June 28, 2009
I have never been a fan of outsourcing. In fact, I was even quoted saying as much in a 2004 BusinessWeek article on the subject. While I still believe a company should never outsource “mission critical” components of their business, I recently discovered areas in our business I believed were core competencies actually were not. And this got me thinking about outsourcing differently.
A company’s core competencies define what the business is and serve as its competitive weaponry. A business’ core competencies should remain within the business so they can be protected, managed, cultivated and enhanced. Cogent Road is a software manufacturing company – we design, build and distribute three enterprise software applications. Naturally I assumed that software coding was one of our core competencies – and thus off limits when it came to outsourcing.
Now this may be a blinding flash of the obvious to everyone else – but I only recently discovered that software coding was not among Cogent Road’s core competencies. It happened during a recent Focused 40 session in which my partner and I were unpacking Cogent Road’s competitive advantages. What was Cogent Road, what business were we in and what made us competitive?
We came up with the following list:
Our software engineering methodology. Cogent Road uses a software development model called Extreme Programming, developed by Kent Beck in 1997. Over the years we have customized the XP process for our type of work at Cogent Road. We all speak in shorthand which helps get large projects completed quickly and under budget – something not easily duplicated by competitors.
Our product ideation methodology. My partner and I have a natural ability to think abstractly – which is good and bad. While no one at the company is going to ask Alan or I to plan the company’s Christmas party (in our minds it would be great, but in reality we’d neglect to book the restaurant) – we easily come up with scores of software features that have never before existed. The result is that Cogent Road’s applications are full of beneficial tools our clients can’t get anywhere else. Again, a significant competitive advantage.
Our customer service commitment. A significant portion of our software is never even used by our clients. In order to better serve our clients, Cogent Road regularly devotes significant R&D resources to developing automation and back-end tools that route, manage and distribute customer service orders and requests. (You can see our latest example here). While it’s true spend time (never enough!) training our account managers – our service commitment transcends the individual to create an overall positive experience with our software, even if the client never contacts us. This too is difficult to duplicate.
On a side note, during this process we made the painful discovery that our sales process was not a core competency. It actually should be, but we have some work to do.
What else did we learn? Writing software code was not a core competency at Cogent Road. This meant that if we found qualified, highly competent outsourced partners – we could plug them in to specific areas of our engineering process. In the same way an architect can use any number of building contractors to assemble her blueprints, Cogent Road can use outsourced programmers.
Still, we are starting slowly with one specific highly compartmentalized project. However, so far I am very pleased with the speed and quality of the work. If the project is successful, and I have every reason to believe it will be, Cogent Road will likely incorporate more outsourced coders into the mix.
I’ll keep you posted.
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Funding Suite, entrepreneurship, internet software | Tagged: internet software, management, software development | 
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Posted by Caped Crusader
June 20, 2009
As a credit reporting agency, Funding Suite works in tandem with our clients to verify elements of applicant’s credit files. Often written documentation is needed to perform this service. Consequently we receive several hundred individual documents for hundreds of different borrowers every day.
Funding Suite used to receive these documents via fax and e-mail. As our business grew, we recognized this highly manual process created bottlenecks in an otherwise automated process. Our processors constantly sorted through a steady stream of incoming faxes attempting to match each with the correct service order. This was a difficult and time consuming process and one prone (unfortunately) to human error. We eventually solved the problem and made document delivery easier (and less wasteful) for our customers, while creating more efficient internal process. Here’s how we did it.
Automated Fax Server: The first step was to eliminate our bank of fax machines by building our own fax server. Once this was integrated into our secure network the server digitized every Funding Suite fax and converted it to a PDF.
Indexing System: Next we used barcoding and indexing to tell Funding Suite what kind of fax it had received. Additionally it recognized the specific mortgage lender and borrower file to which it belonged.
An E-Folder for Every Borrower: Once a fax is received it is stored in an e-folder attached to the corresponding applicant file. Our clients now receive a digital copy of every document for their reference, along with the specific time it was received.
