Mortgage LOS Implementation: A Roadmap for Sustainability

1 Cognizant 20-20 Insights Mortgage LOS implementation : A Roadmap for Sustainability A successful and sustainable loan origination system requires rigorous timelines, infrastructure readiness and workflow management. Executive Summary can adopt to improve the odds of a successful A loan origination system (LOS) is a powerful implementation . tool for developing the Mortgage landscape of a lending organization and increasing lender Challenges of Implementing LOS. responsiveness to market changes. Mortgage Lack of Organizational Alignment lenders implement a loan origination platform When an organization decides to implement an to stay competitive, increase efficiency, speed LOS, it should be prepared for a long journey. turnaround times, control loan quality and remain It takes an average of 8 to 24 months to com- compliant with lending rules and regulations.

2 Plete the implementation , depending on custom- izations, integrations and channels. Hence, it's Studies suggest that 35% of LOS platform imple- important that the cross-functional leadership mentations fail and that 65% exceed budgets and team is aligned with the goals and objectives timelines. A lack of thorough preparation and the of the initiative. This will prevent any potential absence of a clear Roadmap add to the problem. challenges when management weighs the short- term benefits against the long-term to decide Because it can take some time before the on the future course. Well-developed goals and benefits are realized, the LOS should be aligned objectives can help resolve such challenges, with the organization's long-term strategy, with enabling a more effective outcome. the goal of ultimately being absorbed as one of the core systems.

3 That said, during the implemen- Exceeding Timelines and Cost tation, many elements can go wrong and spiral Exceeding the budget and/or taking longer than out of control, resulting in a disastrous outcome. expected to implement the LOS are among Therefore, it is critical to develop an effective the top reasons for failure. Several factors implementation Roadmap . typically cause delays and/or increase costs. For example, a change in the business scenario This white paper evaluates the most common can trigger a new set of requirements. Every factors leading to LOS implementation failures. organization needs a strong governance and We then provide a Roadmap that organizations change management plan to control the project cognizant 20-20 insights | september 2014. Potential Bottlenecks Lack of Exceeding Lack of Orgnizational Alignment Timelines & Cost In-House Skills LOS.

4 implementation Failure Corporate Mergers &. Culture Acquisitions Figure 1. scope, reprioritize the requirements and, con- to adopt and customize the following factors sequently, mitigate cost and timeline issues. to its own capabilities, methods, techniques and Another common problem is the miscalculation of tools (see Figure 2, next page). the estimated hours required for the implemen- tation or the quantum of work that may require Program Office additional resources, thereby increasing costs. The program office is the mission-control of the Additionally, because delays and cost increases implementation . It should be well-connected with can be caused by delivery-related dependencies senior management and stakeholders and be well- on internal or external sources, lending organi- aware of the status at ground zero and ensure zations need to continuously monitor cost and that it is visible and transparent to all team timelines and be prepared to make prompt course members.

5 In short, it should have a strong com- corrections. munication strategy that's both bottom-up and top-down. The program office, through its project Rigid Corporate Structure managers and other stakeholders, should be pro- LOS implementations require a focused team active in identifying challenges, impediments and that is agile, collaborative and skilled in innova- timeline slippage. It should manage all delivery tive thinking. During the implementation process, dependencies through strong governance, esca- resources might be realigned or redeployed, lation and change management procedures. which can cause resentment and reduce produc- tivity if not treated proactively. The project man- Clear Timelines and Milestones agement office should focus on team-building A strong Roadmap lays the foundation for suc- activities and set expectations from the start.

6 Cess by indicating clear timelines and milestones of analysis, development and testing phases, and Lack of In-house Skills release timelines. The plan should factor in the Unavailability of skilled resources can also lead to possible changes owing to business priorities, failure. Organizations need the right mix of skills slippage in third-party vendor release schedules and resources for a smooth implementation . and shortage of skilled resources. To be effec- tive and remain relevant, it should embrace an Mergers and Acquisitions agile approach; plans that are cast in stone can Merging with or acquiring a company that quickly become obsolete. Most importantly, the provides similar benefits to what the LOS is whole team should be aware of the timelines and expected to provide can result in management milestones.

7 Shelving the implementation . But this high-level decision is usually out of the control of the PMO Workflow Management or the team working on the implementation . The LOS can be segmented into several smaller workflows point of sale, acquisition, processing, implementation Roadmap underwriting, closing, funding, post-closing and All organizations are unique in their processes, shipping. Each of these workflows performs a cultures and goals. Each organization will have specific task in the loan lifecycle and may also be linked to third-party services. For example, cognizant 20-20 insights 2. the underwriter reviews the 1003 applications in- For example, a global Mortgage bank implement- depth, evaluating the credit-worthiness, income, ing the LOS had several teams, each of which assets and liabilities of the borrower, and sub- was assigned to a workflow.

8 Every team had a mits them to the investors' automated underwrit- project manager, business analyst, developer, ing system (AUS). The underwriter may also ask quality analyst and subject matter expert (SME). for further information from the processor, loan The project manager and the SME worked on officer or any other party to approve or deny a several workflows, but the business analyst, loan. Similarly, a processor or closer has its own developer and quality analyst were focused on tasks and responsibilities. Hence, the organization the assigned workflow. needs to group the requirements according to the workflow. This way, the PMO can ascertain the The business team, on the other hand, consists number of requirements that are implemented primarily of SMEs. These SMEs, who are well and the ones remaining.

9 Aware of the current market trends, rules and regulations, are responsible for providing the Team Composition requirements for customizing the LOS. They Multiple teams, broadly categorized as IT and perform the user acceptance testing or assign business teams, must work together on their others, and train the end-users of the system. specific roles and responsibilities to make the implementation a success. The IT team will be Third-Party Vendor Readiness responsible for developing the LOS applica- A typical LOS interfaces with a host of external tion, the networking team will ensure the LOS service providers, such as the AUS, credit agen- is securely connected to the internal and exter- cies, document management agency, Mortgage nal systems, the hardware team will provide the Electronic Registration System, FraudGuard, infrastructure to host the application, and the appraisal and title vendors, cash processing database team will ensure the data from the LOS vendors and investors.

10 Making sure that third- is stored securely and is available when required. party vendors agree with the timelines of their The organization must align the teams with the deliverables in the implementation avoids any workflow or workgroup ( , each workflow should last-minute surprises and delays. The deliverables have a dedicated team). Team size can be ascer- should establish a successful communication tained based on the complexity and number of interface between the LOS and the systems of requirements in the workflow. the vendors to send service requests and receive responses. Factors Involved Program Risk &. Office Compliance Success Team Timeline Criteria Workflow Infrastructure Management Post implementation Release Integration Plan Figure 2. cognizant 20-20 insights 3. Infrastructure Readiness Release Plan The organization should finalize the infrastruc- The release plan should be part of the communi- ture requirements during the LOS selection cation strategy of the PMO right from the initial phase.