Not Wasting Any More Time

Not Wasting Any More Time Using Smart Process Re-Engineering to Slash Inefficiency

An interview with Nate Johnson, SLK Global Solutions By Brian Honea

A major part of inefficiency in mortgage operations typically involves wasted time and effort in many of the activities that lead up to the underwriting decision. Among the culprits are long cycle times between application receipt and starting processing, delays in notifying customers about additional document requirements, multiple file touches by underwriters and processors prior to the final decision, and inaccurate quality checks.

Nate Johnson, SVP Mortgage Business Head

with Dallas-based SLK Global Solutions, recently discussed smart process re-engineering with The MORTGAGE BANKER Magazine.

MBM: How does smart process re-engineering work? Nate Johnson: In retail lending, we start at the pre-underwriting support process. We will first engage with an originator and assess what is done manually and determine how far along they are in their digital transformation. This can range from paper files that are being done for portfolio loans to a fully digital loan fulfillment process. The key to re-engineering a process with as many moving parts as a mortgage workflow is to uncover what is a symptom and what is the disease. This will allow us to pinpoint where the inefficiencies are and where things bottleneck. Then we ask, how complete are the files you are receiving? Where along the workflow are you seeing stagnation? What can we automate, and will it bring any lift? What processes do we leave in-house, and what can we outsource? That can be everything from third-party ordering, fraud guard, appraisals to title, verifications, insurance, etc. Streamlining and automating checklists can provide an originator with a significant uplift. I was on a call yesterday with market leaders and quality control experts from all around the U.S. From lender to lender, and from correspondent buyer to correspondent buyer, checklists are not standardized. Everyone has their own checklist. So, in order to truly automate QC, you've got to build each client’s checklist individually. And let’s not forget that you've got to build it for each type of loan your client offers as well. Once these checklists are done, tracking compliance and rules changes for our clients is one of the keys to our solutions. In addition to successfully automating checklists, we have found that automating communication (emails, push notifications and texts to processors, underwriters, borrowers and loan officers) is important to providing a high level of clarity while reducing many of the manual correspondence originators traditionally had to fulfill. MBM: How does automating communication work to improve efficiency? Nate Johnson: I was an originator early in my career, back in the late 90’s, and owned a broker firm in the Houston area. Many of the borrower complaints involved not getting enough communication with their loan officer who, along with their loan assistant, are generally their single points of contact. Many originators today are finding that this continues to be the case. Being able to automate emails for every stipulation that is cleared or remains on a loan, as well as updates on the timetable for completion, push notifications, and dashboards that borrowers are able to access on their own, gives the borrower clarity throughout the loan process. Not only does this increase the customer experience, it also increases your employees' experience all well. Automating these processes will create efficiencies by taking a lot off their plates.

MBM: Can you give an example of how everything goes when perfect, everything's automated, and it's just the most efficient thing ever? And then the flip side of that when it’s not efficient and there's not that communication? Nate Johnson: Absolutely. Suppose you have implemented some automation and you have re-engineered the pre-underwriting portion of the life cycle of the loan. Then, let’s say, you ‘ve got an approved borrower for a purchase loan who has given you two paycheck stubs, their last two years’ tax returns, the last two years’ W2s, and the last three months of bank statements. The borrower has been given a preapproval letter from the originator and submits offers on several properties, but is unable to get an accepted contract for maybe three or four weeks. The borrower would be required to update some of the information that they have already provided.

If you are already anticipating this and doing it manually, you would have a loan assistant or processor communicating with

the borrower that this information is needed, which creates room for inefficiency. Performing these tasks manually can be cumbersome in a high-volume environment. On the other hand, if you’ve automated some of this communication, it reduces the risk that these updated materials would be missed. The system would generate the follow-up emails that you're sending to the borrower. You can also have the system recognize that the date of the last paycheck stub or bank statement is no longer valid and needs to be updated. Once you know that a certain amount of time has gone by where the oldest bank statement and the oldest bank paycheck information has expired and you can't use them anymore, it will automatically send an email to the loan officer’s assistant, the loan officer, and to the customer requesting that they send in their most recent paycheck stub or bank statement. Without these checks in place, the file could go to the underwriter's desk before it’s complete. This would create an underwriting ‘touch,’ when there is a stipulation where the borrower would have to provide the updated income information. Now, that unnecessary ‘touch’ does a lot of things. That one paycheck stub can almost ensure that the underwriter has to touch that file again. It could also be missed and create a stipulation prior to closing, during quality checks, or even when loans are being purchased. Keep in mind that efficiency, especially in underwriting, is primarily based on how many touches an underwriter has on a particular file. And those metrics, especially for large originators, are watched and analyzed closely. It can affect the grading of the underwriter or the processing group. It can also cause undesired friction

between the underwriter, the loan officer, and the loan officer’s assistant. The more the underwriter touches the file, the less efficient the process.

