My process improvement background trained me to build systems that get it right the first time, at the point of production. Toyota’s early success with cars was due to a large extent to their ability to find root causes of issues and fix them instead of fixing defects. Semiconductor manufacturing has taken quality to another dimension, with perfection measured on an atomic scale.
And, so I would love it to be with mortgages, but the reality is that is an idealized state. In the world of mortgage servicing (and origination), we don’t have some of the luxuries that computer chip manufacturers have. They have clean rooms, and we have lots of turnover, manual data entry and older systems.
Checks, Checks and more Checks
We compensate in the mortgage world with double-checks, a second set of eyes, validations, etc. We also do a lot of checklists. Compliance experts think in terms of lines of defense: first, second and third lines of defense against violations. The first line of defense has the first opportunity to get it right. Solve it here, it’s never a problem. But, this is also where antiquated systems, turnover among staff, cost pressures on training, and changing requirements conspire to make it impossible to be perfect.
Historically, the approaches taken have been 1) attack all those sources of unreliability by investing in training, automation, etc., or 2) rely on second and third lines of defense.
Now there’s an innovative approach based on a variety of new technologies. It’s called MESH Auditor, and it can run 1,000+ algorithms against millions of records daily in minutes. It checks for compliance with more than 1,000 regulations using your own portfolio data, but it doesn’t access any sensitive, private data. It’s inexpensive, and it’s a second set of eyes on everything. I think it will go from “nice to have” to “indispensable” in record time.