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What Clerks Can Teach Us About Optimizing Workflow Process

Travels brought us to New Jersey a few weeks ago.  We stopped off at the liquor store where the movie Clerks was filmed.  Clerks was filmed on a small budget in one location with unknown actors for a little under $28K.  Quick Stop Groceries located in Leonardo, New Jersey. Location home of the movie Clerks. Unfortunately RST Video next door is closed (but still has all the dusty VHS tapes on the shelves). The movie grossed over $3M in the theaters or returning 10,714% on the initial investment!  Proving huge success can be achieved on a tight budget.  What does the movie Clerks have to do with mortgage banking?  The successful mortgage companies we’ve seen recently work to originate loans on a tight budget.


Optimizing Workflow Process
For far in 2013 we’ve reviewed 87 mortgage bankers nationwide and every mortgage bank generally sells to the same investors and has the same available loan products.  So how does a mortgage banker different themselves from their compensation?  One of the main differentiating factors is how the workflow process is optimize to decrease the cost to originate loans.  How does a mortgage bank optimize the workflow process?  We’ve identified three key areas: reduce the amount of costly third party reporting, reduce employee loan file touches and minimize the time between loan funding to investor loan purchase.


Ensure The Return on Cost For Third Party Reporting
Third party reporting can be expensive.  A mortgage bank can incur costs for Credit Reports, Fraud Reports, appraisals, refresh Credit Reports, AVMs, pre-funding quality control, MERS and employee man power to check investor/warehouse/industry exclusionary lists (i.e. LDP/GSA) on third parties involved in the transition.  The successful mortgage banks we’ve reviewed reduce the third party reports and internal manpower to run reporting on loan that have a high probability of closing.  Generally the companies we’ve seen that have Loan Officers manage a large share of the third party reporting, have a higher cost to operate.  In fact, we’ve seen several mortgage companies run third party reporting after the initial underwrite.  A great report to gauge your actual cost for third party reports is running a third party report in basis points based on closed loan volume per employee to determine if any employees are running a large amount of unnecessary reports.


Reduce Loan File Touches
A loan that has lower employee touches has a lower cost to originate.  How does a mortgage bank reduce the loan tennis match between sales and operations?  The successful companies we’ve reviewed develop a clear understanding on how loans are submitted and a clearer understanding from all employees of the expectations on how the loan is either approved or denied.  We’re a huge believer in garbage-in, garbage-out and loans that enter the loan life cycle complete have a higher chance of moving through the loan lifecycle cleaner and faster than a loan files submitted incomplete.  We recommend setting expectations in each department on what tasks need to be completed to move the loan along the loan lifecycle.  Clear expectations help move a completed loan file from department to department and makes rejecting a non-complete file easier.  Good loan file delivery rewards, departmental industrywide checklists and holding employee accountable for departmental tasks also help to reduce loan file touches.  Many loan origination systems have the ability to track loan file touches by employee. Set expectations and operational departmental goals, and track them. 


Minimize Time Between Loan Documents and Funding to Purchase 
Complete workflow expectations will ultimately reduce the time from funding to purchase.  Generally we’ve seen closing and post closing picking up the slack from the short coming of origination, loan processing and underwriting deficiencies.  Many times, conditions are pushed to closing, which can create a burden and bottleneck in the closing department.  Once a loan moves to closing, the borrower(s), the real estate agents and Loan Officers assume the loan is ready to fund.  A large number of conditions prior to closing can cause an unnecessary fire drill and if the loan is unable to close, can ruin relationships. If the previous departments take a little extra time to work on the loan to ensure completeness, the closing process may be streamlined and any closing fire drill can be avoided.  Once the loan is funded, getting prior to purchase conditions can be a nightmare.  Successful mortgage companies reduce the amount of post funding conditions to reduce the time loans spend on the warehouse line.


In the workflow analysis we’ve conducted, many times there are little tweaks to the system which can make a world of difference in streamlining the process.  Also, we’re a firm believer in reporting.  You can’t manage what you don’t monitor.  By monitoring third party reporting, reducing loanfile touches and streamlining the funding/purchase process, the overall cost to originate can be reduced.  To quote the eloquent Jay from Clerks, “I feel good today, Silent Bob, we’re gonna make some money!”


Cameron Watts, CMB                                                       C. M. "Corky" Watts, CMB
415.722.0369                                                                 408.497.3135                                    

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