Mortgage Vendor News & Views
Scott Roller founded 3W Partners LLC and is Co-Founder of Vendor Surf LLC (www.VendorSurf.com), each dedicated to revolutionizing sourcing of vendors in the mortgage and credit union ecosystems. The companies monitor and report on the service provider market to provide participants what they need to excel in today’s market. Mortgage Vendor News & Views is a monthly feature in MBA NewsLink.)
In this ongoing article series, we report on mortgage and credit union vendor marketplace events and trends, and we then share our viewpoints. The primary theme today is the growth of a few vendors, especially in innovation and technology. We also address the age-old question of “Is bigger better?”
The Rise of Multi-Line Vendors
As we perpetually monitor the service provider marketplace, there is a trend whereby many vendors are actively getting bigger, adding more products, services and/or technologies. Much of this is accomplished by a very robust merger and acquisition (M&A) environment, which always seems to experience an uptick when refi booms dwindle.
The growth of some of the service providers that we will profile later in this article may surprise you, not only in how much they have grown, but also in the added capabilities and accolades, in financial services and within other verticals. Impressive stuff!
While many vendors may have already charted this course purely for strategic growth reasons, a significant number of vendors have been prompted by the increased costs of third-party oversight and governance for lenders and servicers, whom sometimes think “bigger is better.” Such costs have been unprecedented and are simply not sustainable.
The costs heavily impact vendors too. They have had to add staff and infrastructure to manage all of the added client expectations, audits, scorecards and similar. In the end, the collective costs to the industry get passed along to consumers in rates and fees.
Combating the Cost of Compliance
I frequently get engaged in conversations with people asking how we got to this point. The answer:
In a post-mortem review of the 2008 mortgage market (and global economy) collapse, it was deemed that a substantial lack of vendor oversight was part of the problem. The degree of financial institution culpability ranged from simply not being engaged at all with their vendors, to repeatedly turning a blind eye to some highly egregious vendor acts. Consumers were caught in the middle without much recourse.
Many blamed the Office of the Comptroller of Currency, the primary regulator of the day, for being ‘asleep at the wheel’ in not enforcing more vendor oversight. That, along with a newly minted regulator being launched, the Consumer Financial Protection Bureau, led to each of them having something to prove in this space, as did other regulatory bodies like the Federal Deposit Insurance Corp. and the Federal Reserve Board. Vendor oversight requirements across the board went into hyperdrive–and have remained there ever since.
For nearly a decade now, ever since passage of the Dodd-Frank Act and birth of the CFPB, many of the largest lenders and servicers have begun looking more to multi-line vendors, those offering a wide variety of products and services. In many cases, it cost almost the same to manage a vendor offering a single service (mono-line) as it does the super-sized vendors. Every relationship requires contracts, due diligence, audits, scorecards, issue resolution and follow-up and more. Some believe that favorable economies of scale exist when executing these duties across a single vendor with numerous services.
Seen These Vendors Lately?
Below we highlight four vendors that have really grown their menu of products, services and technologies. They are brands you likely know very well, but I suspect you will be as surprised as I was to learn what they are doing, how they are doing it and for whom they are doing it for. Each have clearly been keenly focused on investing in this space.
When reviewing the mortgage industry’s vendor search engine, these four vendors alone account for nearly 60 individual listings. Here is a sampling: (not all-inclusive)
|Audit, Analytics, QC, Due Diligence||MSR Valuation and Sales|
|Blockchain, Artificial Intel & Robotics||Outsourcing|
|Compliance, Fraud & Risk||Portfolio Valuation & Risk Analysis|
|Governance, Risk, Compliance (GRC)||Property Preservation & Management|
|Information Security||Servicing (performing & default)|
|Insurance||Short Sale Processing|
|Lead Generation||Technology Services|
|Loan Fulfillment & Components||Trading Platforms & TOOLS|
|Loan Origination Systems||Verification Services|
Let’s take a look at the four vendors (in alphabetical order) –
A leading global professional services company on five continents with more than 50 delivery centers, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. It had nearly $40B in 2018 revenue, with $8.24B (20%) within financial services where Accenture employs more than 50,000 professionals. Roughly 3,000 of them are decked against technology solutions, which includes analytics, Blockchain, Artificial Intelligence and Robotic Process Automation (RPA).
