The
mortgage
origination

industry
has
long
made
use
of
an
operational
strategy
that
relies
on
“staffing
up”
during
cycles
of
high
volume
and
then
making
staff
reductions,
sometimes
en
masse,
when
origination
volume
declines.
While
this
was
once
a
necessary
business
strategy,
the

technology
now
exists
to
implement
a
much
more
efficient
approach.
In
order
to
achieve
this,
lenders
need
to
take
a
thoughtful
approach
to
the
implementation
of
technology,
and
the
very
highest
decision
makers
need
to
push
their
orgs
to
adapt
processes
to
fully
realize
technology’s
benefits.

Some
credit
is
due
to
the
mortgage
industry
for
having
made
real
progress
in
a
few
short
years
with
regard
to
making
automation
a
priority.
Structured
data
sources,
automated
underwriting
tools,
and
task
and
workflow-based
systems
can
automate
and
accelerate
many
of
the
functions
traditionally
performed
by
human
employees.
The
technology
to
do
this
is
possible
and
in
many
cases,
has
even
been
built
–
it
just
hasn’t
been
properly
implemented.
We
have
the
means
today
to
shift
lenders
to
far
more
efficient
staffing
and
personnel
models. 

The
problem
lies
in
a
simple
insight:
cost
and
labor
doesn’t
come
out
of
the
process
when
you
automate
a
step,
but
rather
when
the
person
stops
doing
that
step.

While
we
have
adopted
technologies
and
“turned
them
on”
across
the
industry,
so
to
speak,
we
have
not
re-architected
our
processes
around
them.
In
order
to
do
that,
I
suggest
3
truths
that

lenders
should
keep
in
mind:

1. There
   are
   some
   things
   that
   technology
   can
   simply
   do
   better
   than
   humans
   –
   that
   work
   needs
   to
   be
   moved
   to
   technology.
2. There
   are
   other
   things
   that
   humans
   still
   need
   to
   do,
   but
   the
   more
   that
   companies
   can
   make
   those
   tasks
   “lower
   skill”
   and
   easier
   to
   train
   around,
   the
   more
   scalable
   and
   nimble
   the
   organization
   can
   be
   as
   the
   market
   changes.
3. It
   is
   very
   easy
   to
   add
   steps
   to
   a
   process,
   and
   overwhelmingly
   difficult
   to
   subtract
   them.

Moving
workloads
from
people
to
technology

As
an
industry,
we
need
to
start
by
establishing
a
basic
acceptance
that
technology
simply
does
many
things
better
than
humans
can.
For
example,
technology
is
more
reliable
at
making
sure
a
flood
report
is
ordered
as
soon
as
a
loan
is
moved
to
processing
than
a
human
with
a
checklist
is
–
it’s
a
simple
rule
that
fires
every
time.
This
is
an
easy
thing
to
agree
on
when
technology
does
things
“perfectly”,
but
what
about
when
the
technology
has
an
error
rate?
For
example,
does
OCR
have
to
be
99%,
99.9%,
or
100%
right
in
extracting
the
first
name
off
a
driver’s
license
before
we
decide
we
can
have
people
stop
doing
it?
While
a
simple
solution
might
be
to
compare
the
computer’s
error
rate
to
the
human’s,
and
switch
when
computers
make
fewer
mistakes,
we
all
know
this
is
difficult
in
practice
–
one
only
needs
to
look
at
the
regulatory
backdrop
around
self-driving
cars
as
a
prime
example
in
another
industry.
Regardless
of
whether
a
company
is
willing
to
take
a
more
cutting
edge
approach
(switching
as
soon
as
the
technology
is
“good
enough”)
or
would
rather
be
a
later
adopter,
it
is
critical
that
lenders
have
a
strong
framework
and
strategy
around
when
they
shift
work
from
humans
to
technology.

If
we
assume
for
a
moment
that
we
are
willing
to
move
work
to
technology
once
it
can
do
it
better
than
humans,
the
next
step
is
to
survey
the
market
and
understand
what
“automation”
capabilities
exist,
and
to
what
extent
they
can
replace
the
entire
task
a
human
is
doing,
not
just
a
pretty
demo.
This
requires
not
just
a
deep
understanding
of
the
technology,
but
also
an
understanding
of
the
current
human
process
–
is
the
same
person
ordering
flood
reports
and
reviewing
the
results?
Is
that
person
also
troubleshooting
when
the
flood
vendor
is
unable
to
return
a
successful
result
because
the
property
address
hasn’t
been
verified
yet?
For
many
mortgage
lenders,
either
very
robust
automation
capabilities
are
necessary
to
replace
these
large,
complex
tasks
their
operations
people
are
really
doing,
or
their
process
needs
to
be
simplified
and
broken
down
significantly
into
smaller
“jobs
to
be
done”
so
that
simpler
automation
solutions
can
take
those
jobs
on.

