Thursday, December 29, 2005

Zementis: Going beyond the rules

In a previous post, I pointed out that BRM (business rules management) is going to be big in 2006. Lenders will find that managing their guidelines in an automated fashion will pay huge dividends. But at least one firm is hoping that some lenders are willing to go one step beyond that.

Zementis, Inc., San Diego, is marketing the Jade automated underwriting solution. Not an AU system, per se, though it appears that it could serve as a standalone solution, the tool is designed to sit above the lender's AU system, catching exceptions and performing analytics that company CEO Michael Zeller says will let the lender get more out of its automation.
"The complexity of nonprime/high-risk deals is difficult to automate with a rules system and the maintenance of the rules is not trivial. The addition of predictive analytics provides a significant boost to the effectiveness of the AU system. Furthermore, the risk assessment of each loan provides benefits to other aspects of the business process, e.g., quality control, smart queuing, and pricing," Zeller said in an e-mail.

Over the phone, he explained that Jade's analytics probe back into the lender's own portfolio, digging up information on how other similar loans have performed in the past and how profitable they were for the lender. It then uses this data to try to reach an automated decision when the legacy AU throws an exception.

Zeller says his new company (they've been in business less than 2 years) has developed a Model Development Life Cycle that allows it to develop, test, and deploy predictive models in an iterative way.
"The client can gradually 'tune' in the JADE system, which is important since the system has direct impact on revenue and profitability. Hence, we can start very conservative and extend its automation step-by-step, over time. "

Obviously, the more data you have the better the analytics will be at reaching valuable conclusions, so Zementis is targeting larger lenders now. Accredited Home Lenders Holding Co., also based in San Diego, has already agreed to deploy the system, according to a company press release.

Tuesday, December 27, 2005

Vuecentric: Updates its MortgageDashboard

If you've never seen a demo of Vuecentric's MortgageDashboard Web-based loan origination system you probably don't know how elegant and simple these tools can be to use. The company recently announced that it has released an updated version of the application that it says will make it even easier for loan officers to use.

Version 3.0 includes the updated 1003 and 1008 forms, but also includes updates to the underlying WebOrchestra platform and the BundleOne electronic partner network tool. Taken together, the tools are finding a home with net branch operators and other originators that need to coordinate the activities of decentralized originators without limiting their ability to set up workable deals quickly.

Most loan origination software will be Web-based in the future, I expect. Vuecentric has a jump on this. Mortgage companies seeking a new lending platform should check out this software before making a decision.

Wednesday, December 21, 2005

ABN AMRO: Helping customers monitor their credit

It's becoming a shared nightmare for financial services companies. During the course of the company's normal business, a computer tape of customer information is misplaced. This has never been a good situation, but new legislation and the attention of consumer advocates has made this a disastrous situation for companies in this space.

Take the recent ABN AMRO situation. The company is working along normally. It sends out a data tape bound for a credit repository. The tape enters DHL and then falls into a black hole. The company enters crisis mode, sending out word on Dec. 16 that the information is missing and offering 90-day credit monitoring to every client with data on the tape.

Two days later, the tape resurfaces again inside DHL with no signs of foul play.

But the damage is already done. People are less likely to remember the positive outcome than they are to remember the words "lost data." Realizing this, the company has extended its credit monitoring offer for up to a year for all affected clients.

It's not like ABN is the only company to suffer this fate in 2005. Far from it. Bank of America, CardSystems and even the FDIC all had data security problems this year. The worst part is that a breach of security is a costly problem for companies even when none of the sensitive data is actually stolen. Lose one record or one million records and you will suffer. It's enough to keep executives awake at night.

Expect to see more robust data security offerings in 2006 designed to solve this problem. We'll highlight them for you when we see them.

Monday, December 19, 2005

Trendwatch: BRM will be big in 2006

Business Rules Management is poised to be huge in the mortgage industry next year, whatever that is. I mean, I know what BRM is and I'm sure you do, but it's unlikely that we're thinking of the same thing. But that's probably true of any two people you ask in this business.