Client Side Document Delivery: We recognized that if the client already had the document in a digital format, our e-folder could actually eliminate the need for faxing altogether! Our next step was to provide our clients with three different document delivery options accessible directly from their Funding Suite application.
- Barcoded Fax Cover Sheets: If the lender needs to send Funding Suite a document that exists in paper form, a couple mouse clicks creates a barcoded coversheet. When faxed to us, the fully indexed document appears in seconds within their applicant’s e-folder.
- Direct Upload: If the client receives a document via e-mail – why print it just to fax it over to us? Instead, to eliminate faxing altogether, the lender can upload the document directly into the applicant’s e-folder. Funding Suite recognizes the type of document received and responds accordingly.
- Virtual Printer: For any other document, the lender can select Funding Suite’s virtual printer to print it directly into the applicant’s e-folder. No paper is ever used.
Intelligent Routing: The final and most involved step was to write a series of algorithms to match incoming documents with the correct service order, department and processor. Consider the lender requesting two years of W2s. In this example the W2 order is placed electronically and queued up until Funding Suite receives the signed 4506 IRS form. Immediately upon placing the order a completed 4506 and barcoded coversheet is presented to the lender which can now be e-mailed to the applicant. The applicant signs the 4506 and faxes it back. Funding Suite servers read the document, match it to the pending W2 order and tee it up for the next available processor. A digital copy of the signed 4506 is also made available to the lender for their internal files. By eliminating the manual processes we significantly improved our completion speed – which in turn improves our customer service levels.
Although we won’t see a return on investment in terms of additional revenue since Funding Suite doesn’t charge for these enhancements – solving this problem provided an overall service improvement for our customers.
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Funding Suite, credit reports, internet software, mortgage, mortgage broker | Tagged: credit report, Funding Suite, fundingsuite, mortgage, mortgage brokers, mortgage lender, paperless | 
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Posted by Caped Crusader
May 31, 2009
My partner and I were recently entangled in a lengthy discussion about thought leadership and its importance in a company’s sustained success. You can find volumes written about creating competitive advantage through leadership in products, marketing or even employees. But leadership in thought? Not so much.
Cogent Road is growing rapidly and my partner and I are extremely busy. To ensure we spend time thinking, we engage each day in what we call our “Focused Forty”. This is committed block of 40 minutes during which we sit in front of a whiteboard and discuss the future of the business. For those 40 minutes we sit atop Cogent Road’s crows nest peering through binoculars to determine which way our ship should go. If we didn’t schedule this time, we may well drift any which way the industry winds blow.
It was during a recent Focused Forty that we began harping on our competitors. Over the years we have watched our competitors copy nearly everything we do. More than a few competitors have even cut and pasted entire pages of copy from our website into their own. (I’m talking entire pages word for word!). And they’ve copied our software innovations too. Most recently ScoreAll, an innovative idea in which all available credit scores may be purchased for a low cost with a credit report – and the highest ones added to the file.
Yet, after a short time we laughed because we realized Cogent Road had thought leadership. Rather than creating their own futures – they are simply looking at us. Where we go – so go the rest. For them, this is easier and safer. But in the long run this management style is self defeating.
Instead of worrying about your competitors copying your latest strategy – stay focused on the future. Spend time thinking and creating innovations that will lead your business into new markets – and hence new revenue streams. Competition exists when two or more companies battle it out using the exact same products, service and strategy. Consider the airlines or the American automobile industry. This is a bloody war that leaves no victor. Instead, look ahead…where there is only endless ocean and blue sky.
Thinking like this is difficult. Acting on your ideas is harder still. But as the leader of your business, there is no more important work.
1 Comment | 
entrepreneurship, internet software, management, mortgage, mortgage broker, strategy | Tagged: competition, management, mortgage brokers, start-ups, strategy | 
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Posted by Caped Crusader
March 7, 2009
Cogent Road sells Software as a Service (SaaS) applications to the mortgage industry. This places us smack dab in the middle of one of the most violent economic storms our economy has ever endured. Over the past year the world has witnessed established, deep rooted mortgage related companies tossed about and destroyed with the violence of a tornado ripping through a mobile home park. When the dust finally settles, the mortgage landscape will be forever changed – operating in ways entirely unfamiliar.