Making
the
work
people
still
have
to
do
more
efficient

Once
we’ve
looked
at
work
that
can
be
moved
to
technology,
the
state
of
the
industry
today
suggests
that
there
surely
will
still
be
work
for
people
as
well;
how
can
we
make
that
as
efficient
as
possible?
There
are
two
vectors
lenders
should
think
about
when
they
think
about
the
efficiency
of
their
people:
how
much
“work”
(measured
in
loans,
or
ideally
in
tasks)
one
person
can
get
done
in
a
unit
of
time
when
fully
ramped,
and
how
long
it
takes
to
ramp
them.

Work
per
user
per
unit
of
time
is
measured
all
over
our
industry:
how
many
files
can
an
underwriter
review
a
day?
How
many
loans
can
a
processor
manage
in
their
pipeline
at
once?
When
thinking
about
improving
the
efficiency
of
work
that
people
are
doing
and
that
can’t
be
moved
to
technology,
lenders
often
focus
on
allowing
those
people
to
focus
(there
are
elaborate
solutions,
like
workflow
systems,
and
simple
solutions,
like
not
letting
your
loan
officers
instant
message
your
underwriters).
Continuously
re-evaluating
how
your
technology
is
serving
or
hindering
your
team’s
ability
to
work
efficiently
(system
latency,
easy
navigation)
is
critical.

Less
obvious,
though
–
for
work
that
still
needs
to
be
done
by
people,
it’s
also
worth
asking
how
we
can
make
that
work
more
intuitive,
easier
to
train
on,
and
split
in
a
way
that
the
bulk
of
it
can
be
done
by
lower
skilled
workers.
Making
the
work
“simpler”
or
“easier”
allows
for
improved
elasticity
in
the
business;
rather
than
hiring
specialists,
lenders
can
move
more
general
workers
around
to
cover
bottlenecks
in
their
manufacturing
process,
or
even
slide
employees
between
origination
and
servicing
if
the
jobs
and
systems
are
really
made
simple
enough.
When
a
mortgage
business
employs
a
strategy
that
decreases
the
need
for
skill,
the
next
market
boom
will
require
that
business
to
simply
flex
10
or
maybe
20
people
from
other
areas
of
the
business
into
production
to
assist
with
the
sustained
volume.
Instead
of
having
to
hire
(and
later,
lay
off)
100
new
people
and
train
them,
the
business
can
accommodate
demand
without
artificially
bloating
its
workforce.

Actually
changing
the
process
with
subtraction,
not
just
addition

One
of
the
hardest
things
to
do
in
any
organization
is
to
subtract
things
–
adding
a
weekly
meeting
is
almost
frictionless
in
most
companies,
but
removing
it
requires
a
brave
individual
to
speak
up,
and
then
near-total
consensus
from
the
attendees.
Similarly,
in
loan
manufacturing,
lenders
add
steps
(things
to
check,
documents
to
collect
or
send
out)
often,
but
almost
never
inventory
all
of
the
work
their
teams
are
doing
and
figure
out
what
doesn’t
need
to
be
done
anymore.

Compounding
this,
“redundant
work”
is
actually
commonly
employed
as
a
strategy
in
mortgage
origination
to
ensure
that
files
are
high
quality
–
if
2
people
each
have
10%
error
rates
on
missing
a
document
in
the
file,
for
example,
making
sure
that
one
checks
it,
and
then
the
other
checks
the
first
person’s
work,
will
allow
for
a
1%
error
rate.
This
simple
fact
often
leads
to
checkers
checking
checkers.

This
means
that
people
in
the
mortgage

origination
process
often
do
work
on
a
file,
expecting
that
work
to
have
been
done
already
anyways,
and
therefore
that
automating
that
work
upfront
doesn’t
fundamentally
change
their
behavior.
In
order
to
see
the
full
benefits
of
any
kind
of
work
shift
to
automation
and
technology,
the
entire
team
downstream
of
that
work
needs
to
be
retrained
no
longer
to
check
that
step.
So
how
can
this
be
done?