Recognized as a leader in the Everest Group’s 2019 Mortgage Business Process Outsourcing Services PEAK Matrix Assessment, Accenture leverages proprietary tools and licensed technologies to increase efficiency, quality and productivity.
As a global organization, Accenture provides an entire suite of services within Mortgage, inclusive of Accenture Credit Services (Mortgage BPO), Mortgage Cadence (LOS), and Accenture Consulting. Accenture provides end-to-end services from loan setup through funding, servicing, and default while focused on driving cycle time, satisfaction, compliance and profitability.
Here are a few particularly impressive Accenture notables:
–Analytics embedded in operations for near real-time business insights–to drive planning and execution, strategically and operationally
–Award winning fulfillment training and certification, and a methodology for a continual flow of resources to reduce recruitment time
–Demonstrated success at scale, whether it be closing 100K+ HELOCS closed per year, issuing 75K+ credit decisions per year, or delivering customer delight scores of 85+%
–SAFE Act licenses in 50 states plus D.C. and is certified as an originator and servicer (arduous and expensive… showing the commitment to this space)
Lastly, all of Accenture’s Top-30 financial services clients have stayed with them for more than a decade. That is nothing short of remarkable. Think about all of the client executive regime changes that happen on a frequent basis, where it is common for the new leadership team to make major changes, including hiring vendors they have had success with in the past, at the peril of incumbents. Just surviving that would be something, yet Accenture continues to thrive.
Simply NOT your ordinary Credit Reporting Agency or verifications vendor. Credit Plus has long been a pioneer in delivering innovative platforms and exceptional service. In my travels, their name comes up occasionally, and without fail, the discussion always leads to comments made about Credit Plus’ amazing and consistent service. Since this seems to be quite well-known across the industry, I want to focus more on the continuous innovation coming out of Credit Plus.
Here is a brief snapshot of how Credit Plus not only understands the market, but how they aspire to drive it (and do a darn fine job). They were one of the first to:
–offer web-based credit reporting (1998)
–introduce more robust and targeted lead generation tools, and began distributing disclosure letters on behalf of lenders (2005)
–introduce AVM-Lite–a tool that quickly allows a lender to assess a home’s value to determine if it is worth moving ahead with a more expensive appraisal report (2009)
–introduce Lost Sales Analysis, a tool to help lenders gain a better understanding of the applicants they’ve lost, who they lost them to and why (2017)
–introduce CloseCAPTURE, a suite of products designed to help reduce loan fallout by lowering credit report costs, qualifying more applicants with credit score issues, preventing approved applicants from going elsewhere, finding more quality leads and retaining your portfolio
Other things we like about Credit Plus–it is clearly poised to deliver in these three trending areas: 1) Multi-line provider: Constantly adding essential products and services, as well as great bundling of them, including its ‘Credit Plus Collection,” an extensive suite of verifications for every stage of the mortgage process; 2) Embracing digital: Credit Plus continues to ensure they are easy to do business with, including their API integrations to drive a customized user experience, when used with verifications they can facilitate the exploration of different ordering mechanisms and work-flow options to achieve scalability. 3) Non-QM market: Lenders must be doubly certain on the ability-to-repay! Credit Plus has responded with Reps and Warranties coverage for its robust set of verification services–so the more insured Credit Plus products you buy, the safer you are and the more certain you can be. With the proper verifications at your disposal, you can more confidently fund non-QM loans.
Here is another powerful well-known brand that has continuously expanded its presence and capabilities via multiple legal entities and affiliates, such as: Incenter, Incenter Mortgage Advisors, Incenter Technology, Boston National Title, Campus Door, Agents National Title Insurance Company and Incenter Appraisal Management.
