Making the Case for Process Excellence and BPM in the Mortgage Industry

You probably don’t have to be told that the mortgage industry is surrounded by change. Discussions around this change tend to be limited to a specific cause-and-effect events, for example: 

1. Subprime meltdown leads to Dodd Frank Act, CFPB and stricter regulatory scheme;
2. More intense CFPB scrutiny leads to shift in institutional focus from sales to compliance;
3. Rising cost to originate a mortgage (as the result of increased regulation and enforcement) leads to new emphasis on eliminating cost on production side.

A larger trend has begun to emerge as a result of several of these specific pressures. The mortgage lending industry, which for so long has relied on its tried and true processes, systems and technologies, is quickly learning that the “proven” way of doing things is no longer good enough. Flexibility is becoming the norm as markets, regulatory frameworks and even the competition deviate from past cycles.  But is the industry moving fast enough, or thinking beyond the proverbial box? Recently, Gartner, Inc. conducted a survey of CIOs in March, 2017. The objective was as follows:

“…to understand the extent to which organizations are transforming their business through the use of advanced digital technologies. We were interested in understanding:

1. Which technologies are being adopted
2. How these technologies impact business outcomes
3. What the scope of depth of the impacts are
4. What kinds of work areas (managerial, administrative, transactional, customer facing, etc.) are being impacted.

We tested a hypothesis that organizations are not yet transforming their business with their digital technology investments. Rather, they are further automating existing operational work for additional efficiency gains and perhaps innovating existing areas.  Our findings broadly confirmed this hypothesis, but not without a few surprises along the way.” Gartner, Inc. Survey Analysis: Process-Centric Technologies Increase Revenue, Not Just Reduce Costs. (March 15, 2017)

Today, we see a wide disparity among mortgage lenders and real estate service providers. Some continue to chug along using an ad hoc system of technologies and processes, reacting as each new transformative event (such as ATR, TRID or HMDA) forces them to change. Others are basically upgrading the technology they use, attempting to do “what we’ve always done,” but just faster or more efficiently. Others have embraced this change, staffing up with Process Excellence executives and incorporating a Business Process Management (BPM) approach.  These businesses understand that the mortgage business is one that can be transformed for the better, and that an ad-hoc system or workaround simply isn’t acceptable anymore.

Finding No. 3. An Integrated View of Process That Cuts Across Organizational Boundaries Delivers Greater Benefits:

Our survey asked respondents to characterize the kinds of change that advanced technologies might bring to their business.  For process technologies, potential changes exist at three tiers: Incremental, Innovative and Transformative. A change to the business model can result from innovation or transformative changes. To reach such a goal, process-centric technologies would have to be implemented as part of a larger initiative that crosses organizational boundaries, such as innovating the customer experience or new product/service introduction. This type of implementation is rare; most organizations implement process-centric technologies within a single department, function or business unit. In other words, too often, their view of a process is restricted to a single business leader’s span of authority. Thus, they lack the cross-organizational breadth needed for more radical change.

Gartner, Inc. Survey Analysis: Process-Centric Technologies Increase Revenue, Not Just Reduce Costs. (March 15, 2017)

In the coming weeks and months on the Covius blog, we’ll take a deep dive into the case that all mortgage-related businesses should be looking at process improvement initiatives across the board.  We believe that it takes more than just technology to transform a business—it takes a mindset; a vision. We’ll examine the nature of these systems as well as the advantages they bring. Just as importantly, we’ll try to bring you up to speed if you’re not familiar with the concept.