The Outside In

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					    MORTECH Musings                               By J e f f L e b ow i t z

The Outside In
            e all are suffering from another    together physicists, aerospace engineers,      beginnings of a paradigm shift in mortgage
            recession in the mortgage           packaged-goods marketers and commer-           banking technology applications and a rad-
            industry. For seven years, the      cial bankers into a management team            ical change in how operations are organ-
housing and mortgage businesses were the        capable of an original vision of the busi-     ized. The industry spends roughly $3 bil-
center of growth and prosperity. Now they       ness and their companies. The bankers no       lion annually on technology and
are the drag on the “Goldilocks economy.”       longer ran the bank. And it may be time to     technology applications. For all of that
    Dog days? It is a time to retool and sim-   take the management of the mortgage            investment, we still are a disorganized
plify our operations. Now may be the opti-      company away from the mortgage                 industry. So many companies are operating
mal time to rationalize the all-too-many                                                       in ways too dissimilar from one another.
systems and self-propagating interfaces                                                           I marvel at the amount of time and

that choke off the data and information                                                        attention spent over the past four or five
channels within and among mortgage                                                             years on data and transaction standards
banks.                                                 ne place that we                        (MISMO® being part of it). The rising intel-
    There are so many new developments                                                         lectual and resource investment in stan-
to consider: point-of-sale and sales force          might look for an                          dards-setting calls our attention to the
automation systems that tie loan officers                                                      dis-integration of the mortgage banking
closer and more securely to their lenders.       unorthodox view of the                        value chain.
Pricing engines that can scale to match
changes in mortgage markets. Risk-based
                                                 mortgage business is in                       New vocabulary in
pricing almost reaching to loan level. Asset      the gathering of a new                       mortgage technology
sales with loan files never having to move.                                                    The new technologists have no stake in
Loan origination systems (LOSes) that cap-         breed of technology                         the traditional processes in mortgage
ture and compress 2- to 4-inch binders’                                                        banking. They bring with them a philoso-
worth of information. Intelligent workflow               vendors.                              phy of organizing the industry’s work in a
software that sets automatically the speed                                                     radically new way. There is a basic shared
of processing to the complexity of trans-                                                      set of values that underlies their thinking
actions.                                        bankers. The mortgage industry is ripe for     and their application of technologies. The
    To get to the fortified state we need in    a nontraditional approach to designing and     critical values are:
order to meet the future, we will seek the      running the organization of the future.            ● The implementation of a collabora-
advice and counsel of trusted advisers                                                         tive, shared processing platform;
whose vision extends beyond a single busi-      New technologists meet engrained                   ● The development of an information
ness cycle. We will look to the wisdom          behaviors                                      and transaction platform open to every
that comes from the market insights of a        One place that we might look for an            entity and person that takes a part in pro-
Walter Wriston, the former chairman who         unorthodox view of the mortgage busi-          ducing a closed loan; and
repositioned Citibank as the early leader in    ness is in the gathering of a new breed of         ● Distributing the benefit of technol-
multinational banking; that emanates from       technology vendors. They have founded          ogy to all users of the networked process-
the creativity of Richard Kovacevich, the       companies that are “not from here,” and        ing platform.
current chairman of Wells Fargo & Co.,          they are not bound by best practices from          Their values tear at the typical mort-
who used his background in package              a time gone by.                                gage technology and technology applica-
goods to turn Wells Fargo, the bank, into           There are a number of new entrants to      tions architected and implemented to
Wells Fargo the marketing organization; or      the mortgage industry whose founders           support a specific business function or a
that is born of the foresight of John Reed,     and management bring uncommon skills           single business channel (e.g., broker-
also a former chairman of Citibank, who         and a well-honed perspective on business       wholesale). There never has been a gener-
used his Massachusetts Institute of Tech-       and applied technology from worlds far         ally accepted suite of applications that
nology (MIT) connections to re-form Citi        from the mortgage industry. These new          tied in loan officer, underwriter, secondary
into a grand technology laboratory.             companies were formed and are run by           securities trader, service provider. Mort-
    To recognize and prepare for a radically    executives who are mathematicians, astro-      gage bankers built their organizations and
changing business environment, Wriston,         physicists, doctors of computer architec-      policies to the requirements found in
Kovacevich and Reed used similar, uncom-        ture and operations research (see sidebar).    separate organizational, operational and
mon organizational structures. They fused           These outsiders bring with them the        technology silos. Mortgage banking tools
                                                                                              M O R TG A G E B A N KI N G / A U G U S T 2 0 0 7   99
       MORTECH Musings                                        By J e f f L e b ow i t z

