Sunday, August 08, 2004

The Roadmap to Outsourcing
Creating a Roadmap
Today outsourcing of some type of business element should be on the roadmap to mortgage lending success. For example, the goal of reducing the cost of doing business across the mortgage banking enterprise may bring in representatives from the finance department, human resources, secondary marketing, servicing, operations and sales. Choosing between centralized and outsource tasks is an alignment issue for the entire team and its culture. Without matching business requirements or direction between the teams, there is no way to reach the organization's preferred business destination. Is it loan quality, new loan market share, customer retention or the need to speed up loans to market that is the driving force on the roadmap to success? The pressure may be in any one or a combination of these areas. Once determined, finding ways to outsource for optimum efficient cost reduction becomes more effective and much more embraced by the organization as a whole.
The Art of Building Small
Outsourcing tasks or outsourcing entire departments is not just for the large, rich and famous anymore, but also the astute business owner who plans to upsize the organization. For example, mortgage brokers who are at the threshold of full blown mortgage banker status have two basic choices:
1) Build the infrastructure like our grandfather did with all the departments fully staffed, needed equipment purchased with the costs of floor space to hold it all, and lest we forget, hiring executive talent with the appropriate mortgage expertise to execute and manage the plan. All this effort while trying to keep the core business of quality loan origination vibrant and growing.

2) Outsource as many of the necessary functions to obtain optimum expertise, control physical costs, defray management salaries and the expense of hundreds of excess people on payroll, thus opening up huge chucks of time and money to devote to the core business of quality loan origination volume.
Trends in Outsourcing
Technological requirements can be outsourced from the very simple contracting with a technology firm for repair of hardware or network maintenance to the more complex agreement with an ASP (Application Service Provider) that manages software issues for multi-site users. In this case, the data resides outside of the boundaries of the mortgage enterprise thus eliminating branch office VPN connections, saving dollars in technology labor to maintain networks and infrastructure, and cutting related travel costs. Loan officers, processors, and managers use laptops and desk computers to access their live data from anywhere at any time. Scottie Sharpe, President of Rosenvick, Inc. that produce AspireGold—an ASP that brings connectivity of loan processing systems like Point together with Goldmine—says, "Using outsourced technology like ours, not only can you open up a branch office in hours, but you will probably enjoy huge cost savings and reduction of administrative headaches due to reduced distributed hardware and software." In this type of outsourcing, mortgage lenders must choose wisely since their business intelligence will be Web optimized for ease of delivery, and issues such as security and scalability become extremely important.
Human Capital Management
Employees are one of the most expensive items on the general ledger so out- tasking in the human resources area can save huge dollars without skimping on the required outcomes. Such things as background investigations, reference checking, or security badging can be outsourced on an as needed basis. 401k plans and the service providers are easily outsourced and are usually much better at handling complex investment questions from current and former employees. Outsourcing the entire 401k plan administration also keeps the ERISA guidelines met and the IRS 5500 filed on time. Human Resource outsourcing can be expanded to include functions of payroll, including tax deposits, quarterly reports, and benefits administration. A quality human resource provider offers employee orientation, training, and counseling.
Loan Quality Control
The GSE requirement to have audit teams separate from production employees makes the QC area prime for outsourcing of the complete department. The outsourcer does the entire job from file selection to re-underwriting, legal review, and fraud assessment. The mortgage banker can share the outsourcer's QC reports with its warehouse bankers, investors and employees to gain full advantage of the outsourcing cost. Outsourcing of the quality control department is not only used to defray costs but as stated above it is a way of buying the crucial knowledge so essential to becoming and staying a superior mortgage banker.
Servicing Area
Complete outsourcing of the entire servicing function is a tried and true method via subservicers that have the infrastructure to handle thousand and thousands of loans. Servicing in this manner not only keeps costs down but keeps the details of regulations, payoffs and lien releases in check. Out-tasking in the servicing area is more of a trend today as the need for assignment processing and payment collection saves time and money for the servicing organization.
Sales Area
Marketing newsletter creation and mailing is easily outsourced, taking a significant burden from the sales team, while keeping the momentum of referrals in balance. After the sale follow-up mailers are also easily outsourced with the simplicity of a choreographed calendar. Outsourcers provide many types of marketing styles from which to choose and in some cases will allow only one origination company to use a marketing idea per certain geographical locations. Outsourcing doesn't mean losing company identity or creativeness.