationship management and help desk systems, among others. And Motivity presents the data in actionable form.
“They give lenders a system of reports as opposed to a mere collection of reports,” said Tichy.
BI consulting differs from other kinds of consulting “in the degree to which the object is to align goals with identifiable metrics,” said Motivity CEO Tyler Sherman. “It's crucial to deliver practical guidance as well as information.”
By offering an entire suite of reusable out-of-the-box components and tools, Motivity creates “a whole new category” of affordable BI services for the mortgage industry, said Tichy. Instead of charging a $75,000 upfront fee and correspondingly hefty monthly charges for a BI system, the price point for Movation users is extremely modest.
Movation documents the ROI it delivers, claiming a 400% cost reduction for one 150-employee company and immediate average increase in user operational efficiency of 2% to 5% for customers instituting management by exception.
By enabling data reconciliation from disparate systems, Movation claims that it enables a savings of $20 per loan for users of FHA Connection.
“We built the Movation platform to connect any and all disparate systems together — accounting, marketing, QC, to offer a holistic view across an organization,” Sherman said. “For every department, we have a box of metrics for industry best practices that a user can customize from there. Our system is like a mother ship that sits on top of all databases. We also can draw on disparate external systems, for benchmarking against peers.”
Sherman stressed that Movation does more than create reports. “BI is not reporting, it is not dashboard creation,” he said. “Our system bubbles up red flags on exceptions, locks expiring in two days, exceptions to expected cycle times. It lets you rate the quality of your pipeline and push the good loans through.”
“Instead of randomly selecting loans to QC, you use business intelligence to create a more efficient environment for all your loans,” Sherman continued.
“What we concentrate on is delivering information at the right time to the people who need to act on it.”
Too much time spent on monitoring and analysis can be a barrier to efficiency, said Sherman. To prevent “paralysis by analysis” among new users, Motivity counsels focusing on the “low-hanging fruit and obvious pain points” that a lender has.
“We advise a phased, controlled approach to solving the simple things first, especially if they don't already use some analytic tools now. It's not just a matter of suddenly turning your pipeline into a pie chart.”
Sherman said a key example of the way BI can create a demonstrable competitive advantage is in assessing a lender's sales team by analyzing and reconfiguring loan officer compensation.
“What truly is a good loan officer? The way we used to determine that was who brought in the most revenue. Now we can't do that,” he said.
“Now we look at cycle times, pull-through rates, how many underwriter touches it takes per loan officer, how many times files are resubmitted, how many DU or credit pulls it takes to create a funded loan,” and whether they are pricing the loan the way they should, Sherman said. “Your star revenue producers are not necessarily your most valuable loan officers.”
He said the compliance arena is where the most identifiable penalty for not employing business intelligence is seen.
“We are just starting to see the effects of increased compliance requirements,” Sherman said. “If you don't have a system in place that shows all the data points scrutinized in a forensic audit, you are at the mercy of what the investor tells you. An auditable XML data record is a defense against future buybacks.”
Boasting integrations with a dozen LOS providers serving lenders of all sizes, Motivity has a number of customers willing to testify to the benefits they receive from Movation.
With 185 branches in 50 states, Dallas-based Prime Lending has used Movation to swap out its LOS and to get a better handle on its nationwide pipeline of mortgages.
“We've never really measured our loan officers in the branches very well," said Prime Lending CIO Tim Elkins. “Movation gives us the ability to drill down to the loan officer level. Being able to get a lot of reports out of the box gave us a huge start from scratch.”
Motivity believes that its partnership with Eagan, Minn.-based AllRegs, which links the AllRegs content library and aggregated investor requirements with Motivity's business analytics technology, will showcase the practical value of business intelligence. Meanwhile, BI-useful tools are popping up in the systems of various vendors, including LOS providers.
BI Approach Expands
Oxford, Miss.-based FNC developed its Mortgage Business Intelligence product organically by virtue of the massive data it has created by servicing as a national provider to loan originators and servicers in all dimensions of mortgage collateral valuation.
“What brought us into the space was that requests we received from clients that told us they had no ways of benchmarking their performance in a down market against competitors,” said MBI product manager Kagan Coughlin.
FNC introduced MBI primarily to let banks compare their neighborhood market share and foreclosure rates with competitors. “MBI is an add-on to the value we already deliver,” Coughlin said. “They need to be FNC customers to use it.”
He said that MBI can be used to drill down to particular census track or expand out to forecast national trends. FNC claims that its depth of data and analytical make MBI a useful tool for law enforcement and investigative journalism, as well as property valuations.
Tichy singled out Blueberry's Relay platform. Primarily an LOS, Tichy said Relay also includes strong reporting capabilities.
Addressing the mortgage industry's burgeoning appetite for monitoring processes in a timely convenient way, Greenwood, Colo.-based Blueberry Systems now offers its RelayWatch Mobile to access information from blended sources and deliver it in an “actionable time frame” scalable to any hand-held device.
“The next level of BI is what I would consider indirect knowledge discovery,” said Booth, Blueberry's COO.
“Which would address lenders' questions, such as; 'Do I have the data and the system to analyze my loan portfolio to ascertain the common attributes of the files that are problematic and slow the process down? What are the most profitable loans that I should put continued emphasis on?'” Booth said.
He added this indirect knowledge discovery “requires first, an LOS that is committed to storing 100% of the data attributes that are part of the loan production process, including the iterative evolution of those elements. Second, a business analytic engine that can perform the discovery process outside the normal business intelligence performance indicator view of the data.”
That second requirement is the missing link for lenders. Most lenders still run their businesses “on gut feel,” said Sherman, “not even monitoring cycle times. But today, people are being audited or scored by their investors.”
“Mortgage lenders need to be more performance based and self-compliant. The mortgage industry needs to shift the mindset to a proactive culture, and business intelligence is a key component of that,” he said. “Knowing that the regulatory burden is unlikely to lessen in the foreseeable future, you know what you are being tracked and monitored for, so you should monitor yourself on those same metrics.”