For us at Cogent Road, the past year drove home a single point that is, without hesitation, the most important business lesson our company ever learned. Rather than simply telling you, let me illustrate the answer in the following example.
In highly stressful situations the mind absorbs data and feedback very intently. Talk to anyone involved in an automobile accident and invariably you’ll hear the same thing – the experience seemed to happen in slow motion. What actually occurs is that in times of great danger the human mind processes visual information at significantly higher speeds. So fast and with such clarity that events seem to slow down as our brains absorb nearly every detail.
Our body’s natural response to highly stressful events is one of survival. Without conscious thought our nervous systems takes command of every bodily function, sifting through a myriad of possibilities – and finally choosing a course of action with the greatest possible chance of success. And there it is. What instinctively occurs in the blink of an eye also reveals an important business truth.
In my opinion business fail for one reason – they stop trying. I’m not being trite; the business leadership simply stops thinking about they can do to change and improve. In stressful market conditions, these business succumb to fear, which is to say the literally shut down creative thought completely. That is to say the response is entirely contrary our natural inclination to stressful events. Rather than assessing possibilities, they stop thinking and choke off their very lifeblood – which if it doesn’t kill the business outright, it nonetheless leaves it crippled and weak.
My partner and I learned that in good times or bad, we must continually think about how we can grow our business. This means creating an environment which fosters knowledge sharing, crazy ideas and healthy debate. And most importantly it means taking the action you feel is best, despite anything fear may throw at you.
I know what I am saying is true – because Business Spaces, our new workflow automation system is a direct result. Cogent Road management spent countless hours thinking about how we could use existing resources to provide new solutions to the mortgage lending market. We filled up whiteboard after whiteboard with ways in which software could help mortgage lenders get more production from fewer people. We designed improvements over existing paperless solutions while incorporating ways for lenders to enhance the overall experience for their borrowers. Client response has exceeded our expectations.
While a deteriorating market environment kept screaming at us to hunker down and cut spending – we did the opposite. We assessed the market, thought through our options and realized that to grow we’d have to act on the best one.
I encourage you to do the same.
1 Comment | entrepreneurship, mortgage, mortgage broker | Tagged: entrepreneurship, management, success | Permalink
Posted by Caped Crusader
August 23, 2008
In November of 2007 new software – which costs nothing – was introduced to mortgage originators nationwide. I’m referring to the latest version of our Funding Suite credit management platform.
While I try to avoid mentioning our products specifically, I’m forced to in this case because without Funding Suite – and its advanced credit proofreading tools – The Recovery Strategy for mortgage originators would not even be possible.
In this post I’ll describe what the Recovery Strategy is, and why it can dramatically improve any mortgage originators’ business. In my next post, I’ll explain how you can easily implement a Recovery Strategy in your business.
Recovery is the concept of using software to “recover” initially declined applicants. Using a Recovery Strategy will qualify (recover) 15% – 20% of your initially declined applicants immediately – and the remaining applicants sometime within the next 12 months. Further, you will be able to do this without any additional cost or resources – and with very little extra work.
Phase One Recovery: Saving 15% – 20% of your initially declined applicants.
Upon the initial credit review, the loan is usually lost either because the applicant’s scores are simply too low. These low scores may disqualify the applicant altogether, or they may indicate a rate and/or terms unacceptable to the prospective borrower. Either way, you’re forced to disengage from the applicant.
An originator using the Recovery Strategy realizes that 15% to 20% of mortgage scores are actually calculated incorrectly due to credit data errors or credit usage errors. By using credit proofreading software, applicants in this category are instantly identified and then moved to a processor trained to resolve these issues immediately, which provides a new qualifying credit score within 24 to 72 hours.
It’s important to remember that these recovered applicants never left the qualifying pipeline – they were simply moved to Phase One Recovery. Through the process the applicants are positively impacted by a level of professionalism and qualifying expertise in the originator’s business that will generate additional word of mouth business. This is a very pleasant side effect of using a Recovery strategy.
Phase Two Recovery: Saving the remaining 80% of initially declined applicants.
After investing time and money to attract an applicant to your office the last thing you want to do is to disengage from any applicant – even those which can not be immediately recovered. Now you don’t have to. For the first time, software makes it possible to nurture these applicants to qualifying status over the next twelve moths without any effort on the part of the originator. Even better, this turn-key, software driven “mortgage qualifying” service can be sold to your applicants, generating a profit up front.
Instead of sending your declined applicants away, instead enroll them your own private, secured program that will educate them about mortgage qualifying and even give them a step by step plan toward better credit health. Without any effort by the originator, the client receives twelve months of ongoing education, coaching and guidance to help them achieve qualifying status. The moment they do, the system notifies the originator so that the loan process can begin.
How much additional income would you receive by qualifying an immediate 20% of your initially declined applicants? How pleased would your remaining declines be to discover you can offer them a personal credit health program to help them qualify within the next 12 months?
The Recovery Strategy is made possible only because new software has been invented to deliver it. Its free and available for originators right now. Its very easy to actually implement an effective Recovery Strategy in your mortgage business.
2 Comments | credit proofreading, credit reports, mortgage broker | Tagged: credit proofreading, credit reports, mortgage broker, mortgage origination, mortgage qualifying | Permalink
Posted by Caped Crusader
August 9, 2008
While it’s newsworthy to note that mortgage foreclosures are hitting all time record numbers – the fact itself is nothing new. What is new is that additional foreclosures, above and beyond what banks are predicting, will likely exasperate the situation. The reason is that every mortgage loan portfolio contains an as yet undetected ticking time bomb, a risk factor so significant that two percent of loans could have additional foreclosure risk. Ironically, this risk was never even considered when deciding to fund the mortgage loan in the first place.
The risk I’m referring to is the so called Authorized User account, a ridiculous legacy based credit reporting methodology that allows a borrower’s credit score to be calculated using someone else’s payment history. Saying it another way, a bank grants a mortgage to a borrower whose credit report contains the tradelines and payment records of other people. While this would seem incredulous, its common mortgage lending practice.
Authorized user accounts occur when a credit card account holder asks for a credit card to give to someone else. This practice makes sense as its quite common for one to give their spouse or child a card. But what doesn’t make sense is the way in which these new cards (called “authorized user” accounts) are reported by the credit bureaus.
To illustrate this lunacy further, let me share an actual example. I’ve had an American Express card since 1990, I charge a good amount on it every month and have always paid on time. My credit report reflects this account, which seasoning and payment record boost my credit score. Years after I opened this account I got married and requested an American Express card for my wife. Although she has no income and does not pay for this credit account, her credit file now contains a tradeline that reflects a credit card opened since 1990 with excellent payment history; basically an exact copy of my credit history with American Express shows up on her credit report. And her credit score gets the same exact boost as mine does – even though she is not the one responsible for this card.
Maybe your initial response is that it doesn’t matter because she is my wife, or that it’s not a big deal because if we apply for a mortgage loan we’re looked at as a couple. Well, you’re not alone in your thinking because when I’ve discussed this with banks they express the same idea. But the logic is fatally flawed and these authorized user accounts create a very big problem. Allow me one more example – this one fictitious, yet illustrative nonetheless.
Let’s assume my wife and I are applying jointly for a mortgage loan. Let’s also assume my wife is the authorized user on several of my accounts, each with a good payment history. However, in this example let’s also assume I have some derogatory accounts, maybe even a bankruptcy. Now the bank, knowing we are applying jointly, decide to approve the mortgage based my wife’s good credit. (This too is common mortgage lending practice). However, what has the bank actually done? Since my wife’s credit is based on authorized user accounts she actually has no real credit of her own – but what she does have is a “subset” of my credit – just the good stuff. What really happened is the bank gave a go decision based entirely on my few good tradelines, while completely disregarding all the derogatory history. It’s unlikely the bank would have made this loan if they understood how the authorized user accounts were masking true credit risk.
Cogent Road has spent the past year researching this phenomenon – and I’ll share some rather alarming data points.