A good example can be found in the recent article in Mortgage Technology's electronic newsletter. Managing editor Tony Garritano does a fine job of bringing the technology into the light, but it's clear from the responses of the interviewees that it's easier to say what BRM does than what it is.

I think there are two primary reasons for this: first, there are so many ways to implement BRM. Secondly, no one that builds a multimillion dollar technology platform wants to admit that you need a separate controller to take advantage of it. And that's what these systems really have become. They are the brains that allow the technology to automate workflows in accord with the business managers' desires.

In some respects, companies like Mortgage Cadence (featured in the MT newsletter article) have a leg up when it comes to integrating BRM into its LOS because they built the rules engine into their software. Those companies that are using third-party BRM systems to bolt onto the sides of existing LOSs are more likely to have difficultly explaining exactly what it is.

But they all understand what these systems do. They allow companies to make changes to their automation, which is vital when they add new products, target new markets and attempt to streamline their processes. I expect a lot more companies to begin to figure out how to take advantage of these systems next year.

Thursday, December 15, 2005

Trendwatch: Fraud big story in 2006

Call it a reporter's hunch, but you're going to be hearing a lot about mortgage fraud next year, and not just because the companies that exist to fight the problem are so good at hounding the press for coverage. You may have read the story in the National Mortgage News Daily Briefing today:
"...the government said the number of pending [mortgage fraud] cases rose 35% in fiscal 2005, to 721. According to figures released by the Federal Bureau of Investigation on Dec. 14, fraud-related losses totaled $1.01 billion in 2005, more than doubling from the year before. "

Here's why I think this is a trend poised to be huge in 2006. The Fed is expected to continue raising interest rates, which will affect mortgage rates, which will finally kill off the refinance business. Most lenders are betting on home equity to shore up falling volumes, but no one really believes it will come close to keeping companies earning anything close to what they have been over the past few years. Meanwhile, criminals still love earning a dishonest buck.

Not coming crystal clear yet? I grew up in the midwest. I'll spare you the "How Tough I Had It" story (as I'm saving that for my grandchildren), but suffice it to say I saw plenty of folks sending in their hard-earned money for the latest information on how to really make it rich. It was almost always the folks that really needed to hold onto their money that sent if off in the mail.

The greater the desire, the easier the mark for the confidence man.

There are going to be a lot of folks in the lending industry next year trying very hard to stay in it. Without iron-clad fraud mitigation strategies in place, many will fall prey to fraudsters in 2006. Statistics indicate that most mortgage fraud involves an insider. We have the technology today to stop most of these criminals in their tracks. The tough job is making sure that people actually use the fraud prevention tools we already have. Companies that can do that will be the ones that profit in 2006.

Thursday, December 08, 2005

ARC: Taps customers for market intelligence

ARC Systems, Austin, Texas, is taking a page from the B2C world's playbook and using it to find out more about what its customers want out of its products and services. The company has begun hosting focus groups to find out its users' views on automated lending products.

According to Michael K. Pack, who runs a leading market research firm out of Salt Lake City, this type of marketing technique is new to the mortgage industry. "Consumers or Realtors may be tested, but not [these people]. ARC truly understands they have to look outside of the box to get a better perspective on the business," he told Jeff Siegel, an industry journalist who recently wrote about ARC's experience.

The company plans to call together a number of focus groups around the country. Most recently, several were conducted over two days at the Texas Mortgage Bankers Association in Dallas.

ARC says it hopes to learn more about what its users want out of tools like its Loan Finder Express. It will use this information for product development, employee training, marketing and forming new business partnerships.

Taking something used elsewhere and applying it to a new situation is a key element of creativity. It's not surprising to see it employed in a company that has been developing innovative mortgage technology tools for over 20 years. Well done, ARC Systems.