MBM: How big of a difference does it make in your bottom line? Nate Johnson: One of our key questions we ask our clients—and I'm sure other third-party service companies like us ask this, too—is, how do you decrease that amount of touches that an underwriter has? A winning value proposition consists of proven ways to do this for your clients without significant disruption. Underwriters are one of your most important and expensive resources. If you can increase the amount of loans they're able to review by just one a day, it will make a huge difference in your bottom line.

I can tell you that for one of our clients, we brought down their underwriting touches from six to two, which made their underwriters three times more efficient than they were before they signed on with us.

If you're able to automate a lot of the communication with the client and their borrowers, if you're able to automate checklists and auditing of files, wherever that is within the workflow and the life cycle of the loan, and if you pair that with best practices, for processing and fulfillment from pre-underwriting to closing, you're going to be much more efficient than you were before, and ultimately more competitive. I have been asked, “how do I produce a loan for the least amount of money?” The cost of originating alone has skyrocketed in the past decade due to increased resource costs, compliance, quality control measures, and overhead. Ultimately, to decrease the amount of money you spend on a loan, automation and process improvement is essential to making the originator more profitable.

Brian Honea is the managing editor of The MORTGAGE BANKER Magazine.

It’s the New NOW, Not the New NORMAL

By Thomas A. Barstow, NRMLA

As companies continue to operate through the fall and winter, they will need to monitor safety and legal issues while creating office plans that allow them to rebuild their company cultures. But the constant shifting of best practices based on new information means that businesses must remain adaptable. “As we know, we are in pretty uncharted territory,” says Shari G. Kleiner, an employment law attorney with Kleiner Feldman Plotkin PLLC in Washington, D.C. As businesses started to re-open in the summer, her goal was to help clients remove as many landmines as possible because employment law was not built to handle a pandemic. “This is a transition. This is not the new normal. This is not forever.”

The challenges create the “new now, not the new normal,” because this situation is different from the status quo, which will not be clear for a while, adds Kleiner, whose law practice focuses on associations and nonprofits, as well as startups. “It’s probably, and we hope, very different from

what it is going to be a year from now, and we hope what is going to be around a year from now is going to look a lot more like what it used to be,” Kleiner explains. “But let's just say at least until the end of this calendar year, and perhaps longer, we are in the new now, and this is the transition period.”

States began to slowly emerge from the pandemic in the late spring, allowing businesses to re-open as long as they were following guidelines to protect the public and their employees. But by late June and early July, flare-ups in states such as Texas, Arizona, and Florida led some governors to pull back, including closing bars to patrons in Texas. Such uncertainty has meant that businesses can only do their best to follow safety protocols and to stay informed about shifts in best practices, Kleiner and others note.

The oft-cited example is how the Centers for Disease Control and Prevention suggested in the early stages of the pandemic that face coverings were not needed to slow the spread of the virus, only to reverse course and strongly recommend that coverings be used when social distancing of six feet or more could not be maintained.

Those situations leave businesses without a “black letter law” to follow, but that they should be okay if they act reasonably, Kleiner says. That means following the CDC guidelines, while making sure that someone is put in charge of monitoring developments and adjusting for changes to current employment law. She points out that, in the U.S., people can sue anyone for just about anything, so liability always is a concern. But, in general, liability only would be an issue if there is unreasonable or egregious behavior.

Nationally, business groups, such as the National Federation of Independent Businesses (NFIB) have been seeking liability protections in Congress or on the state level, noting that surveys showed that 70 percent of small business owners were concerned about increases in claims as the states started to reopen. “It’s imperative that we establish protections from the threat of lawsuits that exploit the already damaging effects of COVID-19,” says Karen Harned, executive director of the NFIB Small Business Legal Center.

In the meantime, having solid policies in place should avoid nuisance suits, Kleiner says. A danger is having policies you say will be in place but then don’t follow through with them, such as telling workers you will require them to wear masks and then not enforcing the rule. “Be careful with that,” Kleiner says. “It only works if you are as good as what you say you are going to do.” Telecommuting was one of the first issues with which companies wrestled. Not all jobs are suited for remote work, so the goal was to develop guidance on how telecommuting would be assigned and then overlaying the issues from COVID-19. Companies have the right to assess how people did working from home during the crisis, explaining to them that their inability to perform all of the essential elements of their job remotely supports the requirement that they must return to the job site, Kleiner says.

The other way for companies to protect themselves is to do “homework,” she says. Somebody, either inside the company or an outside expert, needs to know the details and stay on top of them as the crisis continues. Imagine being sued, Kleiner says. And then imagine the defense. If you followed the CDC guidelines and put out policies on the guidelines that were distributed to the people who needed them, and then made sure that you followed up with compliance in the workplace, you can demonstrate that you acted reasonably.

The “tools” that already exist and that must be completely understood include current regulations in employment law, such as the Americans with Disabilities Act and the Family Medical and Leave Act. Congress has temporarily enhanced some laws to account for COVID-19, so that means that companies must have experts in place who understand the details of the existing laws, as well as the changes, Kleiner notes.

For example, people 40 and older already are protected from age discrimination for existing laws. With COVID-19 being particularly devastating to people 65 and older, companies need to be sensitive to how they handle issues with people in the older age groups. The ADA already had language in place about making accommodations for people with disabilities, so employers who were well-versed in

such practices will be in the best position to make reasonable decisions for workers who now request accommodations due to COVID-19. “Once you know that someone has a reason and is covered by ADA or in the framework of COVID, you should talk to the worker about the essentials of the job and whether they can do them, and if they can do them at home or they must be done at work,” Kleiner says.

Because adjustments will need to be made throughout the pandemic this fall and winter and until a vaccine is found, companies will need to re-evaluate policies as they go along, the experts say. The consensus among health officials is that a resurgence of the virus is expected in the colder months.

Kleiner and Rachel Platt, founder of the human resources company PLATTinum Consulting, note that rules about what you can and cannot ask an employee still are at play, which means carefully considering how you go about helping workers without violating employment laws.

While unemployment is hitting all-time highs, companies still are hiring, Kleiner notes. And the rules for job interviews still apply. While the updated regulations on family leave account for COVID-19related issues, you still can’t ask job candidates if they have children.

HELPING EMPLOYEES

Platt, whose company is based in Washington, D.C., says that human resources professionals often are dealing with gray areas in dealing with individuals, which means navigating situations that are not as clear as the law. People will continue to be worried about their own health and the health of loved ones, plus job security and the future of their organizations.

“In times of change, what I have learned is that employees just need to have their most basic questions answered first before they can process any of the larger issues,” she says. “They want to know the nitty-gritty.”

For example, some of the top decisions companies faced when going back to work in early summer included increased cleaning of restrooms and common areas, requirements for masks and sanitizers, and repurposing meeting rooms. While the CDC suggests that daily cleanings should be sufficient in an office, employee surveys overwhelmingly showed that workers wanted to routinely see cleaning crews and to have disinfectant around offices, Platt says.

“As an HR professional, I have never spent so much time talking about automatic flushing toilets, those hand-free toilet seat covers and soap dispensers,” she says.

But those are all things that people and companies had to consider. Companies continually must field questions, such as partitions, door-stop policies so no one has to touch door handles, and plans for how to effectively work with workers who are at higher risk. And company leaders should be aware of how their leadership style is affecting employees. Not only do workers have health concerns, but they are changing work routines, adjusting school routines for their children, and making other lifestyle changes that have them focusing on mental health. Communication will help them get through the changes, Platt says.

“If you are not doing it already, this is the time to enhance your two-way communications,” Platt asserts. “You should be proactively seeking input from your employees at every step during this process.”

For example, if compensation changes were made, make clear how long they will be in place or if there will be retroactive payments. Employees will have questions about bonuses and raises, especially as a quarter ends or the year comes to a close.

Be candid and transparent and provide frequent communication about what you can and cannot do. Admit what you don’t know, while leaving room to consider individual needs that match the company culture, Platt says. Experience has shown her that, if company leaders are not anticipating and answering questions, the rumor mills will start.

“In the absence of information, someone is going to make it up and spread the news,” Platt says, adding that such people usually do not have the best interest at heart for employees or companies. Leaders also should understand that workers are re-evaluating everything that they do because of the toll that COVID-19 has taken on their lives. They will be thinking about whether their values line up with the values of their companies, so companies should be sensitive to those dynamics as they set policies.

Long-term, the idea is to grow and prosper, which means you will need your best workers, Platt

says. Continue to evaluate policies to see if they should be adapted. For example, attendance policies should encourage people to stay home if they feel sick, she says. Similarly, companies also should think through vacation policies and what happens if not all time is used before an expiration date. More workers will continue to ask for flexibility, which might include split shifts, different days off, or working remotely some of the time.

“There is no right or wrong answer,” Platt says, adding that the decisions need to be based on company culture and needs. “Things are going to change. We are going to continue to evolve, so own that.” MBM

This article was originally published in the September/October 2020 issue of Reverse Mortgage Magazine, the official publication of the National Reverse Mortgage Lenders Association. RESOURCES TO USE DURING CRISIS While the situation with COVID-19 has been evolving on a nearly daily basis, some resources offer up-to-date information that can help you stay informed. The National Reverse Mortgage Lenders Association (NRMLA) provides a webpage that lists various guides and alerts that you can access by going to www.nrmlaonline.org/reference/anote-to-nrmla-members-regarding-coronavirus. The webpage provides general guidance as well as updates in federal and state regulations. In addition, it provides links to other resources, such as the CDC. Here are some of those resources:

General FAQ from the CDC: www.cdc.gov/

coronavirus/2019-ncov/faq.html

Travel-specific advice from the CDC: www.cdc.

gov/coronavirus/2019-ncov/faq.html

Repository of information maintained by Mike Gruley of 1 Vision Advisors: www.drive.

google.com/drive/folders/1cAXYkbbaaeO7d JYfHcQW0SSjVYvA3xwN