Michele Kryczkowski of Planet Home Lending: Diving in the Deep: How Operations Can Navigate Tight Margins

(Michele Kryczkowski is Senior Vice President Operations, Distributed Retail with Planet Home Lending LLC, Meriden, Conn. Views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views, policy or position of Planet Home Lending LLC.)

Companies that failed to leverage automation or vendor resources to improve operational efficiencies during 2020 and 2021 are likely viewing the margin compression in the current market with dread, especially if their volume is falling.

If you are one of them, two tactics, focus forums and shadowing, can increase the nimbleness of your lending platform. These, along with the application of follow-up technology, will increase your staff’s ability to serve borrowers consistently and more efficiently, despite changing volume and tightening margins.

We know change is coming. MBA’s recent forecast anticipates a 14% decline in 2021 for refinance originations, followed by a whopping 62% decrease to $860 billion in 2022 (that’s down from $2.26 trillion in 2021). The trade association projects, even with home purchase volume holding steady in the year ahead, overall mortgage originations will decline 33% in 2022.

If you are staffed up and need to run at 2020’s fat margins to make a profit, a roller-coaster drop in your profits may be ahead.

Regardless of what the future holds, streamlining processes to increase productivity, raise efficiency and reduce cycle times will ultimately improve the bottom line. That’s true during any economic climate, but especially during lean times.

Two approaches, focus forums and process deep-dives, provide meaningful insights into operational slow-downs. Follow up with the application of IT or outsourcing to operationalize insights to move your company into the best possible position to take advantage of the next market pivot.

Peer and Focus Forums

Peer and focus forums can deliver invaluable grassroots insights. These forums typically consist of one to two of your most efficient and effective production associates from each vertical in your lending line sharing candid feedback about their work process and technology.

Empower operations professionals who do the job every day to share what makes them efficient, as well as what frustrates or slows them down. When you gather your three best processors to brainstorm, they may reveal that they used the LOS differently at another company, or that they’re frustrated by having to click 20 times to enter the same information.

Remain focused on outcome and improvement. Encourage and reward transparency if you want honest feedback.

Once you have gathered insights, share and validate them with larger groups of people performing the task. The goal is for employees to walk away from these forums in agreement and with enough information to modify, implement or enhance a process or technology to make operations more effective and streamlined. 

Deep Dives and Side-by-Side Analyses Can Help

Deep dives and side-by-side analyses can also produce efficiency improvements. The time commitment to conduct deep dives is worth it because they reveal important insights into what works and what needs to be changed.

Your goal: Gain first-hand insight into each step in the originations process through side-by-side shadowing of staff – closers, funders, underwriters, loan originators and processors – as they complete their tasks.

Employees are the experts in what they do every day. Listen to their feedback and leverage their day-to-day experience to understand where pain points lie. Analyze what can be easily fixed or enhanced to increase the borrower experience, employee satisfaction, or better yet, both. Given COVID-19, your side-by-side analyses may be conducted remotely via screen-sharing for those who work from home.

How to begin

At first glance, shadowing can seem daunting and time-consuming. The cure? Focus on one specific pain point at a time. Each insight and solution combines to chip away overall inefficiency.

Even when focused on one pain point at a time, shadowing can be too large an undertaking for one operations team member to accomplish. Deep dives can be done in less time with a larger team, resulting in more complete findings and more exact next steps. Having more people involved means more bandwidth to talk to employees, from entry to senior-level titles, to pinpoint where concerns begin and end.

Involve Business Partners

Deep dives also benefit from external input. Asking business partners to assist can provide insight and new ideas to help you further streamline processes. Strong business partners bring knowledge from other lenders and new ideas for shaving costs.

Additionally, encourage sales partners to share pain points borrowers experience. Because they are on the front lines with borrowers, they can relay what is and what is not important from the consumer’s perspective. The conversations they hold every day with borrowers can uniquely inform a discussion about process improvement and customer experience.

Next, Apply Solutions

The information obtained from the deep dives and forum focus groups will likely lend itself to technology improvements. When you spot repetitive process slow-downs, talk to your technology vendors. They may have the capability to build applications to move those steps to full automation.

Let’s say your best processors or loan setup team say that going to an external USPS website to validate an address slows them down. You might deploy a bot to perform that task or perhaps an existing vendor that could automate it.

Outsourcing may be a solution if a team tells you they are frustrated by how much time they spend posting images of documents, like pay stubs, to your electronic repository. Or, you can look at adding imaging IT.

Your shadowing analysis may reveal a process that causes the dreaded “stare and compare” and takes an employee up to 30 minutes to complete. Implementing new technology to automate the process might reduce the manual stare and compare to just minutes.

Engagement Bonus

Both shadowing and focus forums can also pay employee engagement dividends. Focus forums, side-by-side analysis and process enhancement build morale and ownership because they engage and empower employees. They create a setting for mitigating problems before they start and make employees feel more comfortable voicing concerns and stressors openly.

When faced with margin compression, lenders should consider how focus forums, deep-dive analysis and follow-up technology can spark innovation and create efficiency in their processes.

Consistency and engagement are the key components here for success. Hosting forums on a routine basis will also help you stay up to date with technology, and the process changes prevalent within our industry.

Keeping teams engaged and focused on efficiency goals during the forum also assists in overall adoption when it comes time to implement the solution. What better way for any lender to drive employee adoption of a new process or technology than to have that employee who solutioned it unveil the idea and drive peer adoption!

(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 msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)