The Secrets to Succeeding as an Independent Loan Review Company

I manage a high-stakes business. At $11 trillion, the U.S. mortgage securities market is the third largest debt market in the world. The mortgage capital industry that backs it relies on my company to accurately review and grade mortgage loans prior to securitization. Time is precious, accuracy is paramount and domain knowledge is essential.

I love it.

Daily I ask myself why I do it. The “why” is what motivates me; it’s a powerful reminder of the stakes.

Over the years we have developed a formula for business success that our clients resonate with. This formula guides everything we do. I don’t mind tipping my hand to explain how we operate, because success lies in the execution, not the idea.

Quality in Three Dimensions

We all know the mortgage financing market is obsessed with quality. But in an industry where every product that comes off the assembly line is different; how do you assess and maintain it?

We look at quality in three dimensions: accuracy, which we define as compliance with regulatory and investor requirements; timeliness, defined by meeting or beating established deadlines or client expectations; and reliability, which is a measure of how consistently you deliver on accuracy and timeliness.

Accuracy and the Quest for Excellence

Nobody’s perfect, but that doesn’t mean you can’t strive for perfection. We aim to have better than 99% accuracy on every file we review—and we agonize over the 1%. We support this through a program of continual training and rigorous quality control. And we track our performance to identify areas where we need to improve.

I expect that we will train every associate as an underwriter, and that every underwriter becomes knowledgeable with the entire spectrum of loan products. So, training is nonstop in our organization—even for the experienced hands, who need to stay current on regulatory changes and emerging loan types.

In addition, we scrutinize every loan file at least twice for accuracy, and underwriters are not allowed to QC their own work. At least two sets of eyes are cast on every loan file. This challenges a tight production schedule, but our philosophy is “get it right,” not “get it done.”

Timeliness is Make or Break

Our clients are often under the gun to meet their own aggressive deadlines because, well… basis points hang in the balance. Time is a form of currency, and we are not insulated from this sense of urgency. With that said, urgency shapes our business, but it does not define us.

We leverage a global workforce enabled by production control automation that maintains a tight schedule, one where there are no pauses or lapses that create drag.

With a global workforce we can maintain around-the-clock production: as one production center ends its day, another begins theirs and picks up where production is left off. Automated workflow ensures that files are handed off in the proper order and to the right person.

Reliability Fosters Confidence

When it comes to meeting our obligations, the word “hope” is not in our vocabulary; nor should it be in that of our clients. Our associates should feel empowered by the technology we use, the training they’ve received and the support of other members of the team. Our clients should be confident that we’ll deliver on every commitment.

Culture is important, too. We maintain a work atmosphere that minimizes turnover and promotes and rewards achievement. A positive work environment is essential in times when the deadline pressure mounts.

Capacity Flexes to Meet Demand

While there is no such thing as limitless capacity, we have an infrastructure that can expand to accommodate fluctuations in order volume without sacrificing quality.

We cannot always prepare for projected volume changes. Our volume is not exclusively tied to origination activity or MSR sales; our fortunes are primarily driven by the MBS market, which is one of the most liquid fixed-income markets in the world. Accordingly, we must accommodate unexpected volumes or risk diminishing the loyalty of our clients.

We perform an intricate ballet when it comes to production. Our clients set the tempo while we cast the ensemble, and technology choreographs production flow. Our global workforce gives us added capacity and the ability to quickly staff to meet growing volumes. The performance occurs at a rapid, but disciplined pace.

Another essential element of our performance is our command of a wide variety of loan types. This helps us accommodate production flow when volumes peak. This is a function of training and experience; some of our senior underwriters have more than two decades in the business.

Technology Keeps the Machine in Motion

With all the buzz generated by artificial intelligence driving judgment and decision-making, the value of automation in production workflow is, in my estimation, understated.

In our environment, orders are automatically matched to skillsets and experience levels using a rules-based engine. The same engine automatically routes and reroutes files, so they don’t sit idle. Loan production is coordinated across global time zones, enabling around-the-clock operation. The days of paper-based files sitting in desktop inboxes are over.

We have real-time visibility into production volume and flow, which draws our attention to areas where production may lag.

Our technology focus is on streamlining workflow while automating routine tasks. This enables greater bandwidth among underwriters so they can focus on high-value, meaningful activities that involve evaluation and judgement.

A corollary benefit of automating production workflow is that it yields key performance indicators that are enormously helpful in identifying skillset shortages, bottlenecks, and performance issues. As the saying goes, what gets measured gets improved.

Will AI eventually permeate high-echelon activities, like loan file review? It’s likely, but not without considerable development and testing. The stakes are too high to rely solely on machine judgment. I hearken back to the early days of Automated Valuation Models, when Chief Appraisers were told that AVMs were accurate 95% of the time. “Show me the 5% that are inaccurate,” they would reply.

Our Performance Powers Our Brand

How we perform determines our brand reputation. It is established through consistent performance and burnished as we adapt to changing requirements and adopt modern production methods. Brand reputation is earned on every order; thus, we view it as a potentially fleeting thing that requires our continuous effort.

Confidence is both a core value and a key brand attribute. We maintain it through employee training and empowering technology, which enables us to face challenging conditions and unexpected volumes. If we manifest confidence, we reach our objectives. By extension our clients feel it as well, and our brand reputation grows.

Technology Powers Our Future

As a society we are immersed in change, to the point where it’s difficult to stay abreast of developments enabled by modern technology. But you ignore it at your peril. Discovering, understanding, and imagining how technology can improve your performance provides insurance against disruption. It is better to disrupt your own business than to be disrupted.

We approach modern technology with three precepts. First, we will be transparent in how we use technology, so our clients are comfortable with our approach. Second, we will apply technology that is suitable for business use, not for its sizzle value. Finally, technology must add value in the form of cost reductions, performance improvements or client convenience.

We have an exciting business, and these are exciting times. While we need to continue to modernize, our industry does not need to be reinvented. Traditional values like being client-centric and emphasizing excellence in execution still apply. We practice those daily.

The Secrets to Succeeding as an Independent Loan Review Company Sanjay2
Author: Sanjay Agnihotri
Sanjay Agnihotri is CEO and President of Opus CMC, and a visionary in driving innovative, profitable changes across banking and financial services.

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