1. Leading Mortgage Bankers out of Chaos: Utilization of SWOT Analysis
(Strengths, Weaknesses, Opportunities and Threats)
Debra Gaveglio, Sr. Consultant at Actualize Consulting, dated September 27, 2011
The new world order of Mortgage Banking requires the flexibility to adapt to evolving
conditions and to reinvent as market conditions dictate. In assessing the sustainable health of the
Mortgage Banking Industry, it makes sense to employ certain tools such as a SWOT (Strengths,
Weaknesses, Opportunities and Threats) analysis. The relatively simplistic SWOT matrix was
utilized in the 1960’s and 1970’s by Albert Humphrey at California’s Stanford Research
Institute. SWOT provides valuable intelligence for the planning of business transformation
strategies. “Leading Change”, (John P. Kotter, 1996), adds value to the assessment with an eight
step approach. Kotter describes the guiding principles to mitigate the risk of change failure as
Mortgage Bankers adapt to the future state of the industry. To provide a relevant example of a
SWOT analysis, four attributes applicable to the Mortgage Banking industry are discussed for
each of the four steps in the SWOT analysis.
Strengths
The first step in the SWOT is the examination of Strengths. Leading Change’s eight critical
success factors bear a clichéd theme: “Tone at the Top”. Mortgage Bankers can utilize this
straight forward approach methodology for business transformation. A key component in
sustainability is adapting to change. The first step is creating a vision with an urgently
communicated message communicated from the top down. The second step is to build a guiding
coalition powerful enough to effect change. The third step is to a strategy for change and the
fourth to communicate the change vision with the coalition leading the charge. No mortgage
banking entity will be successful unless the buy-in of the masses; the guys in the trenches doing
the work. Action is taken in the fifth step to reduce obstacles that undermine the goals. The
sixth step is short term wins; grabbing the low hanging fruit. Short term obtainable goals foster
the buy-in of the masses when change is visible. The implementation of short gains enables step
seven; which is the increase of business transformation. New projects are considered with a
strong core team of change agents. The final step is anchoring change into the culture. The
success of sustainable change begins with the Tone set at the Top.
The definition of office space is progressing into a virtual world. Successful Mortgage Bankers
who embrace mobility and virtual office spaces can seek to increase efficiency and productivity.
With a movement away from a traditional physical locality, a flexible lifestyle and an efficient
workplace can seek to meet in the middle.
It makes sense for Mortgage Bankers to humbly self identify inefficiencies and gaps in
compliance to affect change. Prudent project management plans can mitigate the identified risks

2. in the change lifecycle. From my perspective, a conservative approach to reserving for risk and
revenue sharing is the name of the game.
Mortgage Bankers who embrace technology support an evolution towards increased transparency
and accountability. Stakeholders throughout the lifecycle of a mortgage asset can engage in
system and data integration efforts through digital service vendors, “COTS” (Commercial off the
Shelf) and customized technology tools. With increasing opportunities to share, store and
transport data in the internet “cloud”, a potential for cost reduction in infrastructure exists. It is
necessary to note that the security of data and protection of privacy in a virtual cloud
environment is evolving. Mortgage Bankers who embrace technology utilize these key business
drivers to succeed.
Weaknesses
The next step is citing the Weaknesses. Inefficient transactional due diligence and post closing
quality control poses risk throughout the lifecycle of a mortgage asset. Building a robust process
for the review of assets can be a costly and complicated process to implement and maintain.
Once a settled asset is purchased and sold in the secondary marketplace, the lack of clarity
around certain representations and warranties adds risk. Buy in from the mortgage banking
industry is necessary to support quality control plans which affect the cost of doing business. The
absence of comprehensive analysis of significant findings must be mitigated. Significant findings
including early payment defaults, missing documentation, collateral and title issues, non-
compliant high cost loans - exceed points/fee caps, inflated appraisals, material
misrepresentations of assets, income and occupancy, undisclosed debt or litigation and instances
of fraud such as non-arm’s length transactions, real estate pyramid schemes and identity
falsifications). Repurchases, put back and mortgage insurance rescissions will continue to be
problematic.
Without a robust process to insure confidence in the data transmitted throughout the lifecycle of
a mortgage asset, systemic risk cannot be prudently mitigated. The consolidation of “siloed” data
throughout a mortgage banking organization’s legacy systems is a complicated task if not
gathered at the birth of a mortgage asset and maintained throughout its lifecycle. Lack of clarity
with respect to the liability and identification of the legal owners of record as assets bought and
sold adds risk.
President Barack Obama’s “jobs” speech, the Debt Ceiling extension matter and proposed Dodd
Frank legislation add risk to the ability to accurately assess the impact of regulatory
requirements. Ambiguity surrounding the legislation on the proposed skin in the game risk
retention rule (Sec 941 of Dodd Frank) for example hampers risk mitigation. Proposed changes
to the underwriting criteria for mortgage loans can have direct impact how the industry reacts.
The Dodd Frank legislation will increase investor risk retention and regulatory oversight by
governmental agencies on the financial markets.

