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While mortgage loan origination has certainly benefited from impressive gains in technology –

such as today’s advanced origination systems and the ability to digitally interact with consumers

and business partners – the mechanics of originating a new mortgage loan are much the same

as they have been for decades.

Of course, the industry has moved far beyond the handwritten loan lists that were used to

track the status of mortgage loans before computers were introduced in the 1970s and 80s, but

today lenders still largely rely on manually generated spreadsheets to ensure that all tasks are

completed for each loan.

As a result of these and other factors, mortgage origination operations often struggle to achieve

sustainable improvements in productivity. There are several events throughout the mortgage

loan process that seem to be inconsistent, and the majority of these are related to human

behavior. This can lead to considerable variability in both the outcome and in the time it takes to

get a loan from initial application to the closing table.

This doesn’t mean that mortgage operations aren’t focused on improving productivity and

reducing completion times. Through efforts such as ongoing training, performance evaluations,

management reviews and even financial incentives, mortgage companies continually work

to help their production professionals perform their work more efficiently. But even the most

ambitious employees need timely, quantitative information about the results of their work to

understand where and how they need to improve.

Transforming the Mortgage Production EnvironmentIn most production sectors, efficiency and speed are machine-driven equations that provide

uniform and predictable results. While this wasn’t always the case (remember that auto

production began as a human endeavor), the application of science and technology to

production operations has led to today’s high levels of performance and predictable results.

Even now, the continuous study of production environments continues to spark new ideas that

create measureable gains.

On the other hand, many employees in mortgage loan operations--another production

environment--often compare the nature of their work to folding laundry. The best that employees

can do is to take the next task off the top of the pile, perform the necessary work and move on

to the next task. Simply, they follow the protocols they have been given and use the systems that

are available to them. As a result, the pace and accuracy with which they perform these tasks

are dependent on things that no manager could possibly foresee: how much sleep an employee

may have had the night before, what they had for breakfast, or their ability to concentrate on

their work relative to whatever personal issues may occupy their mind on any given day.

HOW FEEDBACK LOOPS CAN TRANSFORM ORIGINATION PRODUCTIVITY AS SEEN IN MBA INSIGHTS ON MARCH 20, 2018

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Tyler ShermanPresident, Enterprise Business Intelligence Division, Black Knight, Inc.

Tyler Sherman is President of the Enterprise Business Intelligence division of Black Knight Inc., Jacksonville, Fla., a provider of integrated software, data and analytics to the mortgage industry. He is responsible for establishing the vision and long-term strategy that combines Black Knight’s LoanSphere Data Hub and its LoanSphere Motivity enterprise business intelligence platform to produce actionable insights for Black Knight’s origination and servicing clients. He has more than 23 years of entrepreneurship and executive leadership experience across the mortgage and technology industries. Before joining Black Knight, he co-founded Motivity Solutions, a provider of business intelligence to mortgage lenders, which was acquired by Black Knight in 2016.

TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, or an affiliate.CO0218 © 2018 Black Knight Financial Technology Solutions, LLC. All rights reserved.

While it’s clear that managers won’t be tracking the sleep or eating habits of their employees anytime soon, or engage in

counseling activities to ensure employees always have a clear head throughout their shift, the application of technology can help

improve performance consistency in the mortgage production environment. The key is understanding that given the pervasive

human element in mortgage production, operational processes cannot be improved without improving the human behaviors that

drive those processes. The proper application of technology can help motivate employees, create a positive team environment

and produce results that are consistently aligned with performance targets and customer expectations.

Here’s how:

The Power of Accessible, Real-Time InformationBusiness Intelligence in the mortgage production environment is focused on measuring and monitoring how employees go

about their work. For example, when workers review loan status spreadsheets, what are they typically looking for? Perhaps they

scan for elements like missing dates, or other common problems that must be addressed before a loan can move forward. By

determining which issues come up most frequently, and then applying technology to automate the identification of those issues

through a live dashboard, workers can address issues more quickly (rather than spending their time hunting for this information

within spreadsheets).

