Brian Simons: The Modern Operating Model for Mortgage Lenders
Brian Simons is President of Maxwell, Denver. He has more than 25 years of experience in the mortgage industry, including capital markets, loan origination and default management. He joined Maxwell last May from Altavera Mortgage Services, which he founded and served as CEO.
Over the long term, most mortgage lenders share similar aims: they want to modernize their cost structure with technology, continue to deliver quality loans to their secondary partners or portfolios and create an enduring business. In the last five years, lenders have made great strides with significant investments in best-in-class borrower experiences, navigating a plethora of new digital tools, all while adeptly navigating the ups and downs of the market.
In my experience, unfortunately, most initiatives to cut costs and improve quality are short-lived or merely incremental. What I have found over my 25 years in this industry is that transformational growth only occurs when senior leadership commits itself to reevaluating their entire operating model.
We’ve seen some great success stories of this over the last decade. Just look at Guaranteed Rate’s move towards a pod structure and Quicken’s dedication to becoming a technology-first company. Even Main Street lenders, like American Mortgage Services Co. in Cincinnati, have successfully implemented upfront underwriting. However, for most lenders, the back office is a place where tweaks have only created incremental improvements over the last few decades. Justifiably, mortgage lenders wonder what capabilities to buy, which to build, and how to prioritize those capabilities in a resource-constrained environment. On top of that, lenders have to keep up with changing customer and regulator expectations, which are themselves evolving rapidly with new technology and market shocks, like COVID-19.
To achieve their long-term goals, lenders must take the leap to transform their business, embracing a modern operating model that will enable them to react with speed, manage costs, and skillfully navigate market cycles. There’s no doubt in my mind that reinventing your operating model has become the most strategic way to win in the mortgage market.
I joined Maxwell because we’re thinking about a modern operating model in two ways. First, we are investing in technology to deliver back office efficiencies, while reshaping the user experience into a positive and transparent process. Second, by leveraging embedded services at scale to hundreds of our small to midsize community lenders, we can improve their nimbleness in the market.
Our leadership as a digital mortgage platform has already had a tremendous impact in shortening time to close and increasing borrower satisfaction across our network of lenders. Now we see lenders taking advantage of our outsourced fulfillment platform as a major building block in their modern operating model. Outsourcing, or what we call “embedded services,” delivers more than cost-savings; it’s a strategic advantage. Our clients view embedded services as a means to increase competitive differentiation and productivity. I’m proud that it has become one of the key tools in their arsenal.
As I know from leading a large mortgage fulfillment operation, any lender who wants to consider embarking on the outsourcing journey should first understand its unique competitive advantage. Is it your customer relationships? Your ability to innovate, build and iterate technology? Manage and scale operations? In my experience, for most retail lenders, their unique competitive advantage is their sales machine — the culture and network of relationships that their loan officers have cultivated in each local market.
One reason lenders push back on the idea of outsourcing is the fear of ceding control of the back office to a partner. Viewing an outsourcing relationship as a loss of control fundamentally overlooks the fact that outsourcing allows management to focus control on the areas of differentiation that actually drive growth. The outsourcing partner gives your leaders the time to focus on growth. Ironically, outsourcing processing or underwriting to a specialist actually means those operations often function better.
When it comes to the borrower experience, the right outsourcing partner will integrate seamlessly into your operations and culture to the point where your customers won’t notice a difference. Your employees won’t either: the embedded nature of an outsourced team, particularly powered by the technology that your LOs and other team members use every day, will translate into much lower resistance from employees.
As the market becomes more saturated and, at this stage of the cycle, just plain busy, pressure will only grow to operate more efficiently — a particularly difficult challenge for small and midsize lenders. Even more than an efficiency driver, outsourcing is now a competitive, strategic tool that allows lenders to hone their differentiation and focus on growth while preparing themselves for the next market cycle. It’s time to position yourself for the future.
(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.)