How Mortgage 1 Doubled Loan Volume Without Adding Operations Staff

At Mortgage 1, they are focused on more than the current trend in online applications. They believe automating their back-office operations keeps their team focused on providing excellent service to the client.

The leadership at Mortgage 1 knows automation will never replace people, but it can provide individuals more time to cultivate deeper, more meaningful relationships. As automation reduces tedious tasks, the most valuable team members will be the ones that can cultivate those long-lasting relationships.

“Quicken Loans Rockets into American Homes with the Company’s First Super Bowl Commercial” is the headline of Rocket Mortgage’s first press release on January 27th, 2016. The following day, Forbes had an article entitled “8 Minutes to Mortgage Approval”

PC magazine’s article on the same day was entitled “You can now get a Mortgage while in line at Starbucks. No, really”. To those of us in the mortgage industry, a hard eye roll follows after reading these now five-year-old articles.

With headlines like these, it’s no wonder software companies who mirrored Rocket Mortgage’s online application rocketed (pun fully intended) to stardom. Rocket Mortgage created an exciting new category of technology called Digital Mortgage.

“We were early adopters of the new point of sale (POS) software. We took our first digital mortgage application in Q4 2016. Many of our loan officers were exceptionally excited but we also had detractors. We spent countless hours helping loan officers understand the value of providing a self-service mortgage application. We also incorporated a vision of a fully digitized mortgage process that would free up more time and money to invest in marketing,” said Mark Workens, CEO of Mortgage 1.

“What I didn’t realize then was automating the application process was one small step in our digital mortgage transformation. To achieve unlimited scalability and high profitability, we would have to automate the manufacturing process.”

One year after launching their point of sale system, they realized the promise of a consumer “getting a mortgage while standing in line at Starbucks” was not going to happen without automating their back office. It was then that Workens set on a course to digitize and automate the entire mortgage process. From application to disclosures, underwriting to closing, and post-closing to delivery, the entire manufacturing process required an overhaul.

Though Mortgage 1 had invested heavily in optimizing their loan origination software, their business processes still relied too much on redundancy and manual labor. Several departments were checking information from their respective view points. A loan officer and processor gathering documents would each review the information.

Then a disclosure desk would manually review the same information to ensure accurate disclosures. Subsequently, an underwriter would check to make sure the file met the requirements for a particular product, which would then require a manual triple-check before new disclosures were sent. The mortgage concept of the checkers checking the checkers is an inside (but not so funny) joke to mortgage executives. Workens decided there had to be another way. The first step was to take a deep dive into all of their business processes. “Our mantra was ‘where there’s a process, automate it,'” says Workens.

The Mortgage 1 team spent several months interviewing stakeholders in various departments. Business processes were documented and scrutinized. User touches were calculated. Human resource costs were evaluated. Cost-to-cure analysis was completed. Delivery commitment periods were considered due to the direct impact on margins. “We evaluated everything and much to my dismay we had so many redundancies and manual processes I felt completely overwhelmed. I was resolved to fix these issues one way or another. The prospect of building solutions was raised but I felt strongly that we needed a technology partner instead,” said Workens.

Lender Toolkit viewed the Rocket Mortgage and POS phenomenon from afar.

As a leading provider of tools to optimize loan origination software and a deep bench of technical mortgage experts, it was perplexing to see so much time and treasure invested in originations when the real opportunities were in the manufacturing process. At the end of the day, point-of-sale solutions were not impacting lender’s head counts or profit margins in the way one would expect for a rich investment of time and money.

“We became obsessed with automating the manufacturing process. Our mission to serve the mortgage industry had renewed purpose. Digital Mortgage would be a fundamental transformation of a lender’s mortgage operation. In the end, our goal is to produce a virtually flawless mortgage loan with minimal human intervention,” said Brett Brumley, CEO of Lender Toolkit.

“With my background in secondary marketing, I decided we would start building a suite of automation products focused on the end of the origination life-cycle. The question we asked ourselves was how can we help lenders sell their loans faster and with more profitably on the secondary market?“

The opportunities to achieve its mission were never more obvious than when Lender Toolkit asked their customers about the human resources in their post-closing departments. Serendipitously, Mortgage 1 and Lender Toolkit had come to the same conclusion: a bloated post-closing department was a glaring illustration of an inefficient manufacturing process. If a lender has invested so deeply in people and processes to manufacture a loan, why would it be necessary to have an entire department double-checking what has already been double- or triple-checked?

And thus, a mortgage lender searching for answers met a mortgage technology vendor with a transformative mission.

For Mortgage 1, it was important to find a technology Partner who had developed an end-to-end solution. Since each of the functional areas of the business worked in concert, it was important an automation solution was able to accommodate the interconnected processes.

“POS, the core LOS, and automation solutions have to work together seamlessly,” said Workens. “Your POS enables originations, your LOS manages compliance and your automation solutions leverage both to produce the mortgage package. We will always need our great originators to develop markets and relationships. Similarly, we will always need our highly-skilled mortgage professionals to manage the exceptions.”

Lender Toolkit’s solution cannot automatically evaluate appraisal pictures to see if there’s a hot tub in the living room. Our underwriters are now focused on their highest and best use.

“We’ve eliminated the tedium of stare and compare. Our underwriters are raving fans of LenderToolkit’s software. It’s improved the work experience immeasurably, nearly as much as my bottom line,” said Workens.

Starting with significant improvements in disclosure accuracy meant the foundation of the manufacturing process was sound.

“Our cures dropped by 65% with twice the volume. That would have seemed impossible to me,” said Workens. Subsequently, the Prism solution provided consistent conditions being applied to the loan. By combining Disclosure Automation with Prism, the loan quality improved so much the post closing department was reduced by 75%.

“Since our loans are highly automated, we’re able to deliver a nearly perfect loan. We can do this without having a post-closing department triple-checking upstream manufacturing steps. Instead of having a bloated post-closing department we simply ship the loans and let the investors tell us what the E&Os are. Our E&Os are less than 5% and continue to decline every day,” said Workens.

“Last year we closed $2,272,345,383 and picked up three basis points moving from a 10-day commitment to a 4-day commitment. That’s $681,703.61 that we picked up. This automation also allowed me to go from having four post closers to one, so we also had the pick up there for less salaries and benefits.”

“With automation running around the clock, when we allocate on Monday and Thursdays, my whole allocation is delivered by the time I get in the next morning. Honestly, with the craziness of last year, I don’t know that we would have been as prepared as we were to deal with all the twists and turns the industry took last year without the automation,” said Nicole Nahodil, AVP at Mortgage 1.

Implementing LenderToolkit’s automation software has had a cascading affect for Mortgage 1.

Combining the improvements offered by a modern point-of-sale experience with a modern manufacturing process has reduced friction in every area of the business.

Company executives are ecstatic with the increased profitability while the production staff and their customers love the responsiveness, transparency, and accuracy.

Results at a glance: