Blueberry COO: Mortgage lenders losing millions on bad data

Lloyd Booth is a founder and chief operations officer of Blueberry Systems, a data manager for mortgage originations. In this role, Lloyd is responsible for product design and engineering for the firm. Booth began his career in mortgage lending in 1984 when he joined Diversified Mortgage Services. Blueberry originated from a $3 billion-plus mortgage banker. How did this happen and why? Lloyd Booth: In 2005, Cherry Creek Mortgage Co. knew that the system they had been on wasn’t very accommodating or scalable enough for future growth. So they hired me, as a consultant, to facilitate their visioning process – that is, to help them identify the next steps in their technological evolution. We helped them identify what their current and future needs were and how they stacked up with existing technology. As it turned out, nothing fully met their needs so they asked me to build it. Early on, we saw the business opportunity in developing the technology so it was universally applicable and breaking it off in a separate venture. It was a lot more work, but well worth it. Some people assume our relationship with Cherry Creek would have drawbacks. On the contrary, to have a working test environment in the same building gives Blueberry Systems a great competitive advantage. That kind of proximity is invaluable. It provides us with real-time feedback from every single person in the production process. Our technology revolves around the individual as much as anything else. While we now have other clients, having a close relationship with a national lender has been extremely beneficial. HW: What do you tell (or offer) your clients looking to reach regulatory compliance and, better yet, avoid repurchases? LB: Data quality is job one. That is, the ability to capture, transfer and audit data seamlessly and in real-time is incredibly important. Amazingly, many of today’s systems still can’t wholly capture all the data a lender is required to manage. And many more are still transferring data between data silos and/or re-keying some of that data during the production process. Finally, very few systems can adequately audit the data as it evolves. Millions of dollars are lost every year by lenders because of bad data that comes back to haunt them in the form of repurchases. With the technology available today, there’s no excuse for it. That includes automated fraud prevention integrated directly into the LOS (loan origination system) workflow, preferably on the front end. Ultimately, garbage in is still garbage out. HW: Do you think the mortgage process needs to be rethought and re-created? LB: Probably, but it’s unrealistic. As long as regulations, pending regulations and potential pending regulations are hanging over the industry’s head, there’s no likely way to simplify the production flow-chart of an average home loan. Back in the real world, however, technology is truly — or at least it should be — a lender’s best friend. The good technology that’s available today can take the ridiculous complexity and risk that’s involved and acutely minimize them. Bad technology can be a nightmare and completely counterproductive. But a good LOS is like an ‘Easy’ button for lenders. HW: Should all mortgages go completely electronic? Are there some pitfalls to something like that? LB: I’m sure electronic mortgages will be standard at some point in the future. There are obviously enormous efficiencies to be made with them and they will make loans more accessible to technology. But that’s not to say there aren’t pitfalls. The biggest pitfall today is the misperception that e-mortgages will solve what ails us. It’s true that loans will become more transparent and auditable. But that only addresses the delivery of the loan data. (Is it complete? Is it intact?) But e-mortgages don’t address the content of the loan. (Is the data truthful?) That’s where things like compliance, fraud-prevention and real-time auditing of the data evolution come in. Have someone who would be perfect for In This Corner? E-mail the editor.