Wednesday, December 07, 2005

VueCentric: Racing ahead in 2006

VueCentric, Austin, Texas, will promote its MortgageDashboard product in 2006 by sponsoring the Richardson Racing team in the NASCAR Busch Beer Series. CEO Jorge Sauri says he expects the deal to give his firm a boost in 2006 as he promotes his online mortgage origination system to net branch operators and independent mortgage loan originators.

NASCAR stock car racing is a sport on fire that is poised to get even bigger in the years ahead. The organization recently signed a new eight year agreement that will see NASCAR races broadcast on a combination of networks that includes FOX, SPEED, Turner's TNT and ABC/ESPN beginning in 2007. But Sauri says he plans to begin reaping the benefits of his association much sooner than that.

VueCentric is not the only company in this space using the races as a promotional tool. Argent, IndyMac, TRW Credit and also sponsor teams.

Friday, December 02, 2005

Portellus: Come into my laboratory

In an effort to make it easier for lenders to purchase enterprise software, Portellus has opened a Customer Readiness Lab (CRL), designed to let prospects try it before they buy it, according to CEO John Le.

The company provides technology tools for the financial services industry, including a suite of mortgage origination, automated underwriting and workflow systems. The lab is a testing, evaluation and solution simulation facility that lets users examine the features and functionality of the company's software.

Prospects don't just to get play with the software. They also get access to the firm's solution architects, analysts and project managers so they can get a feel for what it would be like to actually do business with them.

This is incredibly smart. Dangerous, but smart. As you may recall, Ellie Mae and Calyx recently settled their lawsuit (according to published reports, which may or may not be totally accurate), which centered around Ellie Mae copying the look and feel of the Calyx software. This is hearsay. I heard Ellie Mae executives say they were doing this when I asked them if they were actually doing that.

There are a number of vendors currently working in the same space as Portellus. I've seen some very good software coming out of some of these shops. While I'm sure Portellus will take measures to ensure that only qualified prospects get access to the lab, these people often have friends in other companies. It could open Portellus up to having to add features to compete with other firms at the same time those vendors are getting first-hand feedback on the features Portellus is offering.

On the other hand, the move shows a lot of confidence in their human resources. Software features can be added or deleted relatively easily these days, but a good business analyst that understands both the customer's business and the software tool is much harder to come by. Portellus may be counting on its people to forge strong relationships with prospects while they are in the lab, translating that into sales afterward.

Want to play in the lab? You can contact the company at

Thursday, December 01, 2005

Meetings: Impacts of predatory appraisals

October Research Corporation will be hosting a Mortgage Radio program entitled "The Impact of Predatory Appraisals on the Lending Industry" on December 15. Panel member Vicky Cassens Zillioux recently gave us the low down on this event.

It is largely a discussion of the Center for Responsible Appraisals and Valuations that was set up by NCRC recently, and the work that they are doing with regard to responsible valuations.

David Berenbaum, who is the EVP of NCRC has been working with lenders, AMCs, mortgage brokers, and real estate professionals in the industry to come
together as a group and participate in a best practices agreement. It has been a topic under discussion at most of the large lending institutions as well as the GSE's and now also with the other groups who are concerned. Both sides of the discussion are
interesting, although everyone agrees that something needs to change.

With a few of the large lenders currently under scrutiny regarding their lending and related valuation practices, the timing for this group is interesting. To some extent, it is a politically charged issue - do lenders and others in the valuation related business need an organization to determine best practices? Is what they are doing enough? Is not signing up with the CRAV perceived as being uncooperative or unwilling to implement best practices? What about CRAV publishing a list of non-signatories? How will the appraisers perceive this organization? Will the arbitration process make closing the loan more difficult?

I think these questions and more will be answered during this session. It's an excellent opportunity to hear the pitch from the person in charge of the project at NCRC. There are lots of questions out there.

I used to participate in these radio programs when I was editor of Real Estate Technology Insight. They are well produced and informative. To find out more about this program, check out the company's website.