First
and
foremost,
executive
buy-in
is
critical
to
see
any
reduction
of
steps;
very
rarely
do
individual
contributors
feel
empowered
to
remove
steps
from
the
process.
Tobi
Lutke,
CEO
at
Shopify,
has
a
famous
quote
that
“The
best
thing
founders
can
do
is
subtraction.
It’s
much
much
easier
to
add
things
than
it
is
to
remove.”
Only
executives
and
leaders
have
the
social
capital
necessary
to
actually
get
people
to
stop
doing
stuff.

Once
an
executive
has
decided
to
cut
a
bunch
of
steps
from
the
process,
and
ideally
continue
to
revisit
and
cut
steps
as
a
continuous,
living
process,
there
are
two
ways
to
actually
implement
this.
One
is
to
have
an
extremely
strong
operations
group
that
continuously
trains
and
retrains;
measuring
the
effectiveness
of
the
team
and
ensuring
an
extremely
high
degree
of
compliance
with
written
and
documented
standard
operating
procedures. 

The
second
option
to
implement
effective
change-management
on
your
automation
journey
is
to
encode
the
standard
operating
procedure
inside
of
the
system
being
used
to
originate
the
loans
so
that
the
software
manages
the
process.
When
that
happens,
change
management
becomes
something
akin
to
a
software
update
(with
which
people
will
comply
because
they
are
only
doing
the
work
the
software
directs
them
to
do)
instead
of
a
complex
and
cumbersome
re-training.
The
change
management
is,
essentially,
“baked
into”
the
infrastructure
itself.

Regardless
of
whether
an
operational
or
technical
solution
to
this
problem
is
employed,
all
of
the
automation
in
the
industry
won’t
save
money
if
each
lender
doesn’t
individually
develop
a
strategy
to
achieve
the
all-important
goal
of
subtraction.

Tying
these
things
together

We’ve
long
known
that
the
mortgage
industry
struggles
with
a
lack
of
elasticity
and
scalability.
The

market
conditions
and
unique
events
of
the
past
four
or
five
years
have
starkly
highlighted
that
problem.
As
our
market
has
lurched
from
boom
to
bust
in
response
to
pandemic
and
high
interest
rates,
we’ve
seen
an
almost
continuous
parade
of
hiring
and
reductions-in-force.
That,
in
turn,
has
had
a
broad
impact
on
work
culture
across
the
industry,
including
a
reduced
level
of
loyalty
industry-wide
and
a
volatility
that
makes
it
nearly
impossible
to
plan
much
further
than
the
next
peak
or
trough
in
the
market
cycle. 

To
actually
get
to
a
world
where
scaling
production
up
and
down
doesn’t
require
swings
in
headcount,
the
marginal
cost
of
labor
inside
each
loan
needs
to
be
as
low
as
possible,
and
then
any
need
to
“staff
up”
or
“staff
down”
needs
to
be
low
training
enough
to
allow
the
repurposing
of
existing
staff
instead
of
hiring
and
firing
of
staff
outside
the
company.
Getting
to
this
world
requires
a
careful
re-litigation
of
existing
processes,
with
executive
buy-in,
to
subtract
unnecessary
steps
and
simplify
the
process,
and
this
is
an
exercise
that
must
be
done
continuously
by
lenders.
This
is
not
simple
–
there
is
no
silver
bullet
solution
–
and
it
is
hard
work,
but
it
is
one
of
the
greatest
problems
mortgage
originators
face
today,
and
well
worth
the
work.

As
CEO
at
Vesta,
Mike
leads
sales,
product
development,
and
implementations
as
the
team
redefines
origination
platforms
for
modern
lenders.
Previously,
Mike
spent
4
years
on
the
early
product
team
at
Blend,
where
he
launched
key
components
of
the
flagship
mortgage
platform,
and
later
started
and
ran
new
business
lines
such
as
Blend
Insurance.
Mike
graduated
from
Stanford
University
with
an
MS
in
Computer
Science/AI
and
a
BA
in
Economics.

This
column
does
not
necessarily
reflect
the
opinion
of
HousingWire’s
editorial
department
and
its
owners.

To
contact
the
editor
responsible
for
this
piece:



[email protected]

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