                                                                                                                    ogy (IT) model is a risk-prone operational
   N E W T E C H N O L O G I S T S I N T H E M O R T G A G E I N D U S T RY
                                                                                                                        To retool mortgage technology, the
       D O R A D O C O R P O R AT I O N (San Mateo, California)                                                     new technologists want to eradicate the
                E X E C U T I V E : Rob Carpenter, chief technology officer                                         practice of building applications dedicated
              E D U C AT I O N : Ph.D, systems architecture, University of Southern California (USC)                to a single business entity—such as whole-
      P R I O R C O M PA N Y : Sun Microsystems Inc. (Santa Clara, California)                                      sale or retail banking. Technology applied
                                                                                                                    in a fractured environment produces many
              EXECUTIVE:     Steve Poppe, senior vice president, customer delivery
                                                                                                                    common functions that are redundant
          E D U C AT I O N : Ph.D, operations research, University of California–Berkeley
                                                                                                                    within a single operation and throughout
      PRIOR   C O M PA N Y : McDonnell Douglas (St. Louis)
                                                                                                                    the industry.
                                                                                                                        An emerging IT model brought by the
       E L L I E M A E I N C . (Dublin, California)                                                                 new technologists is based on a network
                E X E C U T I V E : Limin Hu, chief technology officer                                              of well-defined work components that are
              E D U C AT I O N : Ph.D, electrical engineering and computer science, University of                   accessed and used by a web of entitled
                                    California–Berkeley                                                             users. The move from the old model of
      P R I O R C O M PA N Y : IBM/Watson Research Center (Yorktown Heights, New York)                              silo computing to the new open network
                                                                                                                    of capabilities may turn out to be a true
              EXECUTIVE:     Jonathan Corr, chief strategy officer
          E D U C AT I O N : MBA, Stanford University                                                               and legitimate paradigm shift in the mort-
      PRIOR   C O M PA N Y : PeopleSoft Inc. (Pleasanton, California)
                                                                                                                    gage business.
                                                                                                                        I have picked a sample of three compa-
                                                                                                                    nies that exhibit new technologist traits.
       X E T U S C O R P O R AT I O N (Mountain View, California)                                                   The three have shared philosophical begin-
                EXECUTIVE:       Jerome Coonen, co-founder                                                          nings, but have adopted varied solutions
              E D U C AT I O N : Ph.D, mathematics, University of California–Berkeley                               that are built on a networking platform.
      P R I O R C O M PA N Y : Apple Computer Inc. (Cupertino, California)                                          These three solutions to fragmented and
              EXECUTIVE:     Roy Martin, co-founder                                                                 complex computing in mortgage banking
          E D U C AT I O N : Master of science, Iowa State University                                               are built on the companies’ flagship tech-
      PRIOR   C O M PA N Y : Apple Computer Inc. (Cupertino, California)                                            nology platforms:
                                                                                                                        ● Collaboration: San Mateo, Califor-
                                                                                                                    nia–based Dorado Corporation’s Enterprise
and systems have been optimized to serve                    the message: “There are generous gains to               Lending System
individual parts of the business. Mortgage                  be had for all lenders and originators that                 ● One-click transaction: Dublin, Cali-
bankers rarely had the infrastructure, the                  adapt to the emerging collaborative pro-                fornia–based Ellie Mae Inc.’s ePASS®
necessary building blocks or a software                     cessing paradigm that will replace the frag-                ● Processing simultaneity: Mountain
platform to support multiple activities or                  mented technology we use today.”                        View, California–based Xetus Corporation’s
processes across organizations and busi-                       The discussion no longer is about soft-              XetusOnesm
ness channels effectively.                                  ware applications such as a loan origina-                   Dorado’s Enterprise Lending System is
   W i t h l e n d e r s we d d e d t o d i f f u s e       tion system. The traditional conception of              an environment of collaborative applica-
operations, the mortgage technology                         a mortgage banking operation is being                   tions and business assets. Enterprise Lend-
market became populated with myriad                         replaced by such notions as a networked                 ing System connects documents, practices
specialty-applications developers. Given                    lending environment; rich Internet applica-             and people—no matter their location.
the all-around fragmentation, the tradi-                    tions; dynamic process restructuring; cen-              Users on the network get a single view of a
tional technologists never have had the                     tral messaging; and rules-based, on-                    task, a loan or a file. Anyone entitled to
ability to manage integration across the                    demand         business      capabilities.              access the network is able to collaborate
borders of loan production, pipeline                        Conventional approaches to mortgage cal-                with anyone else. Trading partners also can
management, servicing or delinquency                        culations, files and forms are to be sub-               contribute work that is integrated with
management.                                                 sumed under networked collaborative                     internal workflow.
   Because of this fractionalization, mort-                 technology environments.                                    Ellie Mae’s ePASS is more of a classic
gage banks have had to manage dissimilar                                                                            electronic partner network. It was devel-
applications and deal with multiple ven-                    The new solutions                                       oped to rationalize business transactions
dor-specialists. The major problem with a                   O u r n ew te c h n o l o g i s t s s ay t h at t h e   between mortgage brokers and their sup-
disorganized market is that dispersed                       industry’s prevalent computing models                   pliers or trading partners. ePASS attempts
technology resources inhibit moderniza-                     and backbone infrastructure are both                    to offset the extreme fragmentation
tion of an industry when critically needed.                 complex and fragmented. In its current                  within the mortgage value chain and
   The new technologists come bearing                       state, the prevalent information technol-               tighten relationships among the economic
100     M O R TG A G E B A N KI N G / A U G U S T 2 0 0 7
players. Through ePASS, Ellie Mae relieves
the subscribers to develop and replicate
electronic interfaces.
   Xetus’ XetusOne is built around con-
ceptual roles of each user. Xetus develops
desktop or laptop software applications,
prefitted to the data and document needs
of “processing roles.” The applications run
in the PC browser, with each application
having access to a full relational database.
In XetusOne, every user works with a pro-
cessing view structured specifically around
roles made for them and projects they

         he outsider
 technologists have been
  heroic in bringing their
  own solutions to long-
 standing organizational,
    task and structural

have defined. Through the network, all
data are synchronized, simultaneously dis-
playing the work done by each role player.
   The outsider technologists have been
heroic in bringing their own solutions to
long-standing organizational, task and
structural inefficiencies. Their gift has
been to adapt to this industry innovative
mortgage technologies that are native to
industries other than mortgage banking.
Despite their creative approaches and
their unique skills, I think it is far from cer-
tain that their innovative actions will earn
a fair return for the new technologists.
Their influence has been good, and when
we look back, their work will have moved
the mortgage industry to an advanced
state of technology use.

Jeff Lebowitz is founder and principal of MORTECH
LLC, Guilford, Connecticut. He can be reached at Note: This column was sug-
gested by informal writings by Michael D’Antonio,
senior product manager for Dorado Corporation,
San Mateo, California.
                                                    M O R TG A G E B A N KI N G / A U G U S T 2 0 0 7   101

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