Not only do they have a very diverse set of services and solutions, Incenter is also quite diverse geographically. As a Blackstone Group portfolio company with offices in Charlotte, Dallas, Denver, Irvine, New York, Manila, Philippines, Saint Paul and Tampa, Incenter employs about 1,000 professionals.
Long prominent and a leader in the secondary markets space, via IMA, Incenter has made some impressive gains in other segments of the mortgage ecosystem, including the following (to name a few):
–Acquisition of Boston National Title. Wise move. BNT founder, John Keratsis, is incredibly passionate about clients and borrowers. His mentality will, no doubt, infect everyone around him, bolstering an already strong Incenter reputation
–A white-label consumer and student lending LOS platform with a mobile responsive application, real-time credit decisioning and configurable pricing and terms
–Incenter Technology offers a managed cybersecurity program for companies who want a best-in-class and comprehensive cybersecurity solution at a fixed cost; No licenses, contracts, separate billing, admin fees or related costs
–Some other services: Loan Fulfillment & Component; Insurance (Lender Placed, Hazard and Title Underwriting);
Several of the Incenter and affiliate services are available onshore and/or offshore, as you desire.
Sutherland Mortgage Services
If you are of the mindset that Sutherland is just an outsource company, grab another cup of coffee and be prepared to be enlightened–just as I was when re-engaging with them after a few years. They refer to themselves as, “A process transformation company that rethinks and rebuilds processes for the digital age…”
Sutherland (Corporate) has 38,000 employees in 60 locations, with 1,500 mortgage professionals (Mortgage Services, HQ in U.S.), providing end-to-end mortgage services from loan application through closing, funding, post-close, audit and servicing. They have made some major strides on the technology side, with much of the innovation generated from their ‘Sutherland Labs’ located in San Francisco and London. Here are some examples:
–Artificial Intelligence: Developed conversational AI platforms for Disney, Google and Uber
–Technology Platforms & IT Services: To realize the Digital vision and transform business execution with break-through automation while advancing legacy environments
–Analytics: Synthesize multiple data sources, leverage leading edge analytic tools, and build advanced models to discover, predict, and prescribe opportunities for optimized outcomes and measurable impact
As I have done with other vendor profiles herein, I am going to only focus on some of the services and platforms, those you may not know about. In the case of Sutherland, here are some more highlights of how they can help transform clients:
–Journey Mapping: Map your borrower’s journey through your entire enterprise, identifying strengths, issues and opportunities along the way
–Design thinking & Consulting: Researchers, strategists, designers, technologists, and consultants help organizations develop, design, and deliver bold new solutions for satisfying customer experiences and outcomes that matter
–Process Transformation Services: With an integrated platform that drives performance improvement across multiple dimensions for elevated business execution
Beyond all of the above-referenced transformative services and solutions Sutherland delivers across many industries, you can still always count on them to drive improvement and value in core mortgage functions, such as: Lead Generation; Loan Fulfillment & Component; Servicing (performing & default); Audit, Analytics, QC, Due Diligence; Outsourcing; Consulting; Contact Center Services and more.
By now, maybe you are a little surprised by the avalanche of offerings from just these four service providers. They all have appeared to invest wisely, each expanding their footprints, especially in technology and innovation. Expect to see more of the same from them.
Whether or not you believe that ‘bigger is better’ when it comes to vendor selection, as I sometimes hear, keep these things in mind:
A) Yes, there is potential overall cost reduction on vendor oversight and governance
B) But, select based upon capability, track record and good old-fashioned due diligence above all else. Performance is paramount
C) In many cases, vendor size is not a primary procurement component. This is especially true in highly specialized vendors
D) Do you get the sense you will be a major priority to vendor(s) you are considering?
E) You get what you pay for. Be prudent on price, but not cheap, because a lowest-price strategy will rarely work in your favor in the long run.
Thanks for reading.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)