Achieving Extreme Value with Mortgage Process Outsourcing

Achieving Extreme Value with Mortgage Process Outsourcing

How to create the greatest benefits -

beyond cost savings

through outsourcing mortgage origination business processes



Includes critical questions to ask a potential outsourcing partner!

Executive Summary

The mortgage industry is currently facing one of the toughest operating

environments in the last 15 years. A slowdown in originations fueled by interest

rate volatility, increasing housing inventories, tighter underwriting standards,

growing liquidity issues, and the overhang of fixed capacity is putting extreme

pressure on the bottom line.

Through outsourcing business processes, mortgage lenders will be able to mitigate financial risks and improve their processing cycle time and have more time available to focus on their core competencies- product development, marketing, pricing, risk management and customer acquisition.

Business Process Outsourcing (BPO) is no

longer considered only a labor arbitrage cost

saving tactic. The current view of BPO

recognizes it as a strategic imperative that

delivers increases in customer satisfaction,

better operating flexibility and can actually

increase revenue while reducing costs

.

The best outsourcing providers will bring a track record of success in the mortgage industry, domain expertise and specific examples of how they have achieved actual results for clients.

The current economic situation may provide the motivation to implement strategic outsourcing initiatives. The benefits achieved from outsourcing continue to be available – especially in a down economy. Organizations which able to improve their processes and make sustainable changes in

operations today will be the ones that are successful and best positioned at the end of this economic cycle.

MARCH 2008 UPDATE

The State of the Mortgage

Industry:

How the

worldwide financial

situation increases the

benefits of outsourcing

** New:

PUT YOUR BPO

TO THE TEST!

Questions

to ask a potential

outsourcing vendor

Case Study:

Top 10

Mortgage Origination

Company transforms

processes and achieves

results

Outsourcing to Achieve Critical Business Goals

Outsourcing is a familiar concept and the Financial Services industry was an early adopter, so the benefits are well documented. However, not all Outsourcing providers are alike. Whether you are looking for a new vendor or find yourself less than satisfied with your current one, an outsourcing partner should be expected to provide the following deliverables.

1.

Cost savings have consistently been a key driver of moving to an outsourced model. Mortgage lenders typically achieve 20%+ savings when outsourcing business processes.

2.

Outsourcing provides the ability to focus on core competencies and can actually improve customer service. Loan processors are able to spend more time managing customer expectations and with a technical solution, borrowers can receive immediate feedback at each stage in the process.

3.

With a dedicated outsourcing vendor that provides analytical capabilities, internal information can be used to create new products, bring them to market faster and enjoy new revenue streams. By freeing your loan officers from administrative tasks, they can spend less time babysitting a pipeline and more time sourcing for new business.

4.

Especially in challenging economic conditions, the ability to put people in positions where they add the highest value is critical. With an outsourced model, you can change fixed costs to variable costs and gain the flexibility to fluctuate based on business demands.

Decision Time – Be Sure to Ask the Right Questions

When evaluating outsourcing vendors it is critical to understand exactly how they plan on delivering results to your organization. Sutherland Global Services methodically delivers strategic advantages through Business Process Outsourcing to Mortgage originators.

Cost Efficiencies Customer Satisfaction Revenue Increases Operational Flexibility

Processing Cycle-Time Improvements

x

x

x

Mitigate Financial and Operational Risk

x

x

Manage Variable Demand From Business

Cycle Variations

x

x

Technology That Provides Competitive

Advantage

x

x

x

x

Ability to Focus on Core Competency

x

x

x

x

Sutherland Delivers

Sutherland brings mortgage industry experience and proven results to the table. The combination of industry knowledge and outsourcing proficiency allows Sutherland to bring unique insight to your organization.

Put your BPO provider and yourself to the test!

Can your vendor answer all of the following questions to your satisfaction?

Improve Mortgage Processing Cycle Time



Sutherland‟s micro-queues guarantee that all lenders‟ documents will be processed within a maximum of 8 hours from the time the document is set up for processing. Due diligence cycles are accelerated. Exceptions are identified and resolved faster. Applications that are floating pending rate lock can be locked sooner giving the lender a better opportunity to arbitrage the loan for best execution value and reduce the likelihood of pipeline fallout.

The ability to address exceptions faster allows the loan officer / loan processor to give the borrower a near immediate response, positive or negative. The borrowers experience is improved as the quick response increases rapport and allows the lender to fully control the messaging, prepare counter-offers in advance of the customer‟s inquiries and better utilize their time to focus on the problematic loans in the pipeline.

Loan officers can now confidently hand off their in-process pipeline caseload confidently and spend time sourcing leads.

Mitigate Financial Risk



Do you offer a pay as you go or a pay for performance model? Do you offer a revenue sharing plan to minimize out of pocket costs?

Financial risks are possible whenever transactions involve the transfer of money.

With flexible pricing from Sutherland, contracts are designed so that you pay only on closed loans, which not only helps manage your cash flow but also provides a built-in hedge against any negative issues along the processing cycle.

Sutherland provides a written guarantee that if anything causes you to move out your closing date, it will cover the difference in the price spread. If anything Sutherland does negligently results a loan repurchase, our company will reimburse the premium.

With Sutherland, you only buy the services that you want so you can choose among third party, document prep, closing or any combination that meets your business needs.

Mitigate Operational Risk

(Sutherland was!)

Can you guarantee that a loan closing date will be met?

Operational risk is present all along the mortgage processing cycle and can have a dramatic negative impact on profit, customer satisfaction and your reputation.

Sutherland has built a scalable and robust network to support BPO Operations across the globe using technologies like ATM, MPLS, IP, Voice over IP (VoIP), RAD VMux voice compression devices. All critical devices for communications throughout the enterprise have redundancy. Sutherland has designed its network to seamlessly allow redirecting of voice and data traffic from one location to another with no single point of failure. All international data circuits have automatic re-routing capabilities. Your workflow will never be impacted.