- More than 3 out of 10 people have authorized user accounts in the credit files
- 2 out of 100 people have a credit score raised by more than 10% because of someone else’s credit. This means that someone whose actual credit history should reflect a 648 credit score, would instead produce a 720 score for lenders.
- Most shocking of all: 1 out of 200 people actually would have no score if you discard the authorized user accounts. In these cases banks are approving mortgage loans for people with absolutely no credit history at all.
Today’s mortgage portfolios must be screened to asses which loans were approved based on credit scores elevated by authorized user accounts. These loans should then be routed to a call center that can regularly monitor the borrower’s ability to pay during this foreclosure crisis. More importantly, every new loan should be screened to detect how much influence authorized user accounts have on the credit score. Depending on the results, some applications (regardless of a high credit score) should be declined altogether – while others would be sidelined for review prior to approval.
The good news is that new technologies can help banks do this immediately.
3 Comments | credit reports, mortgage | Tagged: credit reports, foreclosure, mortgage brokers, mortgage lender, mortgage loan | Permalink
Posted by Caped Crusader
July 19, 2008
In occasional fits of literal despondency, I question whether the world really needs another blog – especially one as banal as this one.
Yet, in the course of a typical business day I’m reminded how little mortgage professionals truly understand about credit and credit scoring. And naturally, if those in the business lack understanding, how much more the typical mortgage loan applicant. So once again, I find myself behind the keyboard pounding out banality, hoping to educate the world one blog at a time.
This month my company signed a rather large mortgage origination shop. This company is doing well in a very difficult market, and as I’ve come to know some of the executives, I can understand why. Loan applicants are treated with respect, and the company pays for all prequalifying expenses. The company has solidly trained loan officers and even an executive solely responsible for corporate strategy. Its an honor to be supplying their credit management software.
Yet, in an operation this adept, this talented and this experienced, I must admit I was not overly surprised to discover how little they knew about credit proofreading – and the legitimate process of credit rescoring. It’s a fact that 15% of this company’s loan applicants that walked out the door without a mortgage each month could have been approved. Why? The sad fact is that the loan officers had no idea that these applicants credit scores were calculated incorrectly due to errors in their credit files. Errors they could have resolved in less than three days – providing the applicant with an accurate, properly calculated credit score.
The very good news is that this mortgage origination shop now “gets it” – and they are rapidly embracing the credit proofreading concept. Top management is taking the time to learn how to use Funding Suite’s credit proofreading tools which instantly identify harmful credit errors. And they are creating business practices to teach their loan officers to properly communicate this new capacity to borrowers.
So it goes, that each month this firms loan applicants will be served by loan officers possessing state of the art credit proofreading tools. And each month, 15% more of them will qualify for a home mortgage.
1 Comment | credit proofreading, credit reports, mortgage broker | Tagged: credit proofreading, credit reports, mortgage broker, mortgage loan, rapid rescoring | Permalink
Posted by Caped Crusader
July 3, 2008
Over the past several months I’ve received many questions regarding credit repair firms – ranging from the actual service these firms provide to why I remain so dead set against them.
These questions reveal how little mortgage professionals understand about credit repair. How can an industry so vocal in their advertising (just try a Google search on “credit repair”), remain so mysterious about what they actually do?
I realized I needed to write an expose on the credit repair industry – and shed light on why these firms actually harm both consumers and mortgage lenders. This idea became an article which was recently published in Mortgage Banking magazine, and
you can download the article here.
As mortgage lenders tighten their qualifying criteria, and credit score thresholds increase it may be tempting to refer your declined applicants to credit repair firms. This article explains why credit repair firms are not a good solution for you – or your applicant.
Note: If you just happen to be an individual referred to a credit repair firm – please take my advice: save yourself the money and avoid them. See a mortgage broker skilled in credit proofreading instead.
1 Comment | credit proofreading, mortgage | Tagged: credit proofreading, credit repair, mortgage brokers, mortgage loans | Permalink
Posted by Caped Crusader
June 13, 2008
I’m a bit late sharing this story – but if you haven’t seen it yet its worth the read.
Here’s the article
It’s a good example of how credit data errors (though no fault of our own) can seriously damage our credit health. Unfortunately, the scale of this data error affected as many as one million people.
