HOW TO ACHIEVE WORLD CLASS PERFORMANCE VIA OUTSOURCING
Outsourcing is a word that came to power in the re-engineering days of the mid ‘80s. To many in the mortgage banking field outsourcing looked like a fad or a ‘quick fix’ to assist the bottom line ‘until things are better’.
On the contrary, outsourcing itself has been around for ages. You yourself or at least your company may be performing the duties of an outsourcer and not even realize it. Any company with a postal machine processes the beginning flow of mail distribution whenever it runs an envelope through the Pitney Bowes machine. This example is probably one of the very few that have the outsource provider paying money each time they perform the duty for the requester. You will notice that even though you do the work for the USPS there is still no break on your postal rate. Most outsource relationships provide a much more equitable distribution of value. When an outsource provider takes on the out tasking both parties, the requester and the provider, expect and deserve value, efficiencies and return on investment.
Outsourcing requires increased attention to service level agreements from both parties so the contribution of the service provider’s work is not hampered by requester delays. Agreements should state what each party is to do, when they will do it, what terminology is agreed upon (to keep everyone speaking the same technical language) what price is agreed upon and what penalty, if any, for non-delivery. Insurance requirements should be stated along with any and all provisions for cancellation or termination of the agreement.
Mortgage bankers today have an increased exposure to consumer privacy issues and should get a detailed record of how the outsourcer will handle confidential information not only of their borrowers but that of the company.
Well planned, well managed outsourcing can streamline organizational strategy as management of the work effort gets underway in a non-bloated, ‘everyone knows their role’ kind of way. Good communication and excellent reports from the outsource provider answer the age-old question “What’s going on?” Outsourcer reports also enhance the ability for costing, tracking and implementation of training or change within the organization.
There is never a wrong or a right time to outsource a function. When business improvement in any direction mandates a consistent guide to strategic balance, outsourcing should be a part of the planning picture. Outsourcing should always provide best practices, efficiency, effectiveness, a better business return with lower operating costs or the idea should be scrapped.
Creating a roadmap to outsourcing
Today outsourcing of some type of business element should be on the roadmap to mortgage banking 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 enjoyable 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 choices:
- Build the infrastructure like grampa 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.
- 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.
Or
It makes sense to know exactly who is doing what for the growth of the company and those players, whether on payroll or outsource providers, must be experienced at the role instructed for them. A broker turning banker is not yet practiced at every aspect of mortgage banking but is definitely practiced at coordination and supervision of people and events. In most cases, managing several outsourcers is second nature for these executives and the growth of the company occurs where it is intended – in the bottom line instead of the expense line.
Trends in Outsourcing
Many mortgage-banking functions are being outsourced successfully today. The following list provides a quick sample of how outsourcing is used in the various mortgage-banking sectors.
Technology
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) who 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. Makers of 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 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 Q C 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 huge 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 varying types of marketing styles 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 loosing company identity or creativeness!
The Next New Thing
Mortgage bankers are continually up on their toes ready to dance to the next industry tune. Keeping in step can mean staying in business or sitting an opportunity out. When new ideas arise or funding requirements are made it is imperative to look for ways to implement them without stress or financial strain. For example, when correspondent lenders asked their correspondents to make the loan documents they deliver MERS ready it meant leaning on the document companies to provide what was needed. However, there are still internal needs to be ready to handle MERS integration such as the MERS QA review. Vice President of THE SRS GROUP, Colleen Laneer, says “Our MERS team goes into the lender to perform QA for the lender’s MERS QA plan as written. We’re in, we’re out and the job is done. No muss no fuss”.
At the end of the day, outsourcing relationships should provide a way to measure costs to production and quality to output. Asking probing questions to examine the internal tasks of the company will focus attention on areas that may be better left to someone else. Questions like: Are we as good in this area as we think we are? What should our performance targets be and are we making those targets? How did our competition achieve their superior market share? What are some new, fresh ways to think about what we are doing and how we are doing it? In this every changing global economy lenders must decide to recover profits, improve effectiveness, accelerate and better manage change and achieve world class performance via innovative outsource providers.
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