Technology That Delivers Competitive Advantage



Outsourcing with Sutherland provides the lender with best in class access to the latest in LOS support technology without the associated costs. Sutherland has a history of investing heavily in technology infrastructure to create proprietary tools that support our customers‟ business processes. Sutherland can deploy work management, CRM, click-to-chat and staffing support technology to improve the lenders operating efficiency and outsourcing results.

Sutherland‟s innovative technology frees loan processors from routine inbound call tasks and allows them to take an application while on another call. A large number of loan applications start after regular business hours and with an outsourced solution from Sutherland, you can receive applications 24 hours a day, 7 days a week.

With Sutherland workflow processing tools – only requiring processing of exceptions – loan processors can work only on difficult cases and have increased loan processing efficiency by 75%.

Manage Demand, Seasonality and Business Cycle Fluctuations



It is a challenge to manage seasonal workforce requirements during normal times. In today‟s difficult environment, the ability to flex staff with demand changes could be the difference between staying in business….or not.

Sutherland Global Services has skilled and trained associates that become available at the beginning of the busy mortgage season. By retaining knowledge capital year over year, quality is maintained, costly errors are reduced and customer satisfaction can be improved.

Focus on Core Competency

One question you may want to ask yourself: Is the ownership and maintenance of mortgage processing a true core competency or could it be better handled by an outsourcing service provider?

Client Case Study: Top 10 Mortgage Loan Originator

Client Background

 A nationally recognized lender with $23B in retail mortgage originations / $20BB loan servicing portfolio

 Channels of distribution: Private label services, corporate relocation, subsidiary brands  Loans generated through direct, affinity group, wholesale and correspondent channels

Business Challenges

 Fixed costs significantly higher than peer competitors

 First time end to end mortgage loan origination off shore outsourcing engagement  Legacy systems approaching technical and architectural obsolescence

 Extreme seasonal demand

 Dated, inaccurate or non-existent work process maps

 Training program lacked measurement tools to determine efficacy and remediation processes

Goals of Client Engagement with Sutherland Global Services

 Manage and control seasonal staffing

 Deploy knowledge capital across organization  Move as much cost as possible to a variable model  Reduce overall costs

 Improve and provide a consistent customer experience

Sutherland worked with the client to develop a transition plan that included a process and discovery phase, a solution design phase, and a prototype with a 30-day client acceptance clause. All of these steps were met and once implementation began, the following results were delivered:

1. Cost Efficiencies

Sutherland enabled cost savings through Global Process Management by assigning the right talent pool to work on the right piece of work, from the right global location, at the right time, at the right price.

Document control and delivery managed from centers in the US and India

o Mail receipt / document indexing / secondary delivery packaging

B2B and B2C voice support processes delivered from centers in the Philippines

o Appraisal / title commitment flood certificate order placements

o Homeowners insurance binder follow up

Underwriting due diligence processes delivered from India

o Application, disclosure and compliance document review

o DU / LP / Proprietary AUS re-decisioning

o Agreement of Sale / Real Estate Purchase Contract review

o VOE / VOA / VOD / VOR processing

o Appraisal / Insurance / Flood documentation review and resolution

Results:

 90 days after full implementation the client reached a 24% reduction in unit transaction cost, 25% from fundamental adjustments to the work processes

 Click to Chat and Click to Voice delivered 20-30% customer support cost reduction

 Total loan processing costs reduced 30% within the first year of implementation

2. Customer Service and Quality Improvements

Sutherland‟s Business Transformation Group applied a combination of strategy development, domain expertise and process consulting and through the Six Sigma disciplines redesigned and re-engineered work processes. Sutherland developed and automated a data dictionary to complement clients LOS, developed list of “standard phrases” to eliminate repetitive situations or tasks.

Results:

 Processed loans with an average handle time of 48 minutes for most conforming loan programs

 99.75% of all documents and case level inquiries are cleared the same day of receipt.

 95% of document tasks are cleared within 12 business hours of receipt

3. Revenue Enhancements

Combined with a focus on continuous process improvement, Sutherland created significant value by giving loan officers and loan processors more time to focus on customer communications, which in turn, protected the pipeline and increased pull-through ratios. Loan officers have more time to source for new business rather than „baby sit‟ a pipeline.

The client identified and retained only those loan processors with superior skill sets with a particular emphasis on customer service communications, underwriting and the highest quality scores.”

The processing model also allows the lender to determine underwriting adjustments faster, for faster modification of any potential loan level price adjustments. Of course, faster due diligence results in earlier rate locks which occur create price arbitrage & execution opportunities.

Results:

 13% improvement in loan pipeline pull-through since inception

 Increased loan officer customer interfacing contact by 18% (which allows more time to sell)

 Lenders spread on the processing fees charged to the consumer has improved up to 50%

4. Operational Flexibility

One of Sutherland‟s clients is a leading tax software company with majority of its business occurring in the January to April period. The similarities of skill-set requirements and complementarities of business cycles between this clients and a mortgage origination client, enabled Sutherland to pass on the operational efficiencies to both its clients. Since the mortgage client also has seasonal staffing needs, they were able to transfer fixed cost to true variable costs by outsourcing with Sutherland.

Results:

 Peak season ramp cycle time reduced from 42 to 33 calendar days

 Increased loan processor case loads from an average of 65 to 150

 25% year on year retention of cross skilled / redeployed associates

For more information, contact Sutherland at (800) 388-4557 or email us at [email protected] Visit us at www.suth.com

To learn more about Sutherland’s Mortgage Process Outsourcing Solutions: http://www.suth.com/industries_mortgage.htm