This one will be corrected, because its sheer size created its visibility. The danger with most credit data errors is that they go undetected – and thus unresolved. This is why the credit proofreading process is so important. Make sure you get your credit report proofread by a competent mortgage originator before you begin the mortgage qualifying process. Don’t pay more for your mortgage than necessary simply because undetected data errors harmed your credit score.
Leave a Comment » | credit proofreading, credit reports, mortgage | Tagged: credit data errors, credit proofreading, credit reports | Permalink
Posted by Caped Crusader
June 12, 2008
Our Funding Suite credit management software is used by tens of thousands of mortgage originators throughout the country. Consequently, I know many of these originators and some of them are extremely good. This morning I want to recognize a few top originators to highlight what too often goes unrecognized – an unwavering commitment to serve the applicant.
Here they are, in no particular order.
Alan Vogan
First Lending Solutions
Riverside, California
(951) 317-3165
I’ve known Alan for years – and in the spirit of full disclosure, Alan personally handles all of my mortgage needs. When I need to better understand a new Fannie Mae underwriting issue, or the impact of new legislation on lending practices, I’ll call Alan. While its true that he understands the business of mortgage lending better than most, his true strength is an uncanny ability to see things from an applicant’s perspective. I recently referred a friend to Alan and his experience sums this up perfectly. While Alan was working on my friends loan he did the unthinkable and sent my friend to a competitor (Bank Of America) because he knew the bank had a very good loan program. Turns out that BofA didn’t offer the program as advertised, and Alan now counts my friend as a client.
Kevin Glackin
Village Capital
Mount Laurel, NJ
(856)-252-1517
Kevin has a very good understanding of mortgage credit – and is well versed in credit proofreading. Recently, credit proofreading discovered that the single derogatory item on an applicant’s credit report was involved a credit card the applicant used every day. However, though the card had the applicant’s name on it, he was actually an authorized user on the card. This means that the true card holder (his brother), had simply added a card to his account and then gave it to the applicant. The applicant’s brother was going through a difficult time and became late on the payments. Kevin’s credit proofreading tools revealed that since the applicant was only a user on the card, the late payments belonged to his brother, not the applicant. Kevin used his credit proofreading tools to permanently remove this derogatory account from the file in days. And, are you ready for this? The applicant’s credit score increased 240 points. Now that’s service.
Christian Lombardini
United Fidelity Mortgage
Nashville, Tennessee
(615) 383-5626
Christian is another one of my favorite loan officers because he consistently puts the client first. Sometimes this means working with a client for months (at his own expense) until the client is financially prepared to make a mortgage loan commitment. In one recent experience a client wanted a mortgage, but needed to increase his down payment amount. Christian consulted with the applicant and helped him devise a savings plan. Christian also used his credit proofreading skills to improve the applicant’s credit health at the same time. After following Christian’s advice, the client was able to buy his new home nine months ahead of schedule. The capper was that the applicant was referred by a real estate agent, and Christian went out of his way to make sure the agent received the all the credit. Nicely done.
Shane Jackson
ENG Lending
Little Rock, Arkansas
(501) 907-1126
Shane is another expert in credit proofreading, which means simply that he knows how to use software to detect and eliminate errors in credit files that damage credit health. When our company was interviewed by a leading mortgage publication about how credit proofreading helps borrowers, the magazine also interviewed Shane. Shane mentioned that more than 10% of declined applicants can be turned into approvals by simply proofreading their credit files, and removing errors. Imagine a couple declined for their first home simply because their credit score had been incorrectly evaluated due to errors within the credit file. Guys like Shane won’t let that happen.
If you are looking for a mortgage, I’d heartily recommend these folks. They’ll take care of you. If you are a real estate agent, and if you live near one of these mortgage professionals, do your client a favor and pass along one of these names. Tell them the Caped Crusader sent you.
1 Comment | credit proofreading, credit reports, mortgage, mortgage broker | Tagged: credit proofreading, credit reports, customer service, mortgage broker, mortgage loans | Permalink
Posted by Caped Crusader