Employees could also monitor the results of their own work--like the time it takes to move a loan from the milestone(s) they

manage to those downstream from them. This can be done when they have ready access to their individual Key Performance

Indicators. This kind of information could be made available through a dashboard populated with live data and allow employees

to effectively analyze their segment of the production cycle to identify opportunities for improvement. Workers could then make

tweaks to their approach, and immediately see the results of their efforts via the dashboard.This dashboard approach enables

workers to set their own performance goals and monitor their personal results.

Additionally, teams could also see their collective performance and watch as they hit and exceed benchmarks in near real time.

When a group of employees jumps up cheering and high-fiving because they can immediately see that they have collectively

achieved a stretch goal, it’s clear that an important shift is occurring in the mortgage production world. And yes, this really happens.

Motivating People Who Are Motivated by PerformanceImagine the sense of drudgery that some mortgage employees must

feel as they work day after day “folding laundry” with little opportunity

for the self-correction and motivation that can be created through

immediate feedback. It is human nature for people who are motivated

by personal performance to want to know how they are doing in their

jobs. It’s also why we see that super-human surge of performance in

athletes when they are competing in a close race. They can readily see

how they are performing against their competitors, and it motivates

them to press beyond what they thought was possible.

Visible KPIs in the mortgage production environment can have a similar effect. KPIs can be color coded on the dashboard so

employees can immediately see and understand that they are in great shape (green), or need to make some adjustments to hit

their goals (yellow). They can also see their overall performance. This insight enables individuals and teams to evolve from being

task oriented to being goal or performance oriented across the mortgage process.

Of course, the consumer is the big winner when mortgage companies are able to achieve turnaround goals and get their customers

to the closing table sooner. But mortgage employees also win because they have the immediate information they need to manage

their own performance and enjoy the sense of accomplishment that comes with improvement. This shift from being reactive to

proactive is one that can also give employees a sense of empowerment and positively impact job satisfaction levels.

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Live Feedback, Thoughtfully AppliedLike any other production environment in the world, an automated feedback loop is the single most important factor that

separates average production with superior production performance. Whether a factory is producing muffins or pencils or the

latest SUV models, it has systems in place that provide real-time feedback on performance across the production cycle. This

feedback loop is just as important in the mortgage production cycle. It helps motivate people to lean into their work, rather than

just complete each task without giving much thought to orchestrating their work to be more effective.

In this modernized mortgage production world, there is no need for micromanagers who must track what employees are doing or

need to be doing because there is little to no access to KPIs. Conversely, when employees have access to the right information in

an automated way, a loop is created since the result of a task is fed directly to the person who completes the task. That’s the loop

concept in a nutshell – people adjusting their work in real time in response to live metrics.

This also allows lenders to differentiate work assignments based upon product differences. In a practical setting, all loan types

are treated the same way, but some are more complex than others. The feedback loop allows more complex loans to be

automatically routed to resources with higher levels of expertise. This thoughtful application of metrics enables the right people

to work on the right products at the right time to optimize the overall production cycle.

The End State: Transformation The mortgage industry is more than ready for a transformation. A self-tuning operational core is the proverbial Holy Grail-

-a self-optimizing, self-healing organization made possible by automated feedback loops. And just like any other production

environment, the mortgage production cycle will begin to drive itself to higher levels of performance, thereby allowing the

mortgage industry to consistently meet and exceed customer expectations.

There are other promising benefits as well. One side benefit of the feedback loop is that it produces real-time information, automatically

delivered to the point of need and with the ability to detect repetitive processes. For example, most mortgage operations have a mailing

desk that simply manages all the mailing of disclosures to homebuyers--something that can easily be automated. Instead of using

humans to handle these repetitive, predictable tasks, they can focus on higher value production activities.

Use cases in the mortgage origination industry are already proving that the feedback loop has a very reliable and positive impact

on the mortgage production environment. While the feedback loop is not new in the larger world of production operations,

lenders have only recently started to apply it. Early results indicate that this innovation has the power to lift mortgage operations

to the next level of production excellence.

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 Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.