|More to Mortgage Automation Than Technology
Executive defines automation at conference
September 29, 2004
|Remember the old children’s joke that asks: When is a door not a door? When it’s ajar. Fun play on words — okay, corny too — but more than that it’s a challenge for definition; clarity really.
Like technology. If we’ve heard that word once we’ve heard it a thousand times at industry conferences, in conversations with colleagues and in pronouncements from various companies declaring some great advance made possible by the “t” word.
But, Allan Redstone says don’t be fooled; technology is not automation. And, automation is what will ultimately separate successful mortgage companies from the also-rans in the years ahead.
Redstone, chairman of a lending automation systems firm, says “true automation” is the “critical issue” affecting mortgage bankers and will continue to hold that status in the future.
“Automation is a bottom line issue for our customers,” he says, noting that the mortgage industry has been “whipsawed by volume changes and cost structures that make it difficult to maintain a long-term competitive standing.”
At a client conference last week in Marco Island, Fla., Redstone delineated the differences between automation and technology. Automation, as he explained it, “reduces or eliminates the need for human touches during the process” — human touches that, he added, are expensive.
An example would be the popular and ubiquitous software “Microsoft Word. That is not automation,” Redstone declared. Although it delivers “tremendous productivity benefits, it doesn’t eliminate the need for human beings to be involved in the process,” he noted.
Another example can be found in document imaging.
“Scanning in documents to eliminate paper, but then having loan processors or underwriters look at those images on a screen — that’s technology,” Redstone said. True automation, on the other hand, would be “scanning those documents and then having a computer automatically do something with them, like clearing a condition or stipulation and ordering a service.
Drilling down further into the human resource issue, the executive estimated that 70% to 80% of loan origination costs are people related. For that reason, “touchless” rather than “paperless” is the “only real, key long-term strategic issue for mortgage bankers,” according to Redstone.
“I can’t stress this enough,” he said, recommending that bankers eliminate “human touches. Fewer people, means “faster, cheaper and more ability for mortgage bankers to adjust to changing situations,” he said.
Another key component to automation is measuring what’s happening. Redstone recommended “continuous feedback and instantaneous action to change how things work.”
He cited the “80/20 rule,” which suggests spending money to automate 80% of the process and dealing manually with the remaining 20%. “You can’t automate everything on day one,” he acknowledged. Perhaps the group that can benefit first is portfolio lenders who have fewer external requirements. There, he figured, human resource costs could be driven below the 25-30% level.
In its lending automation products, Redstone said, his company has built, and will continue to build, atop a “firm backbone of an automation platform.”
He said customers will demand a more streamlined process from mortgage companies. “In the last few years, consumers have become much more educated about the mortgage process. As a result, he said, “they’ll demand a faster and more streamlined process that will require lenders to embrace automation.”
Neil J. Morse is a communications consultant and independent writer working exclusively in the mortgage finance industry. He resides in Newtown, Conn. and may be reached by e-mail at: firstname.lastname@example.org
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