3. The possibility of deregulation vs. increased regulation will depend on how government,
government sponsored and private marketplace entities respond. These factors are difficult to
predict. Historically, weaknesses in the housing market become systematically visible as the
industry is stressed. Market movements over time indicate the housing market will ebb and
flow. When the check and balance system is laden with risk, the volatility can be severe with the
axe fall point and recovery period being unpredictable. With respect to data transmission and
security requirements, the assessment for any technology optimization and modernization should
align with current assessments of the regulatory environment.
Opportunities
There is tremendous opportunity to affect change in the Mortgage Banking industry. Successful
Mortgage Bankers will strive to increase the efficiency of the way they do business with back to
basic principles. Current housing market conditions support a conservative and balanced system
of revenue sharing with loss participation in transactional agreements. Establishing a strong
foundation of transparency and accountability from the loan origination application process to
closing and then to the sale of the asset makes sense for long term sustainability.
A transformation project plan for successful Mortgage Bankers can capitalize on opportunities
by aligning the business needs and requirements with the technology and the trifecta: to
incorporate a robust risk and fraud mitigation program (This discussion I will save for a future
article).
Successful Mortgage Bankers will adapt to the President’s “jobs” plan, Debt Ceiling extension
issue and proposed Dodd Frank legislative requirements by clearing establishing the roles,
responsibilities and liabilities of the originators, sellers and servicers. The opportunity to evolve
industry best practices in this arena exist, it is the fiduciary responsibility of Mortgage Bankers to
take part in solutions going forward.
Modernization through technology bears mentioning one more time. The successful Mortgage
Banker should align the appropriate subject matter expertise to address the notoriously paper
laden industry. This can promote an improved Best Practices approach for the reduction of
manual and duplicative processes and for the quality of data available for analysis. These goals
should incorporate business intelligence tools to promote robust reporting capabilities and
visually attractive dash boarding capabilities (i.e., summary data, think of a car dashboard).
Threats
The final step is to identify the Threats to Success. Process snags, human capital and budget will
impact the success of business transformation and modernization initiatives. The success of a
Mortgage Banking business forward plan can be threatened by the sustainability of fiscal
backing.

4. The structure of organizational charts that exist in financial institutions is unpredictable.
Volatility in the marketplace, loss of subject matter expertise through natural attrition,
reorganizations, changes to senior management and to the business plan can impact the success
the Mortgage Banker. If the leadership of a given organization is inconsistent, so is the message
which will impair imbedding change in the culture.
Will legacy credit losses ever sunset? The lack of clarity around liability and the cost of time
consuming litigation spent determining such liability will continue to stress the industry. If the
determination of who should bears the credit loss lacks clarity; the perpetuation of legacy loss is
an ongoing threat.
Dodd Frank calls for establishing thresholds of credit risk retention (skin in the game) and for the
modification of underwriting standards that will disqualify certain mortgages from risk retention
exemptions The proposed levels of 5% will ultimately be passed on to the consumer.
In conclusion, the SWOT analysis can be a powerful brainstorming exercise to foster change in
the Mortgage Banking industry. The identification of the Strengths and Opportunities can
become the foundation for the next step: establishing a business plan, obtaining stakeholder buy-
in, procuring the funding and engaging subject matter expertise to deploy results.
[Citation: (Leading Change. Kotter, John P., Harvard Business School Press, Boston, 1996)]